The number of people putting their old homes for sale in San Diego County has slowed dramatically — but don’t expect many options for newly built homes either.

There are fewer new single-family homes hitting the market in 2023 than perhaps since the Great Recession.

Developers state that less than 1,000 new single-family homes will be built in 2023. Guesses at the start of the year are typically much lower than what ends up being built because developers will increase their production based on how well sales are doing.

Still, even if developers add an additional 1,000 homes, it would be low by historical standards. There were 1,706 single-family homes built in 2009, the lowest in the last 20 years. If current building trends hold, it’s possible this year will bring another low point.

The cost of a newly built traditional, single-family home — which is still the most desired home type — is substantially higher than a resale one. Most new homes this year start around $1 million and go up from there. And don’t expect them to be within walking distance of Balboa Park.

New houses are mainly concentrated in Chula Vista’s Otay Ranch neighborhood, San Marcos and Poway.

Nathan Moeder, a San Diego real estate analyst, said the big reason for the lack of single-family homes is California’s push for denser housing. But, another short-term factor is developer uncertainty in the market.

San Diego County home prices have dropped seven months in a row as of December, so Moeder said builders — who prefer prices to be as stable as possible when they release new supply — aren’t willing to ramp up building until things calm down.
Despite builders’ caution, the region’s declining number of homes for sale means demand for new properties might be higher than ever.

There were nearly 6,000 homes for sale in San Diego County last summer, and the majority were resale single-family homes. At that time, interest rates for a 30-year, fixed-rate mortgage hovered around 5 percent. By February, as rates neared 7 percent again, there were around 3,000 homes for sale.

The thinking among many potential sellers is that it makes sense to hang on to homes with lower interest rates and avoid higher rates with a new home. Even if they were looking for a big payday for their property, many are hesitant to face higher mortgage rates — even if the idea of refinancing in the future is possible.

Sellers also might not be very eager to put their homes on the market as prices continue to drop. San Diego County’s resale single-family home price ended 2022 at $825,000 — down more than $100,000 from a peak reached in April.

Some of the most expensive new home options are in Poway. There is The Cottages at the Farm development near Interstate 15 where prices start around $1.2 million or at Homestead at the Farm where prices start around $1.7 million.

There are cheaper options, such as Pomelo in Fallbrook, which has homes starting around $680,000. However, it could be far from where potential buyers work, resulting in long commutes.

In space-constrained San Diego County, it’s becoming much more common nowadays for city planners to prefer smaller single-family homes that are typically more affordable and that maximize space.

The single-family home in San Diego County is not going away, but we might continue to see fewer and fewer new ones.
To address housing shortages, a mix of state and local laws have been targeted at building denser developments, especially near transit. That means more townhouses, condos and apartments, instead of the idealized single-family home.

Source: SDuniontribune by Phillip Molnar