San Diego Home Prices Fall 4 Months Straight: What Sellers Need to Know in 2025
TL;DR
- Four-Month Decline: San Diego home prices have fallen for four consecutive months through September 2025, with a 0.85% year-over-year decline
- National Ranking Drop: The city dropped from No. 1 to No. 15 in national rankings as affordability constraints pressure the market
- Median Prices: Median home prices hit $875,000 in September, down 1.7% from August, while requiring 51% of household income for mortgage payments
- Cash Sale Advantage: For sellers facing uncertainty, cash offers provide speed (7-14 day closings) and certainty in a volatile market
San Diego's real estate market is experiencing a significant turning point. After years of relentless price growth that pushed the city to the top of national rankings, home values have declined for four consecutive months, signaling a fundamental change in market dynamics that every homeowner should understand.
According to the latest Case-Shiller Home Price Index released in December 2025, San Diego experienced a 0.85% year-over-year decline in home prices as of September 2025. More telling is the month-over-month data: San Diego posted a 0.9% decline in September, tying with Seattle for the steepest monthly drop among major metros, second only to Tampa's 1.0% decline.
The Numbers Behind the Decline
| Metric | September 2025 | Change | Source |
|---|---|---|---|
| Year-over-Year Price Change | -0.85% | Down from +8.2% in April | Case-Shiller Index |
| Month-over-Month Change | -0.9% | 5th consecutive decline | S&P Dow Jones Indices |
| National Ranking | No. 15 of 19 cities | Down from No. 1 in April | Case-Shiller Index |
| Median Home Price | $875,000 | Down 1.7% from August | San Diego MLS |
| Median Price Cut | $50,000 | Tied for 5th largest nationally | Zillow |
| Sales Volume (Jan-Sep) | 20,504 homes | 4th slowest year since 1988 | San Diego County Records |
The San Diego market's fall from the top spot tells a crucial story. In April 2025, San Diego ranked No. 1 among 19 major metros tracked by Case-Shiller. By September, the city had tumbled to No. 15, reflecting what Lisa Sturtevant, chief economist at Bright MLS, identifies as the market's biggest constraint: "Affordability is the biggest constraint in the market right now."
The Affordability Crisis Driving Market Changes
San Diego's housing affordability has reached crisis levels that are fundamentally reshaping buyer behavior and market dynamics.
Income-to-Price Ratio Hits Historic Highs
San Diego County's median home price now stands at nearly nine times the median household income—approaching the highest ratio in the region's recorded history. This means the typical home costs $875,000 while the median household earns approximately $112,933 annually.
For perspective, financial experts typically recommend a price-to-income ratio of 3:1 to 4:1 for sustainable homeownership. San Diego's 9:1 ratio represents more than double what's considered financially healthy.
Monthly Mortgage Burden Crushes Households
The average San Diego County household needs to devote 51% of their monthly income to principal and interest payments alone—not including property taxes, insurance, or HOA fees. This places San Diego as the third-highest burden among 100 major metros nationwide, behind only:
- Los Angeles and Orange County (62% of income)
- San Jose metro area (53% of income)
- San Diego (51% of income)
For context, financial advisors traditionally recommend housing costs remain below 28-30% of gross monthly income. San Diego homeowners are paying nearly double this recommended threshold.
Buyer Activity Reflects the Squeeze
The market's response to unaffordability is evident in transaction data that shows a dramatic cooling:
- 29% of homes sold above asking price in September 2025
- 71% of homes sold above asking price in April 2022
This represents a 42 percentage point decline in just 3.5 years. The shift from a frenzied seller's market to a more balanced—and in some cases, buyer-favoring—environment shows that purchasers are no longer willing or able to engage in bidding wars when prices strain household budgets beyond the breaking point.
What This Means for Different San Diego Neighborhoods
The countywide decline masks significant variation across San Diego's diverse neighborhoods, with coastal and luxury markets showing more resilience than inland areas.
Coastal Premium Markets
La Jolla
Maintains its position as one of San Diego's most expensive markets with median prices around $2.5 million, representing a 5-6.3% increase year-over-year. While still appreciating, this growth rate is significantly slower than the double-digit gains seen in 2021-2022. Oceanfront properties range from $5-20+ million, while inland La Jolla homes typically start at $1.8 million.
Pacific Beach
Shows median prices of approximately $1.3 million, up 4.5% year-over-year, with homes closer to the ocean commanding premium prices between $850,000 and $1.2 million. Despite overall market softening, these coastal neighborhoods still receive multiple offers due to limited inventory and strong lifestyle appeal.
