Forecast: San Diego home prices to decrease, but not as much as nation’s

Framers work at the Enclave Otay Ranch Apartments in Chula Vista on Jan.13, 2020.

San Diego-area home prices will decrease 1.3 percent in the next year, much less than other parts of the nation, according to a forecast released July 7.

The CoreLogic Home Price Insights report says nationwide prices should decrease about 6.6 percent from May 2020 to May 2021, driven largely by high unemployment and the continued prevalence of COVID-19.

Estimates of home price changes have varied since the start of the coronavirus pandemic, especially as stay-at-home orders have been rolled out and the virus lasted longer than many expected. At the start of the pandemic, analysts were more likely to say home prices would decrease — but that changed as prices continued to increase. Now it seems evidence is pointing to a decrease again.

CoreLogic said home prices have largely gone up in the first months of the crisis as many sellers took homes off the market and left motivated buyers to fight for a limited number of properties. That was especially true in San Diego County, where the median home price climbed to near-record highs at $590,000 in May.

However, CoreLogic’s analysts believe the unemployment rate is a strong indicator that there will be a slowdown in the housing market — especially considering the recent increase in coronavirus cases.

“Despite new contract signings rising year over year in May, home price growth is expected to stall in June and remain that way throughout the summer,” the report said.

As of April, the San Diego metropolitan area had seen prices increase 5.8 percent in a year, said the S&P CoreLogic Case-Shiller Indices. That was the fifth-highest increase among 19 of the nation’s biggest metros.

The new report puts metro areas into one of three market categories: undervalued, normal (or “at value”) and overvalued. The anticipation is that overvalued markets, such as Phoenix and Atlanta, could experience the biggest losses.

CoreLogic considers San Diego a “normal” market, or valued correctly. The company decides whether home market prices are at the correct value by comparing home prices with long-term averages and looking at fundamentals of a local economy, such as disposable income.

It said Las Vegas home prices are overvalued and expected to drop 20.1 percent as of May 2021, while San Diego is expected to drop 1.3 percent. Like San Diego, Las Vegas is expected to be hit hard by a loss in tourism money.

However, San Diego metro may be better off than many tourism hot spots because of more employment options. A deep dive of unemployment data by Beacon Economics found that roughly 67 percent of workers in San Diego County were considered “essential” and less likely to have been impacted by stay-at-home orders.

CoreLogic’s prediction would make 2021 the first year that home prices decline in more than nine years. However, many reports have had to change as coronavirus cases rise and states slow down reopening. CoreLogic’s January index — released in early March before the virus was a major concern in the United States — forecast that home prices would increase 5.4 percent in a year.

Zillow also forecasts that the median home value in San Diego County will decrease, but slightly less than CoreLogic’s figure, at 0.9 percent in the next year. Its report cites uncertainty from buyers in the current environment and negative economic factors before COVID-19, such as increased corporate debt and businesses scaling back capital investments.