SAN DIEGO — A new study from UC San Diego predicts housing prices in San Diego will drop by 12% by the end of this year.
The study shows that internet search data can be an early indicator of where the housing market is going.
Researchers said they are tracking key words on Google such as, “buying a house” and related terms which allows them to predict the housing prices.
Allan Timmermann, a UCSD professor of finance and economics, is tracking the rate at which potential home buyers use the internet to search for homes.
"Historically, we find there is a stable relationship between search activity on internet and house prices 3, 6, or 12 months down the line. The indication that search activity is lower is an indication that demand is cooling off, at least historically, it has been connected to decline in prices," said Timmermann.
The study predicts housing prices will drop by 5% nationally.
Timmerman says San Diego’s housing prices are dropping more than the national average because it’s where the market over heated the most during the pandemic.
The study predicts Phoenix and Las Vegas will also see a decline in housing prices. However, housing prices in Kansas City and other areas in the Midwest are predicted to rise by 2%.
According to a new study by “Today’s Homeowner," 17% more homes in San Diego were valued at $1 million in 2021 compared to 2015.
"28.8% of homes in San Diego are valued over $1 million, however only 16.3% of people in San Diego can afford them, so there is a housing affordability issue going on," said Hailey Neff, researcher for "Today’s Homeowner."
"It's classical economics. When the prices become higher, even though San Diegans have livable incomes salaries; the rent is so expensive that they spend a higher part of their salary on housing," said Timmermann.
But if Timmermann and the study's predictions turn out to be true, housing in San Diego could potentially be more affordable in the near future.
"All predictions should be viewed with extreme caution, of course. I don’t know if we are any better or worse than weather forecasters," Timmermann said.
You can read more about the UCSD study here.
WATCH RELATED: Goldman Sachs: San Diego housing market to suffer 2008-sized crash (Jan. 2023).
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