Lot vs Home Prices in San Diego, CA
Detached House data and information courtesy of SDAR February report and Land/lot info were supplied by SDMLS.
It is an understatement to say that we are at a historical time in San Diego’s real estate market. Low inventory (down 60% year-over-year or YoY), rising prices (median price up 15%), and more competition than ever before make it impossible for people to find the perfect home. If the market is challenging for buying existing homes, you might be thinking it is the same for land. However, the truth is the land market is different, and there is more land available now than there has been in years. Last month, new land listings were up 900% YoY, and the total for sale is up 740% YoY. Let’s take a look at this in more detail, starting with the detached home housing market.
What are the market conditions for detached homes in San Diego?
For detached homes, inventory is down 60% YoY, while the median price is up over 15% to $760,000 YoY. To put this in context, San Diego’s median sales price has increased 90% dating back to 2012. During that period, the economy started moving out of the Great Recession, and prices began to rise. Last year, we began to see record-low interest rates push down monthly mortgage payments, enabling home buyers to increase their budget. Days on the market are down 31% YoY, with an average of 27 days between when a property lands on the market and when an offer is accepted. This frantic pace has led some home buyers to act extremely quickly and irrationally by waiving contingencies and paying more than they should. A home purchase should always be thoughtful rather than emotional, but it’s hard not to get wrapped up in the frenzy. How has this translated to the land market? Let’s look at it.
What are the market conditions for lots in San Diego?
The truth is that the land market operates differently from the detached home market. Building a custom home without a company like Buildable creates a higher barrier to the everyday buyer than just purchasing an existing home. New lot listings are up 900% YoY, and the total for sale is up 740% YoY. We see more people looking to sell their land because of the increase in demand and the rise in median home price. However, land prices have only increased 13.7% YoY as opposed to 15.2% for existing homes. Lots have appreciated 10% slower over the past year in this market. The average price of land ($349k) is down 8% YoY, while the average price for detached homes ($1M) is up 20% YoY. That’s a wild difference.
San Diego has a maturing tech economy that created more jobs than it lost (+1,500) during COVID and has employees who could easily transition to remote work during the lockdown. Tech workers who could easily transition remotely had unaffected incomes, coupled with lower expenses and a stock market where the S&P500 delivered 16.3% returns in 2020, which means many high net worth individuals could save more money than ever. Additionally, with many public companies calling San Diego home, local companies like intuit, Service Now, and Walmart saw an increase in their stock price in the 50-100% range. There are now more people than ever who can afford homes in the $1M+ range. With San Diego’s desirability and climate, we’re seeing more and more people relocating from places like San Fransico and New York to take advantage of this region’s beauty and relatively lower costs.
Do land/lots move at a different speed than existing homes?
The time between when a lot comes on the market and when an offer is accepted is four times longer (4.4x) than detached homes, at over 119 days. Lot sales move slower as compared to existing homes because of the higher barrier to entry for building. Buildable makes the custom home building process simple, which gives home buyers an advantage over purchasing an existing home.
When looking at land, you have more time to seek multiple opportunities to determine what’s right for you. It isn’t a frenzy, though it does make sense to move on a property when you see it’s right for you. The experience of finding land and building a custom home is different than purchasing an existing home. Most of our clients come to us after seeing multiple open houses and getting outbid to the point they have decided to pause their search for a home. We are an easy option for homebuyers.
How has the cost of lumber impacted building?
One of the biggest challenges for building right now is the price of lumber, and it’s not that big of a deal. Over the past year, lumber has increased 3-4x, hitting 52-week highs over $1,000 for random length lumber futures. As of March, we are already down 12% and look to this trend continuing downward. “While single-family homebuilding should grow this year, the elevated price of lumber is adding approximately $24,000 to the price of a new home,” said Robert Dietz, chief economist for the NAHB. There were increases for Buildable’s typical projects, but nothing catastrophic that created major issues. Try our free estimate calculator if you want to learn more about the cost of building a home.
How is Buildable Simplifying the Home Building Process?
Buildable takes the fear and stress out of finding land and building your dream home by managing the process from start-to-finish. We have a new approach that partners you with the right experts to bring simplicity to the process of purchasing land and building a new home. Buildable enables you to be a land developer to maximize the value and equity of your new home build.
Our process works as follows. First, we help you locate and purchase the land, ensuring that it’s capable of supporting your vision. Second, we help you design your home based on your unique lifestyle and interests, guiding you through the design process to ensure the best balance between your dreams and your budget. Third, we bring your dream home to life with some of the best quality craftspeople in San Diego.
We are innovators of this approach, and no one else offers a similar guided process from start-to-finish. Talk to us, and you’ll see how we are different.
