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Admittedly, there is an element of truth to millennials complaining about their current financial situation as a generation. They have arguably accrued more student debt than any other generation, besides the ones that came after them. Inflation has also been outpacing wage increases over the past few years. Making “one hundred thousand dollars” as your yearly income doesn’t carry nearly as much weight as it used to, especially in California. Even if you make 6-figures, you’re maybe considered middle class in parts of San Diego.
With the odds stacked against them, will millennials ever be able to afford to buy a house in San Diego, CA?
Real Estate Outlook for 2023
Looking back at last year, it appears that June of 2022 was the peak for real estate values in San Diego. While they have decreased consistently each month since then, values remain extremely high compared to a few years ago. The affordability of housing in San Diego has been blown out of the water over the past few years. Real estate values will likely continue to decrease in San Diego for the next few months depending on the interest rate levels. However, affordability still feels extremely far out of reach for many hungry millennial homebuyers.
Once interest rates drop, it will flood the market with buyers trying to capitalize on the combination of affordable mortgages and lower housing prices. There will likely be more demand for housing in the 2nd half of 2023. Once this shift happens, the market could turn from a buyers’ market back to a sellers’ market, causing prices to begin rising again. Just as affordability seems like it will become more attainable, it could be snatched away from millennial homebuyers.
Creative Ways to Buy a House in San Diego
An FHA loan is the perfect financial tool for millennial homebuyers to break their way into the San Diego real estate market. It’s arguably the best loan product for buyers in terms of money down requirements, besides loans designed for people that have severed the US Military. Even if millennials don’t have good credit, there’s still hope to secure a loan that doesn’t require a huge down payment. For example, certain homebuyers can qualify for FHA Loans with Collection Accounts depending on their financial situation. Don’t lose hope if you have a small amount of savings and bad credit!
House hacking is another strategy that millennials are using more often now because of affordability purposes. When a buyer ‘house hacks’ a property, they rent out some of the rooms (or units) in the house and offset their housing expenses with that rental income. Ideally, you can cover your entire mortgage payment, utilities, insurance, etc. with the rental income. However, in San Diego, it’s typically a different story. Covering that entire mortgage payment usually doesn’t happen using this strategy.
It should still be considered a victory if you can cover even a portion of your mortgage. This strategy can enable more millennials to creatively purchase homes they otherwise couldn’t afford. Especially once the market in San Diego gets competitive on the buyer side again, it’s vital that millennial homebuyers use every possible strategy available to them. In 2021, properties would go pending in days. Now, it can take several weeks for a home to sell on the market in San Diego. However, those tides will shift at some point in the future.
Where Should Millennial Homebuyers Look
There are options for millennial homebuyers to shop for houses outside of San Diego if they want to get started at a lower price point. Places like Oceanside offer a more affordable option versus other cities in North County SD. Buyers can also reach out to people in El Cajon to see if they want to sell their houses. This can be a good stepping stone for first-time homebuyers to get their feet wet. However, it’s important to note that if we go into a recession later this year, smaller towns like El Cajon can get hit. This could cause real estate values to plummet. Tread with caution before making the decision to buy a house and have multiple exit strategies at your disposal.
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