California Dreams Breaking the Bank for San Diego Homeowners

The balmy weather, 70 miles of pristine coastline, and relaxed vibe attract people from all over to San Diego County, for both vacations and relocations, but the latter is becoming increasingly difficult to afford. The city that’s known for its transplant population may be pricing out those hoping to migrate, and making it difficult for many native residents to keep their heads above water.

Major cities in California, including San Diego, San Francisco, and Los Angeles, have long topped the lists of priciest places to live, work, and own a home, but slow wage growth coupled with skyrocketing home prices are pushing San Diego further out of reach than ever. In fact, the cost of living is currently 44% higher than the national average, moving the city from No. 8 to No. 5 on Finder’s list of most expensive U.S. cities for homeowners. Wages in the county increased just 2% from 2008 to 2018; not nearly enough to keep up with inflation.

San Diego boasts a diverse population, making it difficult to define a “typical” household, but when you look at average home maintenance costs alongside median wages, it’s apparent why many San Diego homeowners are struggling to accomplish financial goals on top of their mortgages and related costs.

Snapshot of a San Diego Homeowner

Inside the average San Diego home is a family of three, bringing in a median household income of $75,450. Just under half of residents (47%) own their home versus rent, of which 73% are still paying down their mortgage.

Purchasing a home today in San Diego requires a six-figure salary, an estimated $101,023 annual income. That figure takes into account an average home value of $690,900, non-housing expenditures costing $38,156, and carrying non-mortgage debt of $16,584.

These housing expenses are approximately 136% higher than the national average—but it doesn’t stop there. Grocery prices are about 13% more costly, healthcare is 8% higher on average, and utility prices are 15% higher.

A recent WalletHub report put San Diego in the top 11% of cities with overleveraged mortgage debt, proving just how frequently homeowners are overborrowing and overextending themselves to get into a house.

“San Diego is among the cities with the highest mortgage debts,” Jill Gonzalez of Wallet Hub, told GlobeSt.com. “This makes housing affordability a serious issue. However, people want to own a home, and they end up taking mortgages that can put strains on their household budgets.”

Home Maintenance

Of course, the costs of owning a home aren’t restricted to the mortgage. Maintenance costs to keep up home value come with their own hefty price tag.

In 2020, San Diego homeowners typically paid anywhere between $11,783 and $94,270 for home renovations, averaging $53,026.

“With San Diego being one of the hottest real estate markets in the country and so many people working from home as well as home schooling, I believe our business will continue to grow in 2021,” Gregg Cantor, President and CEO of Murray Lampert remodeling told Hometap. “Roughly half of our clients finance their improvements through a cash-out refi, home renovation loans or home equity lines of credit.”

That also means that while these homeowners are likely adding great value to their homes, they’re then carrying a greater burden of debt and accumulating interest payments.

The Toll on Small Business

COVID-19 has added more financial stress for self-employed homeowners and small business owners everywhere, and San Diego is no exception. The city is No. 3 for most self-employed residents in the country, behind Miami and L.A.; approximately 12.2% of San Diegans are self-employed, and small businesses in the county depend on tourism in the summer months to make up for the slow season.

$700 million in PPP loans were given to local San Diego businesses at the onset of the pandemic, and it was recently announced that an expanded loan program would include broader qualification criteria to help larger-staffed small businesses operating in cities.

Still, many small business owners fear it’s too late.

“We haven’t seen any money from the [PPP], but it doesn’t really matter because it would’ve only put a Band-Aid on the problem,” Damon Goldstein, co-owner of Truly Fine Wine told the San Diego Tribune. “It doesn’t give me the runway to manage collection issues, or to make orders. It doesn’t get me back off the ground. Without our income stream, we don’t have enough to run our business.”

A Silver Lining

In the second quarter of 2020, the average California homeowner gained approximately $12,000 in home equity over the previous year. If the competitive housing market keeps up, homeowners may see that number climb in 2021.

Median sales prices in San Diego have risen 17% in recent months, hitting a new record in September. Real estate experts in the area point to a few factors causing the market spike: many sellers are keeping their properties off the market as they wait out the pandemic, making the competition for a limited pool of homes intensify, and the remote working trend is driving more renters to look for larger, more permanent homes.

Record-low interest rates make refinancing an attractive option for homeowners with built-up equity looking for additional cash flow. For those looking for a way to access their home’s value without adding more debt, home equity investors like Hometap have expanded their footprint to invest in homes across California, providing an interest- and monthly payment-free way to turn home equity into cash now.

San Diego homeowners can receive as much as $400,000 from their home equity to use toward high-interest debt like renovation loans and credit card debt, keep their small business going, and pay their mortgage for a more manageable monthly amount.

The more you know about your home equity, the better decisions you can make about what to do with it. Do you know how much equity you have in your home? The Home Equity Dashboard makes it easy to find out.