Deflation is always a possibility in any housing market, but, although we have seen an increase in foreign funds flowing into real estate in San Diego in recent years, we’re not even close to being as heavily dependent upon them as certain other cities.
That said, if, even to a small degree, the real estate market does continue to thrive, we might be looking at a scenario as outlined in the excerpts from the following article:
What will our housing market look like in 20 years?
Our City San Diego
“If you think San Diego’s housing market is strained and pricey now, what will it be like in 20 years?
Yes, feel free to shudder.
No one, of course, can accurately predict that far in advance. There are too many variables at play. But there is one aspect of the current housing market that would seem tough to reverse.
And that’s the ability to build.
For one thing, we have finite developable land, particularly in the city of San Diego. Secondly, a portion of our population appears unwilling to embrace density — at least in their own neighborhoods — which makes it tough on planners and builders to increase supply.
“We’ll be the Bay Area in no time,” said Borre Winckel, president and CEO of the Building Industry Association of San Diego. “We can offer very few product lines for the middle-class buyer.”
San Francisco was once a quirky, counter-cultural city that was home to a bevy of activists, artists and writers. But that city is vanishing because of sky-high housing costs. Now, only the elite can afford to live in the city and, like in Manhattan, low- and middle-income workers are forced to live further afield and make long commutes to their jobs.
San Diego is not far behind. It is already the nation’s fifth most expensive housing market, according to the National Association of Realtors. Only an estimated 25 percent of households can afford the median home price.
Even more troubling, most of the apartment units under construction are higher end, catering to wealthier millennials.
“My lament is that we’re royally screwing the housing opportunity for the middle class and young people,” Winckel said.
San Diego’s population grew by 159,000 people from 2010 to 2014, but the region added only 22,000 housing units in that time, according to the U.S. Census Bureau.
If that trend continues, experts predict housing prices will continue to rise.
And higher housing prices will force people and businesses to leave, Winckel said.
Middle-class workers with families are already moving to North County, and even into Temecula, where they can afford homes. But the commute is brutal and could get worse. And San Diego does not have mass transit like San Francisco or New York that can move large numbers of people — especially from North County.
When businesses can no longer attract enough employees, they will relocate, Winckel said. That could leave San Diego with a smaller number of businesses that pay higher wages, like in the biotech industry.
Another challenge is that only some building projects are financially workable. For example, smaller wood-frame apartments aren’t profitable because of regulation burdens.
Government regulations add as much as 40 percent to the cost of construction, according to one study that local builders helped fund. That means only pricier housing projects pencil out for developers, Winckel said.
Mostly, it’s larger, steel-frame complexes that are lucrative enough to build. But those projects — mostly high-end condos — tend to demand higher rents or sales prices, which doesn’t help middle-class San Diegans.
