June 2025 - San Diego Real Estate Market Update

The housing market in 2025 has found itself in a quieter, more measured rhythm — one shaped by sustained high interest rates, rising inventory, and shifting priorities for both buyers and sellers. The frenzied activity we saw a few years ago has frozen, making way for a market where patience and preparation matter more than ever. Today’s buyers have more options and room to be selective, while sellers have to work harder to stand out. Understanding these dynamics is the first step to making smart, informed decisions in an environment where the right strategy can make all the difference.

Mortgage Interest Rates

Mortgage rates have seen some marginal improvement since their most recent spike in May; however, they’re still hovering closer to 7% than 6%, where they briefly were last fall. Near 6%, mortgage demand improved marginally, but the lion’s share of most would-be buyers still stayed on the fence. To see substantial homebuyer demand return to the market, mortgage rates would need to fall below 6%. There is some hope, as there is increasing talk of the Fed lowering interest rates, as well as geopolitical events being managed to mitigate major negative market impacts.

Demand for Homes

In years past, before the pandemic, a low month for home demand would typically see around 2,000 homes go under contract, and most years, peak months would see nearly 4,000 homes sold. Since the end of 2022, a high month for home demand has seen around 2,300 homes go under contract, while low months have seen fewer than 1,500 homes sell. We haven’t seen major fluctuations in mortgage applications this year, but demand took a steep dive in response to rates rising in the spring of 2022 and has yet to recover as rates and home prices remain high.

Real Estate Inventory

Rising inventory is the biggest change the market has experienced in 2025. In recent years, the few buyers who remained in the market still had limited options for purchasing homes, and thus, sellers still held a level of power in negotiations that is now waning. Demand for homes hasn’t increased, but inventory has – to levels not seen since the fall of 2019 – and buyers are responding to this by moving more slowly and holding out for a better property, as well as using a more assertive approach in negotiations. The mood is languishing, with sellers disappointed in how few showings they’re getting, and buyers feeling a lack of excitement about their options.

Home Prices

Home prices have held stable near their all-time highs; however, seller concessions paid to buyers, which do not show up in pricing data, have increased dramatically since those all-time high prices were established, effectively decreasing home sellers’ net proceeds at closing.

Sales Activity

Home sale activity has likely peaked for the year, as is typical and seasonally appropriate. New listings also typically begin to decrease in June in a normal year, and whether that happens this year or inventory continues to grow will determine the outcome for home prices. Last year, mortgage rates improved in the fall, and sales activity benefited. If sales activity slumps in the fall and into winter this year, we could be looking at a new record low in sales volume.

Market Outlook

The real estate market of 2025 has often been described as ‘frozen’, and that is apt as it pertains to homebuyers. Home sellers have actually ventured out much more this year than in 2023 and 2024, resulting in a much healthier supply of homes for sale for buyers to choose from. Still, buyers have issued a collective sigh of indifference to this change in their favor. They might appreciate more options, but what they need is an increase in affordability. If they can’t get that increased affordability in the form of mortgage rate reductions, they’ll demand it in the form of home price decreases. For now, buyers are getting their needs met by negotiating seller credits - credits to pay their buyers’ agents, credits to pay for rate buydowns, credits for repairs - you name it. If mortgage rate relief doesn’t come soon, home prices will begin to slow. If rates drop near or below 6% – a long shot in the short term – all bets are off in terms of sales activity, home prices, and our current market dynamics. Wouldn’t that be exciting?

The reality is that this market demands a more thoughtful approach from sellers, in an environment where buyers have more choices and a stronger voice in negotiations, pricing correctly and presenting a well‑prepared, well‑marketed home is critical. It’s no longer enough to just put a sign in the yard — sellers need to be realistic about pricing, open to offering concessions when needed, and focused on making their property stand out. The right buyers are still out there, and with the right strategy, a successful sale is absolutely within reach.

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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