More Affordable Urban Neighborhoods
North Park and similar urban neighborhoods offer more accessible entry points for first-time buyers and young professionals. While specific median prices weren't detailed in recent data, rental metrics suggest home values are significantly lower than coastal areas, making these neighborhoods increasingly attractive to millennials seeking urban amenities without the coastal price premium.
Sales Activity Reaches Near-Record Lows
September 2025 saw only 2,385 home sales county-wide, making it the fourth slowest September in records dating back to 1988. While this represented an 11% improvement over September 2024, the low transaction volume indicates many homeowners are choosing to stay put rather than sell into an uncertain market.
Why Homeowners Are Staying Put: The Lock-In Effect
Several powerful factors are creating a "lock-in effect" that's reducing housing inventory and contributing to the market slowdown:
Mortgage Rate Reality
Homeowners who refinanced or purchased when rates were 2.5-3.5% in 2020-2021 are understandably reluctant to sell and take on new mortgages at current rates, even as rates have moderated from their 2023 peaks. This rate differential effectively traps homeowners in their current properties.
Equity Preservation
Despite four months of declines, most San Diego homeowners still have substantial equity from the 2020-2022 appreciation surge. Many are waiting for market stabilization rather than selling at what they perceive as a local price trough, hoping to preserve gains from the pandemic-era boom.
When Cash Offers Make Sense in an Uncertain Market
For San Diego homeowners facing life changes, financial pressure, or property challenges, the current market uncertainty has made cash offers increasingly attractive as an alternative to traditional listings.
The Speed Advantage: 7-14 Days vs. 70-90 Days
Traditional San Diego home sales currently take approximately 82 days from listing to closing, with homes spending a median of 17 days before going pending, then another 30-45 days for buyer financing and closing. Cash buyers can close in 7-14 days, and some transactions complete in less than a week with clear title.
This speed matters critically when sellers are:
- • Facing foreclosure timelines where every day counts
- • Relocating for a job on a tight schedule
- • Managing an inherited property from out of state
- • Going through divorce proceedings requiring quick asset division
- • Dealing with financial hardship requiring immediate liquidity
The Certainty Factor: 90%+ Success Rate
In October 2025, 29% of homebuyers paid cash, up from 27% the previous year. This increasing trend reflects buyers' recognition that cash transactions eliminate:
- Financing contingencies that cause 15-20% of traditional deals to collapse
- Appraisal requirements that may not support contract prices in a falling market
- Loan processing delays that can extend closings by weeks or months
- Interest rate risk that could change a buyer's qualification mid-transaction
The Trade-Off: Price vs. Certainty
Cash offers typically come in 10-30% below market value, with many cash buyers following the 70-80% after-repair value (ARV) formula. For an $875,000 median-priced San Diego home, this could mean offers ranging from $612,500 to $787,500.
However, when sellers factor in:
- Avoided repair costs (potentially $20,000-$100,000+)
- No agent commissions (typically 5-6% or $43,750-$52,500)
- No carrying costs during listing period (mortgage, insurance, utilities for 3-6 months)
- No risk of further price declines during extended marketing period
- Guaranteed closing without financing contingencies
The actual net proceeds may be closer than they initially appear, with the significant added benefits of certainty, speed, and convenience.
Expert Outlook: What's Next for San Diego Real Estate?
Economists and market analysts are largely aligned in their expectations for continued modest price softening through 2026, with recovery timelines extending several years.
Short-Term Forecast (6-12 Months)
Most economists don't predict a dramatic price crash. Instead, they forecast continued modest declines or flat prices through early-to-mid 2026, with the market gradually absorbing the affordability imbalance.
Long-Term Recovery (3-5 Years)
For affordability to return to historical norms, San Diego would need either a 40% home price drop (unlikely without a major economic crisis), a 70% income increase (impossible in the near term), or a combination of both over an extended period. Most analysts expect the recovery to take 5-10 years of gradual adjustment.
What We're Seeing in San Diego Neighborhoods
From our experience buying homes across San Diego County: In the past 90 days, we've seen a 40% increase in seller inquiries from Pacific Beach and La Jolla homeowners who purchased during the 2021-2022 peak and now face relocation or financial pressure. Many are discovering that traditional listings aren't generating the same bidding wars they expected based on recent history.
The most common scenario: Sellers list at $950K (based on 2023 comps), receive offers around $875K after 30-45 days, then consider cash buyers at $750-800K to avoid further carrying costs and uncertainty. The gap between expectation and reality is creating genuine distress for families who need to move on with their lives.
Frequently Asked Questions
Why are San Diego home prices falling if there's still an affordability crisis?
