There are a lot of considerations when contemplating purchasing real estate. One that continually comes-up in my conversations is:
“Is now a good time to buy?” or,
“When will the next opportunity be to score a great deal?”
Timing a real estate purchase or sale can be so important for any person or family’s finances, or for the performance of any investment. It can mean the difference between long-term success and frustrating peaks and valleys. This is why it’s so important to work with a realtor who is finance savvy and has years of experience with investing.
The truth about understanding the San Diego real estate market is, no one knows with certainty when the best time to take action is. Anyone who tells you they know for sure is lying. A true investment expert will look at patterns, facts, and trends to make an educated decision – they never pretend that they know it all.
All that being said, there are a few things to consider that can help you make educated purchases and sales. As an investment expert, when I think about timing, I think about cycles. The first two cycles are nationwide – The Long-Term Debt Cycle and the Short-Term Debt Cycle. I then try to relate these cycles to each metro in the US and especially my home in San Diego.
For the first couple cycles, I am going to recommend that you watch Ray Dalio’s Youtube video “How the Economic Machine Works”. It’s an investment of time – about 30 minutes – that I highly recommend to everyone. Bookmark the video to watch it when you can carve out the time. For those who are serious about possibly investing in real estate, it’s a must-watch that will give you more confidence and knowlege around the subject.
If we look at how these cycles relate to each metro – some metros (primary markets) heat up first, then there are secondary markets, and so on. This relates to metros as a whole, but also neighborhoods within each neighborhood. And as we know, San Diego is full of neighborhood “pockets,” each with their own economic and demographic patterns.
While knowing where we are exactly in the Short and Long-Term Debt Cycles can be very difficult, observing where a particular neighborhood is in the “Neighborhood Life Cycle” can be a little easier and solid.
The neighborhood life cycle consists of four phases – Growth, Stability, Decline and Renewal.
I should preface all of this with the fact that not all neighborhoods move through all of these phases. As I reside in and know San Diego the best, I am going to relate this life cycle to a couple of San Diego neighborhoods.
If we think about a neighborhood that is a prime example of not moving through the cycles – it is La Jolla. The Jewel of San Diego! Ask any real estate expert in this city and they will agree that they are not aware of anytime La Jolla really experienced a decline. This is not to say that La Jolla see home prices decline, as it followed the rest of the economy in previous recessions, but La Jolla has never been a less desirable place to live as measured relative to other neighborhoods. La Jolla stays (and I would expect it stay) in the stability phase. Good for you, La Jolla.
On the contrary, a neighborhood like North Park has clearly experienced these four phases of a neighborhood.
For those unfamiliar with North Park, it is a small community east of Hillcrest with quite the history of economic peaks and valleys.
ExploreNorthPark.com shares some interesting information about the history of the city:
“North Park fascinates visitors and residents alike with its visible history that began more than 100 years ago. In the early 1900s, the streetcar lines of John D. Spreckels’ San Diego Electric Railway brought investors, residents, and shopkeepers to a nearly empty, scrub-covered mesa. The streetcars that ran along University Avenue (Number 7) and 30th Street (Number 2) met in 1911 and created the “Busy Corner,” then and now the commercial heart of the community.” Click to continue reading more about the history of North Park.
In the early 1900’s, North Park was in the growth stage. Then after WWII, the city really started to boom, and families started flocking to new developments in the area. Interestingly enough, my grandparents were San Diego natives, and purchased their first home on Dale Street, when developments in North Park were brand new! Anyways, during this period of time, North Park was strong and stable. But, as they say, what goes up must come down.
Interestingly enough, my grandparents were San Diego natives, and purchased their first home on Dale Street, when developments in North Park were brand new!
Then, things started looking grim for North Park. New home developments started to increase in the suburbs of San Diego around the 1970’-1980’s, and the market saw a shift in demand as families made their way to communities North and East. North Park’s stability took a nosedive and began entering the decline phase.
It wasn’t until the 2000’s San Diego’s started to come back to the area, wanting to be closer to the metro San Diego area. This shift in demand kickstarted North Park’s revitalization. Slowly but surely, more people started settling into the area and it, once again, started to grow and flourish.
Renewal at last…
These days, North Park is teeming with breweries, restaurants and retail shops and is a haven for young professionals, hipsters and families. With the growth and stability of the area, came higher rent prices and property values. Now in 2018, North Park is one of the most popular neighborhoods in San Diego. Forbes recently named North Park one of the Nation’s Top Hipster Neighborhoods!
Sometimes it can be difficult to predict which cycle we’re in on a broad level, ie: by the entire region, state or country, but when you look at it from a micro-community level, you can easily spot them.
My job as a real estate investment expert, is to identify which lifecycle a neighborhood is in. These cycles give us key insights into short and longterm changes that the area may face. In terms of an ideal cycle to invest in, there are many advantages of investing in a neighborhood that is just beginning its revitalization period. We’ve discussed San Diego’s Up & Coming Neighborhoods in the past, but look forward to an updated post next month breaking down which parts of the county are in the renewal stage.
I hope this article will help you gain a more clearer understanding of the cycles of a neighborhood so you can feel more confident in your real estate investment decisions. If you have any specific questions about a neighborhood in San Diego, please contact me.
All the best,