San Diego Real Estate Market Analysis

The San Diego real estate market has witnessed a strong real estate appreciation in recent years. According to NeighborhoodScout, since Q1 of 2000, San Diego property values have increased by 145.43%, which is an average annual appreciation rate of 4.77%. According to Zillow, the median house price within the city climbed by a modest 1.8% over the past year, and even smaller gains (0.5%) are predicted through the summer of 2020.

Zillow lists the current market temperature as “neutral”, with the median San Diego home value standing at $634,100. After several years of being a very hot seller’s market, it now seems that the San Diego housing market is cooling off and shifting towards a balanced market, with an equal number of buyers and sellers. Home prices in the area are rising more slowly today than in past years. That’s why buying an investment property in San Diego makes for a good real estate investment.

With tourists visiting in record-breaking numbers, San Diego is the 2nd most popular destination in California for Airbnb users after Los Angeles. Some 1 million guests stayed in Airbnb rental properties throughout San Diego County in 2018, bringing hosts a total of $213 million in income, the second-highest Airbnb income in California after LA.

San Diego’s City Council is in the middle of a long and ongoing battle between supporters and opponents of vacation rentals. It spent much of 2018 arguing over proposed short-term rental regulations, especially after it enacted a new law sharply curtailing Airbnb rentals in the city. However, a successful referendum petition drive led by Airbnb supporters forced the City Council to repeal the new law. The law in question, which was to go into effect in July 2019, would have limited short-term rentals in all parts of the city to owners’ primary residences (i.e. barring the use of non-owner occupied short-term rentals), and only for 6 months of each year while hosts are not present. Under this ordinance, all San Diego Airbnb operators would have been required to obtain a Short-term Rental License annually for a fee of $949, as well as a San Diego transient occupancy tax (TOT) certificate. 

In May 2019, a new bill to regulate short-term rentals in San Diego County’s coastal communities won approval in the state Assembly. The bill takes aim at vacation rental platforms such as Airbnb, HomeAway, and VRBO. Under this assembly bill (AB-1731), vacation rental platforms are restricted to listing a residential property for no more than 30 days a year unless the host was on site. Nevertheless, the bill allows year-round rentals for traditional home-sharing in which hosts rent out a spare bedroom or a granny flat on their property. The listing of any other home or investment property is banned.

This bill received mixed reactions and divided local jurisdictions in San Diego County’s coastal zone. As for the Airbnb platform, it voiced strong objection to it.

The future of Airbnb in San Diego is uncertain given the years-long delay in getting any firm regulations adopted. The AB-1731 bill is supposedly a pilot program that shall expire in five years, and that shall be studied to determine the effectiveness of the tighter controls.