San Diego will be the hottest major home market for California in 2020, concludes a panel of experts in a Zillow study, but it won’t experience major gains as in past years.
Experts predicted a more sluggish year of price increases across the nation. On average, the group of more than 100 economists and housing experts predicted home values would rise 2.8 percent this year.
The group turned out to be quite accurate last year, predicting home values would increase 3.8 percent by the end of 2019. As of November, values were up 3.8 percent. Some of the experts include chief economists at Bank of the West, Standard & Poor’s, Fannie Mae, BBVA Research and Moody’s Analytics.
They did not give an exact prediction of how much the median San Diego County home value would increase, which was about $600,650 as of November. Instead, they rated the region on how likely it is to reach the national average of 2.8 percent.
A quarter of panelists predicted San Diego County home values would grow faster than the national rate, 39 percent said they would grow slower than the national rate, and 37 percent said it would be about the same.
Cheryl Young, senior economist at Zillow, said real estate analysts are more pessimistic about how much prices could rise after years of substantial growth since the Great Recession. She said the economy is still strong, but there is still an affordability ceiling buyers will inevitably hit despite strong job growth and low mortgage interest rates.
“The economy itself is still doing pretty well, which would make you think the housing market would still be relatively strong,” she said, citing consumer confidence and other factors. “All those things would make it seem like it would still push people into buying homes and keep house prices up. But, I think there is a headwind of unaffordability.”
Young said the 2.8 percent prediction is much more sustainable, especially in high-cost California markets, after years of major jumps.
Austin, Texas, was declared the hottest market in the study with 83 percent of respondents predicting it would outperform national gains. The other top markets were Charlotte, Atlanta and Nashville.
The study, conducted with research firm Pulsenomics, calculated the hottest markets by weighing answers for those who predicted home markets would exceed the national average against those who thought it would fall below.
While 39 percent of respondents thought San Diego County home values would under-perform compared to the national average, it was more extreme for other California markets.
In the survey, 64 percent predicted San Francisco would under-perform, 61 percent for San Jose, 55 percent in Los Angeles, 52 percent in Sacramento, and 47 percent in Riverside.