San Diego Housing Affordability Just Took a Step Back

11 minutes ago
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If buying a home has felt a little harder lately, the latest affordability numbers help explain why.

For the first time in almost three years, a key measure of U.S. housing affordability worsened.

According to the National Association of Home Builders and Wells Fargo, the mortgage payment on a median-priced $410,700 home now takes about 34% of a typical family's income, up from 32% in the first quarter.

The biggest culprit? Mortgage rates.

Here in San Diego, affordability is even more challenging. Recent California Association of Realtors data found that only about 17% of San Diego County households could afford the median-priced home.

That's a big reason buyers are being more selective. At today's prices and rates, the monthly payment has to make sense.

Thirty-year mortgage rates climbed during the second quarter and are now hovering around 6.8%. At the same time, the median price of a new home increased about 2%.

Put those together, and buyers simply have less purchasing power.

What Does This Mean in San Diego?

This matters even more here because our home prices are significantly higher than the national median.

Buyers aren't necessarily saying, “I don't want to buy.”

They're saying:

“At this monthly payment, the house needs to make sense.”

And we're seeing that play out in the market.

Buyers have become more selective. Homes that feel overpriced or need significant work can sit longer, while homes that are well-priced and show beautifully can still attract strong interest.

There's an Opportunity for Buyers

A slower market isn't necessarily bad news if you're trying to buy.

You may have something buyers haven't had much of in recent years:

Negotiating power.

Depending on the property, that could mean negotiating on price, asking for repairs or credits, or requesting a seller credit that can be used toward closing costs or an interest-rate buydown.

So while affordability is challenging, the list price isn't the only number we should be looking at.

The right question is:

Can we structure the purchase so the monthly payment works for you?

And If You're Selling?

Price matters.

Buyers are doing the math, and they're much less willing to stretch for a house simply because it's available.

That doesn't mean you can't get a great price for your home. It means we need to understand your competition, prepare the home well and price it where today's buyers see value.