UC San Diego Professor Allan Timmermann and his colleagues have come up with a new model for forecasting home prices in the San Diego region. Their new formula uses something most of us use everyday: Google search.
Timmermann said he helped come up with the idea after his own home search.
"So we thought, well, maybe if we could somehow track people's search interest, the search volume, we could get a sort of a pure measure of housing demand, and, well, the higher the demand, if the supply doesn't move too much, the higher prices should also be, and that's exactly what we found," he said.
His model has worked at predicting other things.
"Search has been found to be good at predicting things like the labor market," Timmermann said. "I think the human search reflects interest, and if you can keep track of that, you can predict outcomes."
The model or formula, he said starts with the term “buying a house” but then compiles other search data, with hard data, like actual home tours and offers. The results show that home prices in San Diego are predicted to drop.
"Essentially the number we were coming up with was -12% or so and that’s sort of from the beginning of the year 2023 until the end of the year. Our model predicts a steady decline," he said.
But it also shows a drop in the rest of the market too, as much as 5% nationally, 18% in Phoenix, 13% in Las Vegas.
The model’s predictability rate is 70%, the professor said that’s because new factors can come into play.
"This could definitely turn around and we’re still settled with the issue that the house prices are in absolute terms in absolute terms in level terms are still very high in San Diego right now and there's not not much supply coming online so that could help to cushion any sort of reductions," Timmermann said.
But San Diego real estate agent Jon Fields with Keller Williams Metro, said every time one of these studies comes out he has to help his clients navigate what they mean.
"Once I’m able to have that conversation with clients and really also discuss how long they plan to stay in a home and they can really make a much more informed decision from there," Fields said.
That decision for most people is about more than money, Fields said. It’s about stability and putting down roots.
"It's a lot less about trying to time the market and see 'Okay, how low can I buy how good of an interest rate can I get.' It’s about when you’re ready and you have the funds for your down payment and you’re able to support the payment that it’s going to give you, that’s when is the right time for you to buy," Fields said.
Both Fields and Timmermann agree though, home inventory is so low in San Diego that may be one of the factors that changes this prediction.
