What's Really Going on in the San Diego Housing Market

San Diego real estate has changed. And if you live here, you've probably already felt it. Affordability is low, rates are still much higher than where we'd like them to be. It has a lot of people wondering, should I buy, should I sell, or should I just sit tight? Hey, I've been off YouTube for a little while now. So what better way to come back than diving into something I'm truly passionate about? And today I'm gonna be talking about the truth about what's really happening right now in San Diego. Hi, I'm Jamie Lennon, your local San Diego realtor, sharing insights on neighborhoods, the lifestyle, and the market. If you're looking to buy or sell anywhere in the greater San Diego region, know that you can call, text, or email me anytime. You will find my contact information in the description. And if you are looking for a different market anywhere in the country, I have a network of amazing realtors that I'd be happy to connect you with. So to really understand what's happening in the market, we have to look at the numbers. So the data that I'm gonna be pulling from today is from HomeDex, and I'm going to compare the metrics for detached single-family homes from September 2024 to September 2025. And we're gonna be looking in the county of San Diego as a whole. So we're gonna be casting a bit of a wider net here. So new listings are up 10.3%, showing an increase of homes coming on the market. Now, median days on market are up 30%, now at 30 days. So median sales price is at 1,035, which is up 2.5% year over year. Now, percentage of original list price received is 97.8%, which is down 1.4%, meaning homes aren't selling for the full price anymore. That's why we're seeing a lot of price reduction. So as of September, we sat at 2.7 months of inventory, which indicates a neutral-to-buyers market. For perspective, during the pandemic, we hovered at just one month of inventory. But throughout 2025, we have teetered between 2 1⁄2 to 3 1⁄2 months of inventory. Now, when I look at that, I don't see anything extreme in this data, but it does show obvious signs of a shift. Plus, you can't deny the fact that homes just aren't selling like they used to. We see a ton of price reductions, homes sitting longer, and the biggest reason, portability, that's it. There's not enough demand. Buyers are sitting on the sidelines waiting for something to give because homeownership feels more and more out of reach, especially for first-time homebuyers, especially here in California. The general rule for affordability is that housing is considered affordable if your payment equals about 30% of your gross monthly income. The median household income in San Diego is about $100,000 a year, or roughly $8,300 a month. 30% of that is around $2,500 a month, which can afford you a mortgage on a $400 to $450,000 home. But the median home price in San Diego is over $950,000. A recent study done by Realtor.com suggests that a San Diego household must earn $258,000 a year to afford the average home here, which is a 73% increase since 2019, and it's the fourth most expensive market in the US. So given the average salary of $100,000, a typical San Diegan can afford a $400,000 home, but the average home here costs more than double that. This is why affordability is our number one issue in our market right now. Now, we cannot talk about affordability without talking about interest rates because this is the number one reason so many buyers have hit pause. Now, take this home for example, this one right behind me. This is listed at $875,000. This home is located in Carlsbad. It's a three-bedroom, one-bath home, just under 1,000 square feet. It is within an HOA, but the HOA is fairly low. So these are going to be attached single-family homes. So you're going to have one unit attached to you. Behind this unit is a big, beautiful, grassy area. It's a really clean neighborhood. But one of the best parts about this home, minus the price, is the proximity to shopping. So just at the end of the main road here, you have Costco. You also have the Carlsbad outlets, not to mention that this community is pretty much right dab in the middle, equal distance to Carlsbad Village and Lucadia down in Encinitas. So you really can't beat the location here. All right, so at today's average rate of 6.3%, your total monthly payment, including taxes, insurance, and HOA for this property is roughly $5,200 a month. Now, three years ago, when rates were around 3%, this same home would have cost about $3,800 a month. Now you tell me, is it the cost of the home or the interest rate? Because a lot of people can afford a $3,800 payment over a $5,200 payment a month. Now, of course, it's going to be both, but rates have the biggest impact on whether or not someone can actually afford to buy in this market. Even with a dual income of $180,000 a year, a household could afford this home at 3%, not comfortably at 6%. So who's actually buying homes right now? It's not your typical first time home buyer right now. The majority of buyers today are cash buyers, they're move up or move down buyers. These are people using the equity from their previous home to roll into the next one. We're also seeing generational wealth transfers, which in most cases are going to be parents helping their kids out with the down payment. And of course, we have the investment groups. Gary Berman is CEO of Tricon Residential, a Toronto based company that has quietly become one of the largest owners of single family homes in the United States. So today we own about 30,000 single family rental homes across the US, largely in the Sunbelt. And we've got probably about 75,000 people living in our homes. These investment groups are buying up our homes in cash, knowing that owning real estate is a good business, especially in a place like San Diego, which will always be in high demand. But they're buying up our homes and making it harder for first time home buyers to compete. So homes are still selling right now, but it's the who that's changed. If you're a first time buyer, please don't give up hope. You just have to be strategic. The challenge is that builders are not building any starter homes anymore. They're more focusing on luxury and high density apartments because, well, that's where the money's at. But if you're open to condos, townhomes, or