August 2025 - San Diego Real Estate Market Update

San Diego’s housing market is in a unique moment: interest rates have dipped to their lowest levels in a year, sparking more buyer activity than expected for this season, while inventory has climbed to levels not seen since 2019. Prices overall remain near historic highs, but sellers are adjusting to market expectations with more concessions and reductions, creating opportunities for buyers who are ready to act. With sales volume still muted and affordability challenges persisting, the market is finding a balance that looks more like stagnation than dramatic shifts. For both homeowners and homebuyers, it’s a time to stay informed and consider how these conditions might open the right window of opportunity for those ready to make a move.

Mortgage Interest Rates

We have seen some rate relief this month that has buyers more active than they were last month, at a time of year when buyer activity is usually slowing down. Rates are currently hovering around 6.5%, which is lower than we’ve seen since the spring of 2023, with the exception of a one-month blip last September where rates were close to 6%.

Demand for Homes

While demand ticked up slightly in July and is keeping pace thus far in August, the bump is nominal compared to what would be needed to return to “normal” demand. On a ten-year timeline, this year’s highs for pending sales (demand) are only slightly higher than other years’ lows pre-2023. This is also evidenced by the increased market time before properties sell. Demand would likely return in force if rates fell below 6%, but that scenario seems unlikely with continued challenges with inflation and employment.

Real Estate Inventory

If no new listings came on the market and demand remained unchanged, it would take about three and a half months to sell all of the inventory of homes for sale on the market currently. That number hasn’t been higher since the summer of 2019. The total amount of active listings has decreased slightly as of late, which is typical for this time of year. New listings will likely decline rapidly now through the end of the year. Still, inventory is higher than it’s been since the fall of 2019, and because of a lack of adequate demand, we are starting to see homes stay on the market longer, and sellers adjust their expectations of their homes’ pricing.

Home Prices

The highest income earners are keeping demand just high enough to keep home prices roughly flat, but as you drill into the stats, you see that price metrics are highly variable depending on the area, the price point, and the desirability of a property. While the county-wide median home price is staying relatively flat, we are seeing homes sell for a lower percentage of their listing price and an increase in price reductions on active listings. Seller concessions are common, further chipping away at home sellers’ net profit. And while this is all good news for buyers, it’s not really bad news for sellers, as their home values still hover near all-time highs. For sellers, it's all about an adjustment of expectations and strategy compared to past months and years.

Sales Activity

Without a big jump downward in rates before the end of the year, 2025 will be a near record-low sales volume year, the same as 2023 and 2024 were. The overall low sales volume skews our statistics in a favorable light, but the reality is that affordability is still a challenge for everyday San Diegans with typical salaries and budgets, and that is keeping sales activity restricted.

Market Outlook

In order for affordability to return in our market, we’d need to see rates drop below 3.5%. That scenario is very unlikely, as rates that low are indicative of broader financial market distress and are used to keep the market moving. In the absence of major rate improvements, home values would need to fall by 25% to achieve general affordability. This is also unlikely, as mortgage default rates are extremely low, and consumer spending tells us that we have very little recession fear to contend with. That being said, jobs and wage growth are pretty stagnant, keeping people from leveling up in terms of what they can afford. This is a recipe for stagnation, which is more or less what is expected in the housing market for now. That doesn’t mean it’s now a good time to buy or sell for those who are in the position to do so; it just means that fewer people find themselves in that position.

Most importantly, if you have questions or concerns about your specific situation… CALL ME to help sort through them. That’s why we get up in the morning - not just to sell homes, but to serve our clients.

As always, we will be here to continue to provide you with updates about the housing market and answer any and all of your questions. Feel free to reach out to us anytime.

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