San Diego Home Prices Fall 4 Months Straight: What It Means

Introduction: A Historic Market Shift

San Diego's once red-hot housing market has entered unfamiliar territory. For the fourth consecutive month, home prices declined in September 2025, with the San Diego metropolitan area experiencing a 0.85% year-over-year price drop according to the S&P Case-Shiller Index. This sustained downturn marks a dramatic shift from the pandemic-era frenzy when bidding wars were commonplace and homes routinely sold above asking price.

The statistics tell a sobering story: the median single-family home now costs $975,000, yet only 13% of San Diego County households can afford to purchase at that price point. "Affordability is the biggest constraint in the market right now," explains Lisa Sturtevant, chief economist at Bright MLS. With the median home price reaching 8.7 times the median household income of $112,933, San Diego ranks as the third-least affordable metro area among 100 major U.S. cities—trailing only Los Angeles/Orange County and San Jose.

For homeowners considering selling, understanding these market dynamics is critical to making informed decisions about timing, pricing, and sale strategies.

The Numbers Behind the Decline: What's Happening to San Diego Home Prices

Four-Month Downward Trajectory

The pattern of decline has been consistent throughout 2025. Local prices fell 0.70% in August, following decreases of 0.69% in July, 0.32% in June, and 0.08% in May. When adjusted for seasonal factors, San Diego posted a 0.9% decline in September—among the steepest drops of the 20 metropolitan areas tracked by the Case-Shiller Index.

This places San Diego as the 15th-ranked market among 19 major U.S. cities, a significant fall from its position during the pandemic boom. Only Tampa (down 4.14%) and Phoenix (down 2.02%) experienced larger annual declines among major metros.

From Bidding Wars to Price Cuts

The shift in market dynamics becomes even clearer when examining how homes are selling:

"Bidding wars are in the rear view," notes Anthony Smith, senior economist at Realtor.com, who characterizes the market as "settling into a period of slower, more fragmented price growth heading into year-end."

Sales Volume at Historic Lows

Perhaps most concerning for the overall market health: San Diego County recorded only 20,504 home sales through September 2025, putting the region on track for potentially the slowest year since 1988. The previous record low occurred in 2023 with 25,317 sales for the full year.

This dramatic slowdown in transaction volume reflects the fundamental affordability challenge constraining buyer activity across the region.

Why San Diego Home Prices Are Falling: The Affordability Crisis Explained

Income-to-Price Disconnect

The root cause of San Diego's market slowdown isn't complicated: homes have become fundamentally unaffordable for the vast majority of residents. The median home price of $985,092 represents 8.7 times the median household income—a ratio that has reached crisis levels.

To afford San Diego's median home using traditional lending guidelines (allocating 28-30% of gross income for housing costs), a household would need an annual income of approximately $242,000-$260,000, assuming a 20% down payment and current mortgage rates around 6.22%. That's more than double the county's median household income of $112,933.

Even more striking: the average San Diego household must now dedicate 51% of monthly income to mortgage principal and interest payments alone—before accounting for property taxes, insurance, maintenance, or utilities.

The K-Shaped Market Emerges

Lisa Sturtevant notes evidence of a "K-shaped market" where luxury homes continue performing well while entry-level and mid-tier properties struggle. This bifurcation reflects the reality that only high-income earners—representing just 13% of the county's population—can qualify for mortgages at current price levels.

Inventory data reinforces this dynamic: homes for sale jumped to 4,351 in March 2025, more than doubling from the 2022 low of 1,656. San Diego experienced the highest year-over-year growth in active listings among major U.S. metros, with inventory rising 67% in March 2025. This surge in available homes indicates that sellers are finding fewer qualified buyers at current price points.

Why Mortgage Rate Drops Haven't Helped

Despite mortgage rates declining from their 2023 peaks above 7% to the current 6.22%, buyer activity remains sluggish. The reason is straightforward: when home prices have risen far faster than wages over the past five years, even lower interest rates can't overcome the fundamental affordability gap.