maybe just neighborhoods just outside the city center and further from the coast, there are still going to be great opportunities for you. The key is to go in with realistic expectations. And I cannot stress this enough. Do not buy a home with a deal breaker. This includes homes on main roads or backing freeways, homes that have converted garages without getting permits, homes located on a T intersection, just no deal breakers. Got it? So we find a good home and a good neighborhood, and we're ready to make an offer. So this is where things like a rate buy-down can really help out a first time home buyer. A 2-1 buy-down is a temporary interest rate reduction that's usually paid for by the seller or builder to make your first two years of payments more affordable. Here's how it works. Year one, your rate is 2% lower than the note rate. Year two, your rate is 1% lower. And then year three and beyond, it's back to the full note rate. So on that same $875,000 Carlsbad home, a 2-1 buy-down could drop your first payment to around $4,200 a month, then $4,600 a month the second year before adjusting to the full $5,200 a month. It's a great short-term strategy if you expect rates to come down or you're just looking to pocket some extra cash in the first two years. And something else that I tell my clients is you're getting approved at the current rate, which is over 6%, meaning you can afford the monthly payment at $5,200 a month. So you can, instead of pocketing that extra cash, put it towards your mortgage to pay off your mortgage sooner or you take that remaining $1,200, $1,400 a month and you put it into S&P 500. Watch that grow over the next 30 years. Another thought. If you do not believe that you'll be able to stretch to $5,000 in two years, then do not buy the damn house. This should be looked at as a way to save for two years or invest for two years. But if that initial payment is a stretch to begin with, then I always say don't take the risk. Because if rates don't drop and you're unable to refinance, then you'll be kicking yourself for buying that house two years ago. Another major factor shaping this market is the locked-in effect. Over 70% of homeowners have a mortgage rate below 4%. If they sell, they'll be buying their next home at double the rate. So more often than not, they're just staying put. This lack of movement is what's keeping inventory so tight, which keeps prices from dropping even further, even though buyer demand is low. It's this tug of war. And that's why the market feels stuck in this weird middle zone. My prediction, nothing wild is going to happen. For those wanting a crash, that means prices have to tank 30% or more. And if that happens, you better have six months to a year in reserves, because it won't just be the housing market crashing. If you're a seller, pricing your home right means everything right now. Gone are the days when you can just throw your house on the market with little to no upgrades and you got 10 offers by the weekend. Buyers have options, and they're very picky. Your first two weeks on the market are going to be the most important. That's when you get the most attention. If you're overpriced, you lose momentum. And that's when price reductions start happening. The homes that are selling are priced right. I know we do not want to hear it and don't shoot the messenger, but the only reason your home is not selling is due to price. That's it. You're getting feedback that the neighbor's house is junky and you feel like it's out of your control, lower the price. Everything sells for the right price. And for buyers, the good news, you actually have more leverage now than you've had in years. We're seeing seller credits, rate buy-downs, and repair negotiations again, finally! You can breathe a little before making an offer. If you're financially stable and planning for the long-term, it can still make sense to buy in 2025. But what we can't do is expect to score a massive discount. Your deal will likely come in the form of concessions and better terms, but not necessarily price. Can you negotiate on price? Absolutely. But I have people reaching out to me. Jamie, you think the seller will take a $1.5 million offer on a house that's listed for $2 million? Hey, if the home's paid off and the seller wants it gone, well, I always say nothing's impossible, but at the same time, let's just be realistic, okay? So where is the San Diego market headed? We're not seeing a crash, we're seeing a cooling, and we're seeing a rebalancing. Inventory is rising, price growth is slowing, and buyers are gaining a bit of leverage. But long-term, San Diego still remains one of the most desirable places to live in the entire country. People will always want to be here. The weather, the coastline, the lifestyle, all those people who relocated out of California during the pandemic are moving back. So here's the truth. If you're financially ready, have job stability, and plan to stay for at least five years, buying in 2025 can still be a smart move. But if you need flexibility or aren't sure where life's taking you, renting just might make the most sense for now. The San Diego housing market isn't dead. It's cooling, normalizing, and it's finding balance again. And honestly, that's a good thing. And if you're looking to sell, it's so important to have a strategic game plan. Preparing your home to sell is the most important step, then follows timing and having the right representation and the right person in your corner. Those are all gonna be ingredients to get your home sold. If a realtor wants to blow smoke and sell you on the fact that you can sell your home for last year's prices, that is not the realtor for you. I promise you, you'll be dead in the water, chasing the market. Hey, if you found this video helpful, make sure to show it some love and drop a comment below with all of your thoughts. I honestly would love to hear your thoughts and opinions. I just always love hearing from you regardless. And as always, if you're thinking about buying or selling anywhere in the greater San Diego region, know that you can call, text, or email me anytime. You will find all my contact information down below. And I haven't done this in so long and it's gonna feel so good. But friends, I'm going to leave you the same way I always do and that is to stay classy. San Diego.