San Diego Housing Market Slows as Prices Decline

San Diego Housing Market Cools, Presenting Buyer Opportunities amidst Shifting Trends

San Diego’s formerly red-hot housing market is showing signs of a significant cooling, with median sale prices and sales volume experiencing year-over-year declines. In June, the median sale price for a home in San diego County stood at $917,500, a 3.3% decrease from the previous year, according to Redfin data. Furthermore, the number of homes sold also dipped by 1.4%, with 2,019 transactions recorded in the same period.

Chen Zhao, head of economic research at Redfin, attributes this shift to a confluence of factors. “Demand has slowed down a little bit,” Zhao explained. “Simultaneously occurring, supply has really started to pick up. The reason why demand has slowed down is because of really high mortgage rates, and that affordability is still pretty strained in most of the country, and including in San diego.”

Realtors on the ground are witnessing these changes firsthand. Destiny Roxas, a broker associate with Remax Connections, described the current market dynamics: “It’s very challenging for sellers, for those of us that have listings, but it’s hugely beneficial for buyers because they’re getting everything they ask for.” This buyer’s advantage is further underscored by the increase in days homes spend on the market. In June, the median days on market for a house in San Diego County was 29 days, an increase of 12 days compared to the previous year.

Adding another layer to the evolving market, a weakening U.S. dollar could potentially translate into more attractive opportunities for foreign buyers. “In the context of a weakening housing market, what’s also happening at the national level is that the U.S. dollar is also weakening,” Zhao noted. “So, what that means for a particular group of buyers, for foreign buyers, is that for some of them, U.S.real estate is becoming even more of a better deal.”

Looking ahead,market experts anticipate a continued buyer-favored surroundings. Zhao predicts that the San Diego housing market could be even weaker in six months, with potential for further negative price growth beyond the current 3.1% decline. This forecast is largely based on the expectation that mortgage rates are unlikely to decrease in the near future, maintaining pressure on affordability and empowering prospective buyers.

Evergreen Insights:

Understanding the cyclical nature of real estate markets is crucial for both buyers and sellers.While high mortgage rates and affordability challenges can create headwinds, they often present unique opportunities for well-positioned buyers who can negotiate favorable terms. The interplay between national economic trends, such as currency strength, and local market conditions can significantly influence investment potential, particularly for international buyers. For those considering a move in San Diego, a cooling market suggests a shift in negotiating power, making it an opportune time to explore options and secure a property with potentially greater concessions.

What impact are rising mortgage rates having on buyer demand in the San Diego housing market?

The Current State of San Diego Real Estate

The San Diego housing market, long a hotspot for California real estate, is experiencing a noticeable slowdown in late 2025. After years of rapid gratitude, San Diego home prices are declining, and inventory is steadily increasing. This shift presents both challenges and opportunities for buyers and sellers in the San Diego County real estate landscape. Several factors are contributing to this change, including rising interest rates, economic uncertainty, and a shift in buyer demand.

Key Indicators of a Cooling market

Median Home Price: As of July 2025, the median home price in San Diego County is $950,000, a 5.2% decrease compared to the peak in Q1 2025. (Source: San Diego Association of Realtors, July 2025 Market Report).

Inventory Levels: Active listings have increased by 38% year-over-year, providing buyers with more choices. This is a meaningful change from the historically low inventory levels seen in recent years.

Days on Market: Homes are staying on the market longer. The average days on market is now 45 days, up from 28 days in July 2024.

Price Reductions: A growing percentage of listings are experiencing price reductions, indicating sellers are adjusting to the changing market conditions. Currently, 22% of listings have been reduced.

Mortgage Rates: The average 30-year fixed mortgage rate currently sits at 7.12%, impacting affordability and buyer demand. (Source: Freddie Mac, July 24, 2025).

Regional Variations Within San Diego

The slowdown isn’t uniform across all of San Diego. Certain areas are experiencing more significant price declines than others.

Coastal Communities (La Jolla, Del Mar): While still relatively expensive, these areas are seeing a moderate decrease in demand, with price reductions becoming more common.Luxury home sales are especially affected.

Central San Diego (Mission Valley, Hillcrest): Condos and townhomes in these areas are experiencing increased inventory and slower sales.

North County (Carlsbad, Encinitas): Remains relatively stable due to strong schools and lifestyle appeal, but even these areas are seeing a slight cooling trend.

East County (El Cajon, Santee): More affordable options in East County are holding their value better, attracting buyers priced out of coastal areas.

Factors Driving the Market Shift

Several interconnected factors are contributing to the current state of the San Diego housing market.

1. Interest Rate Hikes: The Federal Reserve’s aggressive interest rate hikes to combat inflation have significantly increased mortgage rates,making homeownership less affordable.
2. Economic Uncertainty: Concerns about a potential recession and job security are causing some buyers to delay their home purchases.
3. Increased Inventory: More homes are coming onto the market, giving buyers more options and reducing competition.
4. affordability Challenges: San Diego remains one of the most expensive housing markets in the United States. The combination of high prices and rising interest rates is pricing many potential buyers out of the market.
5. Shifting Demographics: Some reports suggest a slight outward migration from California, contributing to a decrease in demand.

Impact on Buyers and Sellers

For Buyers: Opportunities Arise

The cooling market presents opportunities for buyers who have been priced out in recent years.

More Negotiating Power: Buyers have more leverage to negotiate prices and terms.

Reduced Competition: Fewer bidding wars mean less pressure to overpay for a property.

Increased Inventory: A wider selection of homes to choose from.

Contingencies are Back: Buyers are more likely to be able to include contingencies (like inspections and appraisals) in their offers.

For Sellers: Adjusting expectations

Sellers need to adjust their expectations and strategies to succeed in the current market.

Realistic Pricing: Overpricing a home is a surefire way to have it sit on the market.

Professional Staging: Making a good first impression is crucial.

Consider Concessions: Offering concessions, such as help with closing costs or repairs, can attract buyers.

* Be Patient: Homes are taking