San Diego Housing Market Update: Not Booming, Not Busting—Just…?

As we move through the second half of 2025, it’s important to take an honest, measured look at what's really happening in the San Diego housing market. There’s no denying we’ve seen shifts, but despite some of the doom-and-gloom headlines floating around, the reality is much more nuanced—and even encouraging in several key areas.

Inventory Outpacing Sales? That’s a Warning Sign

One of the more concerning trends is when inventory growth significantly outpaces sales. This typically signals a market slowdown and is often followed by price adjustments. Sellers who tested the market with aggressive pricing are starting to feel the impact—many listings are now expiring. These are homes that didn’t sell, often because they were overpriced or poorly presented.

In previous years, the number of expired listings in San Diego was extremely low, often in the single digits. Now, we’re seeing a noticeable uptick, which suggests buyers aren’t biting unless a home is priced competitively and shows well.

The Bright Side: Homes Are Still Selling

Despite these shifts, sales volume has remained relatively steady. Last month alone, 1,637 homes sold—on par with monthly averages from last year. This tells us that well-presented homes in desirable neighborhoods are still moving, especially if they’re priced right.

A Calmer Market Is a Healthier Market

We’re no longer in a frenzy. Buyers are sitting on the sidelines longer, doing their homework, and refusing to overpay. Meanwhile, sellers are getting smarter. Gone are the days of throwing a high number on a property and expecting bidding wars. Sellers are beginning to understand that pricing strategically—and making their home the “next-to-sell” in their neighborhood—is key.

Another good sign? New listings are starting to decline after an initial surge earlier in the year. This reduction in new inventory is helping balance the market and maintain pricing stability. We’re trending back toward the same listing and sales numbers we saw last year, which brought around 4% home price appreciation—a modest but healthy gain.

Prices Are Holding, with Slight Adjustments

Yes, we are starting to see some downward pressure on prices, but it’s minimal. The current average sales price is just about 1.7% below asking price. In the grand scheme, that’s hardly a crash—it’s more of a correction. Most sellers are still getting close to their list prices, but negotiation is back on the table.

Mortgage Rates: A Glimmer of Hope

Mortgage rates have been the elephant in the room for much of the year. While we all expected rates to drop sooner, recent movement in the bond market has helped bring rates down by about 0.25% to 0.5% in recent weeks. That’s a promising trend.

Looking ahead, many analysts now expect mortgage rates to land around 6% by the end of the year. The big moment will come when the Federal Reserve finally starts lowering its benchmark rate. When that happens, we’ll likely see buyer confidence rise and activity pick up again.

Smart Strategies for Buyers and Sellers

For buyers: Now is the time to be strategic. Don’t just look for price drops—look for opportunities. Consider properties that have been sitting on the market and explore financing options like a 2-1 buy-down, where the seller helps lower your interest rate for the first couple of years. When rates eventually drop into the 4–5% range, you can refinance for long-term savings.

For sellers: Don’t aim to set pricing records. This market won’t support it. Your property needs to be in better condition than similarly priced homes—or priced more competitively if it’s not. Presentation matters, pricing matters, and working with experienced professionals is critical. Now more than ever, you need to be one of the best options on the market if you want to sell quickly and for top dollar.

Final Thoughts

San Diego's housing market is no longer on fire, but it’s far from collapsing. What we’re seeing is a natural rebalancing—a shift toward a more rational and sustainable environment. There are still opportunities on both sides of the transaction, as long as you approach the market strategically.

If you're thinking about buying or selling, don’t navigate this complex market alone. Reach out to me or a trusted member of the True Local Team!