New data shows that home prices in this city have increased 16.7-fold over the past 100 years, a pace faster than other major cities, including San Francisco and New York City.
Homes in San Diego, a California city a half-hour drive from the U.S.-Mexico border, increased in value by a whopping 1,572 percent between 1890 and 2006, adjusted for inflation, according to a research tool from the Federal Reserve Bank of Philadelphia.
Home prices in San Francisco, typically considered one of the most expensive cities to live in the country, rose just 5.6 times over the same period, or a 462 percent increase.
By comparison, in New York, Boston and Los Angeles, real estate prices rose an average of 3.6 times.
This is why San Diego home prices have risen so shockingly.
Pictured: Downtown San Diego. The city has transformed from a small town of just over 16,000 people in 1890 to one of the largest, most expensive metros in the country
The Philadelphia Fed collected the data it used from the sales prices of homes listed in millions of newspaper real estate advertisements during the late 19th century, the entire 20th century, and the first six years of the new millennium.
The listings are adjusted for inflation and changes in the quality of the homes over time. The data stops after 2006, because listings were generally posted online during that period.
A closer look at the data shows that until about 1940, homes in San Diego were much cheaper than homes in New York, Boston, and San Francisco. The West Coast city would experience a boom a hundred years later.
Compared to other major industrial metropolises, San Diego was still a fledgling city for much of the late 19th and early 20th centuries.
In 1890, the first year the Philadelphia Fed was able to collect data, New York City had a population of just over 1.5 million, while San Diego had only about 16,000.
It’s actually unfair to compare these two cities in this day and age, as New York was already well on its way to becoming a metropolitan powerhouse.
Skyscrapers had already been built, such as the 18-story New York World Building, which opened in December 1890.
In terms of infrastructure, the Brooklyn Bridge opened in 1883 and was the longest suspension bridge in the world at the time. The subway system would first open in 1904.
Pictured: Wall Street in downtown Manhattan circa 1890
On the left, the 18-story New York World Building, completed in December 1890. On the right, the Brooklyn Bridge, an engineering marvel that connected Manhattan to Brooklyn. Construction of the bridge began four years after the end of the Civil War and was completed in 1883.
This is what San Diego’s main town square looked like around 1880
This historic photo, taken sometime between 1905 and 1906, shows another public square in San Diego.
And by 1907, the city had more than 400 miles of asphalt, clearing the way for automobiles, according to The New York Times.
By comparison, San Diego County as a whole had only 250 miles of paved roads in 1929, nearly two decades later, according to the County’s Public Works Department.
That is to say, an early 20th century home in New York, a bustling, vibrant neighborhood with jobs and plenty of transportation, was clearly much more valuable than a home in San Diego at that time.
That began to change in the mid-1940s, at the height of World War II, and house prices in all four cities began to converge.
By then, San Diego’s population had grown to over 200,000. The city played a key role in the U.S. war effort in the Pacific, with its large, fully equipped naval base.
The trend of San Diego real estate keeping pace with other major cities would continue until the 1970s and 1980s, when prices skyrocketed. The same phenomenon occurred in San Francisco.
“California, even before the ’60s and ’70s, was a little bit more expensive than the rest of the country, but the difference really started … starting in the late ’60s,” MetroSight economist Issi Romem told the San Francisco Chronicle.
In Los Angeles, pictured, home prices rose 3.2 times between 1890 and 2006.
In Boston, real estate has also increased in price by 3.4 times over the past century
Houses in New York City were 3.6 times more expensive in 2006 than in 1890
The Philadelphia Fed doesn’t explain why housing in California rose so much in the 1970s and 1980s, but Romem says it had a lot to do with environmental regulations and tax breaks for farmers.
In the 1960s, California created the world’s first coastal protection agency, which protected the San Francisco Bay Area from pollution and overdevelopment.
The push to protect the environment only grew stronger when state legislators passed the California Environmental Quality Act in 1970.
Critics say the law continues to hinder the construction of houses and apartments to this day, as local planning commissions are required by law to evaluate the environmental impact of each new project.
Five years earlier, in 1965, the state legislature had passed the Williamson Act, which reduced property taxes for farmland owners who agreed not to further develop their land.
All of this has created a situation in California where it is incredibly difficult to develop new housing.
This keeps the supply of single-family homes low and the demand high, which is why you often see starter-home-like homes in major California cities for over $1 million.
“Neighborhoods with single families will in principle become untouchable,” said Romem.
“This is the story that explains why houses in California cost millions (of dollars), while houses in Texas cost hundreds of thousands of dollars.”
The only city in Texas the Philadelphia Fed studied was Dallas, where home prices in 2006 were 60 percent lower than they were in 1890.
Home prices in San Francisco (pictured) and San Diego rose in the 1970s and 1980s as a result of environmental regulations and tax breaks for farmers who did not develop their land.
Aerial view of residential luxury single-family beachfront homes on Mission Beach in San Diego. According to Zillow, the average home on Mission Beach costs almost $1.9 million
In Dallas, pictured, home prices in 2006 were as much as 60 percent lower than in 1890.
Pictured: San Diego Naval Base, located not far from the city center
Due to the high cost of living, California’s population declined steadily from 2019 to May 2024, when it grew by a small 67,000 people.
Meanwhile, Texas is growing rapidly, adding about half a million people last year.
And many of the people who contribute to Texas’ growth are fleeing California because they want to take advantage of homes that are a third cheaper based on the statewide average price.
Recent trends also suggest that real estate prices in the southern US could fall significantly, giving first-time homebuyers the opportunity to make an offer.
This is certainly not the case in San Diego, where the average home is worth over $1 millionan increase of 11.5 percent over the past year.