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

The New Reality: San Diego's Housing Market Cools After Years of Growth

After years of relentless price appreciation, San Diego's housing market is undergoing a fundamental shift. The San Diego County median home price for single-family homes reached $975,000 in September 2024, representing a 0.85% decline from the previous year according to the S&P Case-Shiller Home Price Index. This marks the fourth consecutive month of price decreases, signaling what economists are calling a "new equilibrium" in the local real estate market.

For homeowners considering selling—particularly those facing time-sensitive situations like inheritance, foreclosure, or relocation—understanding these market dynamics is critical to making informed decisions.

What the Numbers Tell Us About San Diego's Market Shift

The statistics paint a clear picture of a cooling market. Nicholas Godec from S&P Dow Jones Indices notes that "the market appears to be settling into a new equilibrium of minimal price growth, or, in some regions, outright decline." This shift is evident across multiple metrics:

Sales Volume Reaches Historic Lows

With only 20,504 homes sold through September 2024, San Diego County is on track to record one of its slowest years in history. The previous record low was 25,317 sales in 2023, according to data going back to 1988. This dramatic slowdown reflects the dual challenges of high mortgage rates and severely constrained affordability.

Bidding Wars Become Rare

Perhaps the most striking indicator of market change: only 29% of San Diego County homes sold above asking price as of September 2024. This represents a dramatic reversal from April 2022, when 71% of homes commanded over-asking offers during the pandemic buying frenzy. Even compared to the lowest point in January 2015 (14%), today's figure shows a market that has settled into a more balanced state.

Mortgage Rates Keep Buyers Cautious

Thirty-year fixed mortgage rates averaged 6.30% in late September 2024, significantly higher than the sub-3% rates that fueled the pandemic housing boom. These elevated borrowing costs, combined with high home prices, have created what Lisa Sturtevant, chief economist at Bright MLS, identifies as the market's "biggest constraint"—affordability.

How San Diego Compares to Other Major Markets

San Diego's 0.85% annual price decline placed it 15th among the 19 major U.S. metropolitan areas tracked by the S&P Case-Shiller Index. While nationwide home prices still rose 1.3% annually—the slowest pace in over two years—several markets experienced more severe corrections:

This data reveals significant regional variation, with San Diego experiencing modest declines compared to markets like Tampa while underperforming growth markets like Chicago.

The K-Shaped Recovery: Luxury Thrives While Traditional Market Stalls

One of the most notable characteristics of San Diego's 2024 market is its bifurcation. As Sturtevant notes, there's clear "evidence of a K-shaped market" where luxury homes continue to perform well while the traditional market struggles.

High-end properties in coastal neighborhoods like La Jolla, Point Loma, and Coronado continue to attract strong buyer interest and competitive offers. Meanwhile, the broader market—particularly in inland and more affordable areas—faces significant headwinds from the affordability crisis.

What This Market Shift Means for San Diego Homeowners

For property owners throughout San Diego County, this cooling market presents both challenges and opportunities:

Longer Time on Market

The median time on market increased to 25 days in October 2024, up from 20 days the previous year. Sellers should expect their properties to sit longer before receiving offers, requiring patience and realistic pricing strategies.

Pricing Strategy Becomes Critical

With only about 29% of homes selling above asking, overpricing is a significant risk. Properties that are competitively priced still move—hot homes can sell for about 1% above list price and go pending in around 13 days. However, poorly priced listings languish and often require price reductions.

Buyer Negotiating Power Increases

As of March 2024, 49% of homes in San Diego sold below their original list price, demonstrating that buyers now have meaningful negotiating leverage. This shift favors prepared buyers, including cash purchasers who can move quickly without financing contingencies.

When Selling Fast Makes Sense: Scenarios for Cash Sales

While the broader market has slowed, certain situations make fast cash sales particularly attractive:

Inherited Properties

If you've inherited a property in San Diego County, you may face maintenance costs, property taxes, and potential family complications. A cash sale can provide immediate liquidity and avoid the uncertainty of listing in a slower market.

Pre-Foreclosure Situations

With mortgage rates elevated and economic uncertainty, some homeowners face financial distress. Despite low foreclosure rates overall (approximately 357,000 filings in 2023, compared to over 1 million annually during the 2008 crisis), individual households still struggle. Cash buyers can close quickly, helping homeowners avoid foreclosure and protect their credit.

Vacant or Distressed Properties

Properties requiring significant repairs or updates face particular challenges in today's market, as buyers are more cautious and selective. Cash purchasers who buy properties as-is eliminate the need for costly renovations before sale.

Relocation or Time Constraints

Job transfers, divorce, or other life changes often create time pressure. With the average home now taking 25 days to sell (and potentially much longer for properties with issues), traditional sales may not align with urgent timelines.

Understanding Affordability Constraints in San Diego

The affordability crisis mentioned by economists isn't abstract—it's quantifiable and severe. Only 13% of San Diego County households could afford to purchase the $1 million median-priced home in the third quarter of 2024, according to housing affordability data. This represents a slight improvement from 12% the previous year but remains at multi-decade lows.

This constraint explains much of the market's current behavior:

• Fewer qualified buyers can afford homes
• Those who can afford them are more selective
• Price growth has stalled as demand weakens
• Sales volume has dropped to historic lows

The market is settling into what Godec describes as "an affordability-constrained equilibrium"—a new normal where minimal price growth (or modest declines) reflects the fundamental imbalance between what homes cost and what buyers can afford.

Looking Ahead: What to Expect in 2025

Market forecasters predict San Diego's housing market will remain competitive but more balanced in 2025. Key expectations include:

• Moderate price stability: Prices likely to remain relatively flat or show minimal growth
• Continued low inventory: Despite cooling demand, supply constraints persist
• Interest rate sensitivity: Any significant mortgage rate changes will impact buyer activity
• Neighborhood variation: Coastal and well-located properties will continue to outperform

The market appears unlikely to return to the frenetic pace of 2021-2022, when bidding wars and rapid appreciation were the norm. Instead, buyers and sellers should prepare for a more measured, traditional real estate environment.

Quick Facts: San Diego Housing Market 2024

Frequently Asked Questions

Making the Right Decision for Your Situation

San Diego's housing market has entered a new phase characterized by modest price declines, reduced sales activity, and what economists call an "affordability-constrained equilibrium." For homeowners navigating this environment, understanding these dynamics is the first step toward making informed decisions.

Whether you choose to list traditionally, wait for market conditions to improve, or pursue a fast cash sale depends on your specific circumstances, timeline, and property condition. What's clear is that today's market offers more balanced conditions than the seller-dominated environment of recent years, creating opportunities for those who approach the decision strategically.

If you're considering selling your San Diego County home and want to explore a fast, hassle-free cash offer with no repairs, commissions, or waiting, contact San Diego Fast Cash Home Buyer today for a free consultation and fair offer within 24 hours.