Number of New San Diego Sale Listings Rises in March
CoStar Insight: But Uncertainty Is Looming in the Capital Markets After Residents Stay at Home
Almost every property type added more for sale listings in March than in February. (CoStar)
By Lou Hirsh
April 1, 2020
On March 19, California’s Governor, Gavin Newsom, issued an indefinite stay at home order for the state in an attempt to slow the spread of the coronavirus. The order pertains to all non-essential business activity – grocers, pharmacies, gas stations, banks, laundromats, delivery restaurants, among others are considered essential.
The resulting order closed dine-in restaurants, bars and nightclubs, gyms, convention centers and public events while San Diego closed its beaches, parks and trails to help people maintain social distancing and limited gatherings to less than 10 people.
The pandemic is widely expected to slow demand across all property types in San Diego, perhaps retail, more than others. Only about one-third of America’s workers are employed in positions that would likely be able to be performed from home according to the Bureau of Labor Statistics, excluding the self-employed. That exposes a significant amount of the region’s workers, and their physical business space, to consequences from the order.
And as leasing slows in the space markets with rents falling across the board, deal volume in the capital markets is likely to come to a screeching halt for the next few months, as capital sources disappear and buyers and sellers avoid physical contact.
But so far, the number of properties offered for sale in San Diego in March, when the spread of the coronavirus moved from the hypothetical to reality, actually increased compared to February, according to CoStar.
Almost 110 properties were added for sale in March, a 13.5% increase compared to February and a 3% increase from January. And it was the same number as were added in March 2019.
Only apartment listings declined month-over-month, falling from 38 new listings in February to 35 in March. All others increased, with the largest percentage increase since February in the industrial sector, which recorded a 66% increase in for sale listings.
As April unfolds, we may find that some sellers pull back their for-sale listing in the hope of targeting the market on the way up, instead of on its way down. There are already examples of that happening across San Diego.
Unemployment is expected to continue rising into the second quarter and perhaps beyond. Oxford Economics forecasts nearly 70,000 lost jobs during the second quarter in San Diego in its severe downside scenario. In that scenario, businesses will be less likely to pay rent and may begin going out of business in the very near term.
If and when that happens, even if the number of active for-sale listings continues creeping up, there’s likely to be few buyers, and less debt available to finance those deals.
Most of the transactions that recorded in the second half of March were already under contract with financing lined up. The true barometer will likely begin playing out by the end of April.
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