San Diego home prices will decrease 1.3% in the next 12 months, much less than other parts of the nation, according to a recent forecast.
The CoreLogic Home Price Insights report says nationwide prices should decrease about 6.6% from May 2020 to May 2021, largely driven by high unemployment and the continued prevalence of COVID-19.
Estimates of home price changes have varied since the start of the pandemic, especially as stay-at-home orders have been rolled out and the virus lasted longer than many predicted. At the start of the pandemic, analysts were more likely to say home prices would decrease — but that changed as the home price 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 it out for a limited number of properties. This 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 COVID-19 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% in a year, said the S&P CoreLogic Case-Shiller Indices. That was the fifth highest increase of 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 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 if home market prices are at the correct value by comparing home prices to 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% as of May 2021, while San Diego drops 1.3%. Like San Diego, Las Vegas is expected to be hit extremely hard by a loss in tourism money.
However, San Diego metro may be better off than many tourism hotspots because of more employment options. A deep dive of unemployment data by Beacon Economics found roughly 67% 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 home prices decline in more than nine years. However, many reports have had to change as COVID-19 cases rise and states slowdown reopening. In January, CoreLogic's January index — released in early March before the coronavirus was a major concern in the U.S. — predicted home prices would increase 5.4% in a year.
Zillow also forecasts the median home value in San Diego County will decrease, but slightly less than CoreLogic, at 0.9% 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 on capital investments.
