The ‘most unaffordable housing market in history’? San Diego No. 2 in nation for rising home prices

San Diego home prices are still rising among the fastest in the nation but, for a second month, New York is top dog.

The San Diego metropolitan area’s home price increased 8.7 percent annually in June, said the S&P Case-Shiller Indices report released Tuesday. New York topped the 20-city index with a 9 percent annual rise.

San Diego metro, which includes all of San Diego County, has seen the pace of increases slow while still near the head of the pack. The metro had seen prices rise around 10 percent to 11 percent annually for the start of 2024, making recent gains seem like a notable drop.

Even with slowing price gains, national home prices in June reached the highest level ever recorded by the index.

Lisa Sturtevant, chief economist at Bright MLS, wrote in her analysis that the 5.4 percent nationwide rise in prices in June, down from 5.9 percent last month, was its lowest since November. However, she said it was still remarkable that prices were rising given mortgage rates near 7 percent.

“The upward pressure on home prices is making this the most unaffordable housing market in history,” Sturtevant said. “In most markets, inventory is still low by historic standards and sellers still have the upper hand.”

Mortgage rates have been steadily going down since May. On the last day of June, the average interest rate for a 30-year, fixed-rate mortgage was 6.86 percent, said Freddie Mac. That’s down from a high of nearly 8 percent in October last year.

Sturtevant argued home prices won’t necessarily be more affordable if interest rates continue to drop because prices have increased so rapidly over the last few years.

The Case-Shiller Indices track repeat sales of identical single-family houses — and are seasonally adjusted — as they turn over through the years. The median resale single-family home price in the San Diego metro was $1 million in June.

Brian Luke, head of commodities, real and digital assets at S&P Dow Jones Indices, said that it breaks home categories into three categories: Low, middle and high.

“San Diego has seen the largest appreciation in higher-tier homes over the past five years” he said of the 20 cities. “While the overall San Diego market has risen by 72 percent in the past five years, the high tiers have done even better, rising 79 percent versus 63 percent for the lower tier.”

All cities in the index had prices rise year-over-year, but just barely in some cases. Portland was up 0.8 percent and Denver up 1.9 percent.

Zillow chief economist Skylar Olsen says there are now more homes on the market but it doesn’t mean buyers are jumping off the fence.

“While sellers continued to return, buyers seemed to be more cautious,” she said, “perhaps finally unable or unwilling to move forward at current pricing and mortgage rates that then still averaged above 6.9 percent for prime borrowers.”

Federal Reserve Chair Jerome Powell indicated last week that an interest rate cut was coming soon, which could equal lower mortgage rates. Mortgage rates follow the yields on mortgage-backed securities. These bonds typically track the yield on the U.S. 10-year Treasury.

As of Tuesday morning, Mortgage News Daily said the average interest rate for a 30-year, fixed-rate mortgage was 6.44 percent.

Annual price growth by metropolitan area, S&P/Case-Shiller Home Price Index, June 2024

New York: 9 percentSan Diego: 8.7 percentLas Vegas: 8.5 percentLos Angeles: 8.2 percentChicago: 7 percentDetroit:7 percentMiami: 6.9 percentCleveland: 6.7 percentSeattle: 6.7 percentBoston: 6.6 percentCharlotte: 6.4 percentWashington, D.C.: 6 percentAtlanta: 5.1 percentSan Francisco: 4.3 percentPhoenix: 3.7 percentTampa: 3.1 percentDallas: 2.3 percentMinneapolis: 2 percentDenver: 1.9 percentPortland: 0.8 percent