An article published yesterday included some guesses about the future of the real estate market over the next five years. For those who thought it would be the usual expert opinions touting 3% appreciation per year, you won’t be disappointed, though Larry did throw in a possible 10% decline in California:

Yun foresees no major changes in purchase price tags on a nationwide level next year, with fluctuations of only about 5 percent one way or the other. The only exception is California, he says, where the market could see 10 percent declines: “Because it’s so expensive, California is always the most vulnerable to changes in interest rates.” This scenario is already playing out in the priciest areas in the state: For example, San Francisco median home prices are down 9.71 percent since last year, according to Redfin data. Overall, in five years, Yun expects prices to have appreciated a total of 15–25 percent.

McBride predicts home prices will average low- to mid-single-digit annual appreciation over the next five years. This rate of appreciation, he says, is consistent with the long-term average of home prices increasing by a rate that hovers a percentage point above the inflation rate.

I think the North San Diego County coastal region will perform much better for the following reasons:

  1. Baby boomers aren’t dying fast enough. The capital-gains tax for long-time homeowners is so burdensome that heirs to the estate will insist on their elders aging-in-place, or renting out the home if their elder goes into a senior facility. This will prevent any concentrations of boomer liquidations, and sprinkle them over the next 20-25 years – keeping inventories low. (Half of boomers are still working!)
  2. The dollar continues to devalue – money isn’t worth what it used to be.
  3. San Diego is a premier destination spot for rich people. The affluent who tire of deteriorating conditions in their current town will be happy to join us – and pay whatever it takes.

The demand will stay strong and the inventory extremely tight. The realtor and lender populations will get cut in half (at least) and the fascinations about the real estate market will continue – but for almost everybody it will be from the sidelines.

The local Case-Shiller Index has risen 54% since March 2020.

I think we will see another +50% in the next five years, and in 2028 there won’t be a month when we have 100+ sales of detached homes between La Jolla and Carlsbad.

What do you think?

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