The real estate market in San Diego is constantly evolving, with numerous factors affecting supply and demand. Among these factors, three current hot topics are interest rates, taxes, and artificial intelligence (AI). Interest rates and taxes play a significant role in shaping buyer behavior, while the latest introduction of AI could transform the job market in San Diego as well as feeder markets.
Interest Rates & Taxes
Over the past three years, San Diego has seen an influx of wealthy buyers coming from Los Angeles, Orange County, and San Francisco. This has led to inventory suppression, as many of these out-of-town buyers have had a willingness to spend more on properties than local buyers. As a result, many local buyers have struggled to get offers accepted, which has (in return) kept their inventory off the market. Now, as the influx of out of area buyers has slowed considerably, inventory remains increasingly limited. Homeowners with low-interest debt have been forced to decide whether transferring that debt to higher interest debt will be worth it.
A recent tax policy change in Los Angeles County could drive another LA migration to San Diego. On April 1st, 2023, "Measure ULA" went into effect in Los Angeles County, imposing a 4% tax on sales over $5 million and a 5.5% tax on sales above $10 million. This will likely incentivize LA County Residents to look to Orange County and San Diego instead. Also, buyers considering Los Angeles will now be forced to consider this future selling condition when deciding where to move.
As mentioned in our blog post on February 6th, Artificial intelligence (AI) has made significant strides in recent years and is now surpassing human capabilities in certain tasks. One of the most notable examples is the AI system that recently passed the bar exam. This demonstrates that AI has the potential to disrupt the legal profession by making the work of paralegals and even some lawyers obsolete. This is not just limited to the legal profession, AI is also making inroads in other fields such as finance, medicine, tech and business. Ironically, the same coders who have been building this technology have created a system so powerful that it’s rendered many of their tasks obsolete.
As AI continues to improve, it will likely have a significant impact on the job market. AI is not just a passing trend, it's here to stay and will only get more traction. So, it is essential for industries and employers to start thinking about how they can adopt this technology early on and learn how to speak with AI to produce results that they are seeking. Artificial Intelligence is poised to transform industries across the country.
San Diego is home to a diverse range of industries, with a strong emphasis on technology, healthcare, biotech, and defense. These industries provide a significant number of jobs in the region. However, as AI becomes more prevalent, tech jobs in San Diego are likely to be impacted and/or transformed. This could have a knock-on effect on the influx of out-of-town buyers, as many of them are tech workers from the Bay Area and Los Angeles. If these workers lose their jobs due to AI integration, they may be less likely to migrate to San Diego. Despite this potential impact on the real estate market, San Diego's diverse job market should help to insulate the region from the worst effects of AI.