Is This a Housing Bubble: Should You Invest in Interior Design?

Oct 5, 2015

As an Interior Designer I always consider resale value when helping a client remodel. In this crazy housing market, I asked 3 realtors for their opinion on where the market is, what they think the market will do and are people still renovating?

Q. What percentage have home prices gone up/down over the last year?

Claudette – In La Jolla, median home sales have increased 20.6% over last year! As of May, 2015, the median home price in La Jolla is $1,000,000, compared to May of 2014 when the median was $829,500 according to Sandicor.

Angela – San Diego prices have increased approximately 8.2%

Micah – The San Diego County Real Estate market has appreciated 3.1% percent since May 2014, according to CoreLogic, a real estate data tracking company. The median price of a home in San Diego County was $459,000 as of May 2015.

Q. What do you attribute this increase/decrease to?

Claudette – The recovering economy, pent up demand and a continual influx of national and international buyers choosing La Jolla as the perfect place for a second home.

Angela – Price increases or decreases are always driven by supply and demand. Prices have been on the rise since the beginning of 2012 because of a low supply and a strong demand. Demand continues to be strong with the number of homes that have been sold, along with the number of homes in escrow, increasing year over year. Interest rates are offering today’s buyers a historic opportunity. Rates are almost 50% lower than the decade of the 2000’s which had an average rate of 6.29%. Today’s rate at approx 3.7% is as low as it has been in this current decade of the 2010’s, matching the low of 2012, and being as low as rates have ever been in decades, again, truly a historic opportunity. Also making first time home buying more attractive has been the steady increase in rents since 1988 that continue today.

Micah – This relatively small increase actually surprises me considering the competitive nature of select zip codes in San Diego. Inventory has been low this year and it is not uncommon to see multiple offers and bidding wars on homes that are priced right. I do believe that 3.1 percent is healthy and sustainable, especially compared to the high increases we were seeing in 2013 and 2014.

Q. What do you see happening in real estate in the next 3-6 months? What about one year from now?

Claudette – We are seeing a steady incline in pricing currently which I expect to continue through the summer months. The local market tends to level off in the 4th quarter as we approach children returning to school and the holidays. We are anticipating steady growth of approximately 5-7% over the next 12 months

Angela – Rates are projected to increase to 4.75% by 2016 2Q so rate increases are coming. More homes are sold in the summer months so sale volumes will increase, combine that with the continued low inventory levels and we will see prices continue to rise.

Micah – I believe this answer hinges largely on what interest rates do. They are predicted to increase in the near future which will affect affordability and home prices could potentially drop. My prediction is that the price of San Diego real estate will stagnate or even continue to steadily increase due to buyer demand and lack of inventory. The real estate market here is very localized, meaning one zip code could be appreciating at 10% while another zip code may experience only a 2% increase. From an overall perspective, I foresee we will see a fairly stable market over the next couple of years.

Q. Do you think we are in a housing bubble?

Claudette – No, demand for our luxury market remains stable.

Angela – No. For this next year the projections are for price increases of approx 4.5% nationally. 119 top industry experts were polled in 1Q 2014 and almost every expert predicts increased prices at the end of this decade, 2019. In fact the forecasted average of all these experts is an increase of 19.3% nationally from today’s prices. The Real Estate market is very healthy, sales are up, prices are on the rise, and interest rate remain at historic lows, now is a great time to buy Real Estate.

Micah –Our economy is strong, inventory is low and buyer confidence is high. Additionally, buyers are putting a lot of money into the real estate market. Housing prices have been driven up by buyer demand exceeding the amount of available inventory. This is a different time. Buyers are not over-leveraging and purchasing homes they truly can’t afford, or speculating to make a quick profit like we saw during the Great Recession. The rental market is equally competitive and rental rates have been on the rise. There are currently not enough homes to support the number of people wanting to live in San Diego.

Q. Any observation about housing or the market that you would like to share?

Claudette – Properties priced at fair market value are receiving multiple offers due to low inventory.

Angela – With both interest rates and home valves projected to increase, today’s market is offering a much greater opportunity than it will a year from now. Waiting to make a move, as rates and values go up, decrease a buyer’s purchasing power. Buyers need to keep in mind finding a house is the easiest step in the buying process, but completing the negotiations and contracts have become more complex than ever, as such buyers should seek and employ experienced Real Estate Agents to assist them in completing their transactions.

Q. Biggest mistakes sellers make?

Claudette – Overpricing their homes due to an “overinflated” perception of the actual market.

Angela – Putting their homes on the market with a price above market value thinking they can lower the price later if it doesn’t sell. Statistics show that homes receive the highest priced offers within the first couple of weeks of going on the market, the longer a home is on the market the lower the offer price becomes.

Micah – Overpricing. It is a constant hurdle I have to overcome while meeting with a seller to list their home. I understand that a home is most likely a clients biggest asset and they want to net as much as possible on the sale of their home. However, overpricing can lead to chasing the market, and making the home appear as a stale listing. This could lead buyers to think something might be wrong with the home and the seller may take a lower price. Capturing buyers right out of the gate with a competitive price will put the seller in the drivers seat with negotiations, especially if we can draw in multiple offers, ultimately netting the seller more than if they priced the home too high to start with.

Q. What percentage of your clients renovate the homes they have bought? Is the renovation major or minor?

Claudette – Approximately 18-20% of my clients complete major renovations.

Angela – Renovation can mean many things. There is almost always things that can be completed to increase a home’s value.

Micah – Id say less than 25%, but this number is increasing. Many people dont have a vision or want to go through a remodel. They often times feel overwhelmed by the process. However, I try to encourage my clients be open-minded to buying a home that could use a little love in order to allow them to live in a more desirable area for their budget constraints and customize the home exactly to their taste. I always encourage my clients to contact a designer to help with remodeling plans, even if its a small job such as sprucing up a family room. Ive seen what Rebecca has done to improve the value of my clients properties and its amazing what she can do to transform a space and maximize the value of the home.

OPTIONAL Q.: Any thoughts on interior design and housing? 

Claudette – As I also sell new construction infill projects, a large percentage of our buyers retain the services of a professional interior designer to complete their homes.  This gives them access to the latest trend in design and technology

Angela – Great Interior design also increases a home’s value!

Micah – I love it! Beautifying a home and making the floor plan more functional can greatly enhance the quality of life of the homeowner. People walk into a property and think, how can I live here? If you maximize the potential of a property, you are going to maximize your return and the likelihood the next buyer will pay a premium when you go to sell because they want the lifestyle you have created. I have a lot of experience working with Rebecca as she is currently helping us remodel our home in Solana Beach, as well as helping other clients of mine with remodeling their homes. She has been an invaluable resource and I cant imagine going through this process without her!


Micah, Claudette and Angela seem to agree that the housing market is strong, inventory is low and the worst mistake a home owner can make when selling their home is to over price it. It seems that homes are selling fast in this market and that you can’t go wrong investing in interior design whether it is for you to enjoy or to increase your property value.