San Diego Home Prices Fall 4 Months: What It Means for Sellers

The San Diego housing market is experiencing a significant shift that is sending ripples through neighborhoods from Pacific Beach to La Jolla. After years of relentless price increases, home values have now fallen for four consecutive months, with the most recent data showing an 0.85% annual decline in September 2025.

"Affordability is the biggest constraint in the market right now," says Lisa Sturtevant, chief economist at Bright MLS. This statement captures the essence of what thousands of San Diego homeowners are experiencing: a market in transition where traditional selling strategies may no longer deliver the results they once did.

For homeowners considering selling, understanding these market dynamics is not just important, it is essential. Whether you are facing foreclosure, dealing with an inherited property, or simply need to relocate quickly, the current market conditions create both challenges and opportunities that require careful navigation.

How Severe Is San Diego's Housing Market Decline?

The numbers paint a clear picture of a market under significant pressure. San Diego's housing market is not just slowing, it is contracting in ways we have not seen since the post-pandemic adjustment period.

Price Decline Details

According to the S&P Case-Shiller Home Price Index, San Diego ranked 15th out of 19 major U.S. cities in price performance. While the national average saw home prices rise 1.3% annually (the slowest pace in over two years), San Diego moved in the opposite direction with its 0.85% decline.

The median home price for single-family homes in San Diego County dropped to $975,000 in September 2025, down from over $1 million in previous months. By October, the median had ticked up slightly to $985,000, but this still represents a 2.5% decrease from October 2024 when prices hit $1,010,000.

The Asking Price Reality

Perhaps the most telling statistic is the dramatic shift in homes selling above asking price. As of September 2025, only 29% of San Diego County homes sold above their listing price. This is a stark contrast to April 2022 when 71% of homes commanded over-asking offers during the pandemic buying frenzy.

This shift reveals a fundamental change in market power. Sellers no longer hold the same leverage they enjoyed just three years ago. Buyers have more negotiating power, more time to make decisions, and increasingly, they are walking away from deals that do not meet their terms.

Sales Volume Collapse

The San Diego housing market recorded just 20,504 home sales through September 2025, putting it on track for one of the slowest sales years in recorded history. For context:

• 2023 saw 25,317 sales (previously the lowest on record)
• 2024 recorded 25,920 sales
• 2025 is trending even lower

This means fewer transactions, longer time on market, and increased uncertainty for sellers who need to move their properties quickly.

Why Is San Diego's Affordability Crisis So Severe?

Understanding why prices are falling requires looking at the underlying affordability crisis that has made San Diego one of the least affordable housing markets in the nation.

The Income-to-Price Ratio Problem

San Diego County's median home price is now 8.7 times the median household income, according to October 2025 data. With a median home price of $985,092 and median household income of $112,933, homeownership has moved out of reach for the majority of working families.

To put this in perspective, the U.S. median home price is currently 5 times the median income. San Diego's ratio is 74% higher than the national average. Historical data shows:

While the ratio has improved from its 2022 peak, it remains near historic highs and far above levels considered sustainable for long-term market health.

The Mortgage Burden

San Diego County households must dedicate 51% of their monthly income to mortgage principal and interest payments, making it the third-most burdened metro area in the nation behind only Los Angeles/Orange County (62%) and San Jose (53%).

With mortgage rates averaging 6.30% in late September 2025, the combination of high prices and elevated rates has created a perfect storm of unaffordability. Even modest price declines have not been enough to offset the impact of interest rates that remain well above pandemic-era lows.

What Experts Are Saying

Nicholas Godec of S&P Dow Jones Indices summarizes the situation clearly: "With mortgage rates stubbornly elevated and affordability at multi-decade lows, the market appears to be settling into a new equilibrium of minimal price growth, or outright decline, in some regions."

Anthony Smith, senior economist at Realtor.com, adds that the housing market faces "higher mortgage rates and affordability constraints" resulting in "slower, more fragmented price growth."

These expert assessments suggest that the current price declines are not a temporary blip but rather a structural adjustment to a new market reality.

How Different San Diego Neighborhoods Are Affected

The housing market decline is not uniform across all San Diego neighborhoods. Some areas are experiencing more dramatic shifts than others, creating a "K-shaped" market where luxury properties continue to perform well while mid-to-lower-tier homes struggle.

Coastal Premium Areas

La Jolla remains one of San Diego's most expensive neighborhoods with median home prices around $2.5 million, showing a 5% increase from the previous year. The luxury market here has proven more resilient, with 68% of buyers paying cash for homes over $2 million.

Pacific Beach has seen median home prices reach approximately $1.3 million, up 4.5% year-over-year. Properties in this beachfront community still receive multiple offers and often sell quickly, though not at the frenzied pace of 2021-2022.

Mission Beach and other coastal areas continue to command premium prices due to ocean access, lifestyle amenities, and limited inventory availability.

Urban Core Neighborhoods

North Park represents the more affordable segment with home prices typically ranging between $550,000 and $1 million. These areas are seeing the most significant impact from affordability constraints as first-time buyers struggle to qualify for mortgages in a high-rate environment.

The urban core has been growing faster than other parts of the county, but the current market slowdown is particularly pronounced in these previously hot neighborhoods where millennial buyers were driving demand.

What This Market Means for Homeowners Who Need to Sell

If you are a homeowner who needs to sell in the current San Diego market, you are facing a very different landscape than sellers experienced just two years ago. Understanding your options is critical to making the right decision for your situation.

The Traditional Sale Challenge

Selling through a real estate agent in today's market means:

• Longer time on market: Homes are sitting longer as buyer demand has cooled
• Price negotiations: Expect offers below asking price in most cases
• Repair demands: Buyers have more leverage to request repairs and concessions
• Financing contingencies: Deals fall through more frequently when buyers cannot secure favorable loan terms
• Carrying costs: Extended listing periods mean continued mortgage payments, property taxes, insurance, and maintenance

For sellers in distressed situations (facing foreclosure, dealing with divorce, managing an inherited property, or needing to relocate for work), these traditional sale challenges can become impossible obstacles.

The Cash Buyer Advantage in a Declining Market

Cash buyers represent 25-35% of transactions in many San Diego market segments and are particularly active during periods of price uncertainty. Here is why cash sales offer distinct advantages in the current market:

Quick Facts: San Diego Housing Market December 2025

Understanding Your Selling Options in Different Scenarios

Every homeowner's situation is unique. Here is how the current market impacts different selling scenarios:

Frequently Asked Questions

Conclusion: Taking Action in an Uncertain Market

The San Diego housing market has entered a new phase characterized by declining prices, reduced sales volume, and significant affordability constraints. For homeowners who need to sell, whether due to financial pressure, life changes, or property challenges, understanding your options is essential.

While the traditional real estate market has slowed dramatically, with only 29% of homes selling above asking and sales volume tracking toward historic lows, cash buyers remain active and offer a viable alternative for sellers who value speed, certainty, and convenience.

If you are facing foreclosure, managing an inherited property, going through divorce, relocating for work, or dealing with a property in need of repairs, a cash sale may provide the fastest path to resolution. With closing timelines of 7-14 days and no requirement for repairs or upgrades, cash buyers offer what the traditional market increasingly cannot: certainty in uncertain times.