‘Higher-income buyers are still very active’ as San Diego leads U.S. in home price gains for 4th month

by Phillip Molnar

San Diego had the fastest rising home prices in the nation for a fourth month — an increase of nearly double the U.S. average.

The San Diego metropolitan area’s annual home price increased 11.1 percent annually in March, according to the S&P Case-Shiller Indices report released Tuesday. It was followed by New York at 9.2 percent, and Cleveland and Los Angeles at 8.8 percent.

Prices were up across the nation, with all metros in the 20-city index experiencing gains. In March, the average national increase was 6.5 percent, despite pressure from higher mortgage rates.

Lisa Sturtevant, chief economist at Bright MLS, said a shortfall of homes for sale would continue to put upward pressure on prices, especially in high-cost markets.

“The fast pace of price growth in these markets,” she wrote in her analysis, “suggests that higher-income buyers are still very active in the market.”

Sturtevant thinks home price growth would likely slow in the summer as mortgage rates remain high, and some markets start to see an increase in home inventory.

San Diego metro, which includes all of San Diego County, has finally had more homes come on the market for sale after record lows. There were 3,693 homes listed for sale from March 4 to March 31, said the Redfin Data Center. As of mid-May, that had increased to 4,070. While that is down from nearly 6,000 in the summer 2002, it is an improvement from around 3,000 at the start of the year.

Interest rates have only continued to climb since the March data was collected for this current Case-Shiller report. In the last week of March, the average interest rate for a 30-year, fixed-rate mortgage was 6.79 percent, according to Freddie Mac. It had risen to 7.14 percent by Tuesday morning, down from 7.41 percent at the start of the month, reports Mortgage News Daily.

“Given the surge in mortgage rates between the end of March and the beginning of May,” wrote Redfin senior economist Ralph McLaughlin, “we expect both home price growth, inventory, and home sales to moderate in future housing market data releases.”

The Case-Shiller Indices track repeat sales of identical single-family houses — and are seasonally adjusted — as they turn over through the years. The median resale single-family home price in the San Diego metro was $975,000 in March.

Brian Luke, head of commodities, real and digital assets at S&P Dow Jones Indices, says that pandemic boom towns — Phoenix, Tampa and Dallas — are now growing at a much slower pace. Despite San Diego’s performance, he said the Northeast was top dog.

“Regionally, the Northeast remains the top performer with an 8.3 percent annual gain,” he wrote in his report, “showcasing robust growth compared to other metro markets.”

The pace of San Diego metro increases had slowed slightly at 11.1 percent, down from 11.4 percent the previous month.

Metros lagging behind much of the nation in annual returns include Portland, up 2.2 percent, and Denver, up 2.1 percent.

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