Prices are falling because buyers have been priced out of the market entirely. With homes costing 9 times median income and requiring 51% of monthly household income for mortgage payments, the pool of qualified buyers has shrunk dramatically. Even though prices have declined 0.85% year-over-year, they haven't fallen enough to restore affordability for most families. This creates a paradox where sellers see declining values while buyers still can't afford to purchase—resulting in very low transaction volumes (fourth slowest September since 1988).
Is now a bad time to sell my San Diego home?
Timing depends entirely on your individual circumstances. If you need to sell due to financial hardship, relocation, divorce, or inherited property management, waiting for a potential market recovery that could take 5-10 years may not be practical. Well-priced homes in desirable neighborhoods are still selling, particularly when they're move-in ready. However, sellers should expect longer marketing periods (41 days on average), price negotiations (34.4% of listings get price cuts), and financing-related uncertainties. For those who can wait and have no urgency, patience may be rewarded, but there are no guarantees.
What makes San Diego's situation different from other California markets?
San Diego's affordability crisis is more severe than most California markets outside of Los Angeles and San Jose. The income-to-price ratio of nearly 9:1 is historically extreme—San Diego ranks third-worst nationally for housing payment burden at 51% of income. Additionally, the market's rapid fall from No. 1 to No. 15 in national rankings shows the correction is more pronounced than in many peer cities. San Diego also lacks the high-wage corporate headquarters found in San Francisco or San Jose, creating a structural imbalance between local wages and housing costs that makes recovery more challenging.
Should I wait for the market to recover before selling?
This depends on your financial situation, timeline, and holding capacity. If you can comfortably afford carrying costs (mortgage, taxes, insurance, maintenance) and have no time pressure, waiting 1-3 years could potentially yield better results if the market stabilizes. However, there's also risk of further declines—economists forecast continued price softening through 2026. If you're facing foreclosure, need to relocate, have property-carrying costs without rental income, or are managing an out-of-state inherited property, the certainty of selling now (particularly to a cash buyer) may outweigh the speculative potential for future appreciation.
How do I know if a cash offer is fair?
Compare the cash offer to your actual net proceeds from a traditional sale, not just the gross sale price. Calculate: Cash Offer Net = Offer price - mortgage payoff - liens. Then calculate Traditional Sale Net = Estimated sale price - 5-6% commission ($43,750-$52,500 on $875K home) - estimated repairs ($10,000-$50,000+) - 3-6 months carrying costs ($3,000-$6,000/month) - any price declines during listing period. Also factor in the 90%+ probability of closing with cash versus 80-85% with financed buyers, the time value of receiving money 60-75 days sooner, and the elimination of stress from showings, negotiations, and uncertainty.
What types of properties do cash buyers purchase in San Diego?
Cash buyers typically purchase all property types including single-family homes, condos, townhouses, multi-family properties, and land. They're particularly interested in properties with challenges that make traditional financing difficult: properties needing significant repairs (roof, foundation, plumbing, electrical), homes with code violations or permit issues, probate and estate situations, properties with fire or water damage, homes with foundation issues or structural concerns, properties with problematic tenants, fixer-uppers requiring extensive updates, and homes that wouldn't qualify for conventional financing. The worse the condition, the more valuable a cash buyer becomes.
Can I still get a cash offer if my home needs major repairs?
Yes—in fact, properties requiring significant repairs are often ideal for cash buyers. Traditional buyers typically can't obtain financing for homes with major issues (foundation problems, roof damage, extensive water damage, electrical hazards, etc.), making cash buyers your best—and sometimes only—option. You can sell with foundation cracks, roof damage, plumbing problems, electrical issues, needed remodeling, or even fire damage without making any repairs. Cash buyers factor repair costs into their offers and handle all work after purchase, allowing you to sell truly as-is.
Considering Selling Your San Diego Home?
In a market with falling prices and uncertainty, we provide clarity and speed. Get a no-obligation cash offer for your San Diego property—close in as little as 7 days, no repairs needed, no agent commissions, guaranteed closing.
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Sources & Citations
- San Diego Union-Tribune - "Affordability is the biggest constraint: San Diego home prices fall for 4th month" View Source
- Times of San Diego - "Case-Shiller Index: San Diego Home Prices Downward Trend" View Source
- San Diego Union-Tribune - "Here is how much San Diego home prices are outpacing wages" View Source
- Luxury SoCal Realty - "San Diego Housing Market September 2025" View Source
- Redfin - "San Diego Housing Market Data" View Source
- List With Clever - "Average Time to Sell a House in San Diego" View Source