Why San Diego's new builds are cheaper than old homes
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Condos, apartments and single family homes in Pacific Beach near Mission Bay. Photo: Kevin Carter/Getty Images
Home shoppers could get a better deal buying new than used around San Diego, according to a recent Zillow report.
Why it matters: People typically pay a premium for brand-new houses, but in San Diego, location is king and existing homes are on the most desirable land.
By the numbers: New homes in San Diego County are selling for $552 per square foot, compared to $609 for existing homes, per the report.
- That $57 discount is the largest among major U.S. metros.
- Land value is the biggest factor contributing to that difference, according to local real estate analyst Gary London.
Between the lines: Existing homes tend to be closer to the high-cost, highly-desired coastal areas, whereas new homes tend to be built further east and south.
- A new, 3,000-foot home in La Jolla would be worth three times more than the same new house built in El Cajon, London said.
- Coastal communities are mostly built up already, so new homes are less common there. The exceptions: some infill development with townhomes and higher-density housing, or homes that are torn down and rebuilt.
- Most new builds are in more affordable places like Chula Vista, Otay, or inland Oceanside and San Marcos, he said.
Reality check: There's not a lot of new housing being built at all around San Diego, according to London.
- The city issued more permits last year than it has in decades, but it's still not enough to keep up with demand.
- Low inventory is keeping prices high.
Zoom out: Home buyers are seeing these discounts in 21 major U.S. metros, led by San Diego, Salt Lake City and Los Angeles, per Zillow.
The big picture: With elevated interest rates hammering housing affordability, many builders are shrinking homes to cut costs or offering incentives, including lower rates on mortgages, Axios' Sami Sparber reports.
- The average 30-year fixed mortgage rate has fallen lately, reaching 6.47% last week, according to Freddie Mac.
- "Not only are cash-strapped buyers continually seeking out lower-cost options, but developers are changing what type and size of home they're producing to try and meet that need," Zillow senior economist Orphe Divounguy tells Axios.
The bottom line: In San Diego, "new builds are in inland areas and existing homes' resale reflect the fact that they're better locations closer to the coast," London said.