September 2025 - San Diego Real Estate Market Update

As we step into fall, the housing market is starting to show some real signs of movement, with mortgage rates finally trending downward after a long stretch of highs. That shift alone has the potential to reshape buyer and seller behavior over the coming months, but it’s not the whole story – economic headwinds, shifting inventory, and affordability challenges are still playing a big role in how the market is behaving. In this report, we’ll take a closer look at where rates, sales activity, inventory, and prices stand today, and what these trends may mean for the rest of 2025 and into 2026.

Mortgage Interest Rates
Mortgage rates have fallen substantially in the month of September, and it looks as if this improvement will continue, which should offer a small pressure release valve for property demand. That being said, the improvement in rates is due to weakening economic conditions for American consumers, including a slowing job market, which is causing homebuyers to act with caution and restraint. While we have current, live data on mortgage rates and demand, we only have data from the previous month for home prices and market activity, and rates had yet to reach their current lows by the end of August. That means that we only have anecdotal evidence of the impact of these recent rate drops on the market; hard data will lag by a month or more.

Demand for Homes & Sales Activity
Mortgage applications are currently higher than they’ve been since the spring of 2022, when rates reversed course from their record lows and began climbing. Rates surpassed their current levels by the fall of 2022, and since then, have only briefly reached the current low twice, in early 2023 and fall of 2025 – both times for less than a month. Now, the downward rate trajectory seems sustainable, meaning not only are potential homebuyers excited by the prospect of lower rates now, they’re encouraged that by the time they find homes in a month, or two, or six, rates will be even lower. Anecdotally, it seems that pending sales have picked up a bit since leveling off in August. However, don’t expect a huge surge of homebuyers flooding the market and bidding up prices… at least not yet.

Real Estate InventoryReal Estate Inventory
Active listings of homes for sale currently sit far above their highest levels since 2019, but would still be considered low by historical standards. Both new listings and active inventory dropped in August, which was a bit early to chalk up to typical seasonal shifts. It seems that since the mortgage rate dropped in early September, inventory has risen again, although we don’t have hard data for that yet. This demonstrates that there are plenty of homeowners who have been waiting to jump to sell until they felt rates were low enough to justify a move. The question will be whether the new rates tempt enough homebuyers off the fence to absorb the inventory.

Home Prices
If buyers come out of the woodwork due to the new rate environment, we will see home prices stay level or grow slightly, but it’s unlikely that we will see enough buyer activity to cause prices to jump substantially, at least until after the new year. What is more likely is that price decreases will slow but continue into January, then begin to climb again as spring draws near. How much depends on how low rates go, whether the employment landscape improves, and how much inventory materializes.

Market Outlook
The outlook for the housing market through the end of 2025 and into 2026 is looking a bit brighter, with mortgage rates expected to ease gradually (possibly dipping below 6% by late 2026) and home sales picking up gradually, after what’s been a slow few years. Prices aren’t expected to skyrocket but should continue a steady annual growth, despite seasonal dips. Affordability will remain the biggest hurdle for buyers as incomes trail behind home values, but lower rates will help, and should also encourage an increase in inventory, offering more options to those buyers who venture into the market. Overall, conditions heading into 2026 look more balanced and optimistic than we’ve seen in recent years, even as affordability remains a challenge.

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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