A buyer who could have purchased a $600,000 home in 2019 with a 4% mortgage rate would face monthly payments of approximately $2,864 (principal and interest). That same buyer today faces a median price of $975,000 with a 6.22% rate, translating to monthly payments around $6,000—more than double, despite the relatively modest interest rate increase.

What This Means for San Diego Homeowners Looking to Sell

Pricing Strategy Is Critical

With only 29% of homes selling above asking price—and many languishing on the market—strategic pricing has become essential. Homes that are overpriced for current market conditions risk sitting unsold for extended periods. The average days on market has increased substantially, with some properties taking 47 days or longer to receive an acceptable offer.

When Quick Sales Make Sense

For certain homeowners, the traditional listing process may not align with their needs or circumstances. Quick-sale scenarios include:

• Inherited properties: Dealing with an estate settlement often requires faster timelines than traditional sales allow
• Financial distress: Homeowners facing foreclosure, job loss, or mounting debts may need immediate liquidity
• Relocation: Job transfers or family emergencies sometimes necessitate selling within weeks, not months
• Property condition issues: Homes requiring significant repairs may attract limited buyer interest in traditional channels
• Divorce proceedings: Court-ordered sales often benefit from certainty and speed
• Vacant properties: Carrying costs for unoccupied homes can accumulate quickly

Alternative Sale Options Beyond Traditional Listings

Homeowners have several options for expediting sales:

Understanding the Trade-Offs

Each sale method involves trade-offs:

The right choice depends on individual circumstances, financial position, and priorities. Homeowners should calculate the net proceeds from each option after accounting for repairs, carrying costs, agent commissions (typically 5-6% in San Diego), and timeline considerations. Get a free consultation to compare your options.

Market Outlook: What Experts Predict for 2025-2026

Short-Term Expectations

Economists anticipate continued market softness through the remainder of 2025. Anthony Smith from Realtor.com describes the current environment as one of "slower, more fragmented price growth heading into year-end." The combination of elevated prices, limited affordability, and increased inventory suggests prices will remain under downward pressure.

Mortgage rates are expected to average around 6.30% by the end of 2025, with forecasts suggesting rates could trend into the 5.5%-6.0% range by late 2026. However, even with modest rate decreases, affordability constraints will likely persist without corresponding price corrections or significant wage growth.

Potential Stabilization Scenarios

For the market to stabilize, economists identify several necessary conditions:

• 1
  Price moderation: Further declines of 5-10% could bring more buyers into qualification range
• 2
  Income growth: Wage increases of 15-20% would help close the affordability gap
• 3
  Mortgage rate improvements: Rates falling to 5.5% or below would reduce monthly payment burdens
• 4
  Inventory normalization: A balance between supply and demand (typically 4-6 months of inventory)

Most analysts believe stabilization will require a combination of these factors rather than any single catalyst.

Regional Variations

While countywide data shows price declines, San Diego's diverse neighborhoods experience different dynamics. Luxury coastal communities like Del Mar, La Jolla, and Coronado continue seeing stronger demand from high-income buyers. Meanwhile, inland areas and entry-level markets in East County face more significant affordability pressures and slower sales.

Frequently Asked Questions

Conclusion: Making Informed Decisions in a Changing Market

San Diego's housing market has entered a period of adjustment after years of unprecedented price growth. The fourth consecutive monthly price decline in September 2025 signals a fundamental shift driven by affordability constraints that have priced out 87% of the county's households.

For homeowners considering selling, this environment requires realistic pricing expectations, strategic timing, and clear understanding of available options. While the traditional listing process remains the right choice for many sellers—particularly those who can afford to wait for the right buyer and want to maximize sale price—alternative options exist for those facing time constraints or unique circumstances.

Whether you're dealing with an inherited property, facing financial challenges, relocating for work, or simply want the certainty and speed of a guaranteed close, understanding your full range of options empowers better decision-making. The key is matching your sale strategy to your specific needs, timeline, and financial goals rather than trying to time a market recovery that may be months or years away.

As Lisa Sturtevant aptly summarized, "Affordability is the biggest constraint in the market right now." This reality shapes every aspect of today's San Diego real estate landscape—and every homeowner's decision about when, how, and why to sell.