San Diego Home Prices Fall for Sixth Straight Month: Rents Drop to 15-Year Low as Inventory Surges 66.6%

• 22 min read • By San Diego Fast Cash Home Buyer

TL;DR: San Diego Housing Market Triple Threat

San Diego's housing market is experiencing its most sustained correction since the Great Recession. The October 2025 Case-Shiller Home Price Index revealed a sixth consecutive monthly decline, with year-over-year prices down 0.59%. Simultaneously, rents are falling for six straight months (first time since 2010) and inventory has surged 66.6% year-over-year. This triple threat creates urgent questions for San Diego homeowners: Should you sell now or wait for recovery? Understanding the math behind carrying costs, price declines, and cash buyer alternatives is critical.

San Diego housing market experiencing sixth month of price declines with surging inventory

San Diego's housing market is experiencing its most sustained correction since the Great Recession. The October 2025 Case-Shiller Home Price Index revealed that local home prices fell 0.10% month-over-month, marking the sixth consecutive monthly decline. Year-over-year, San Diego prices are down 0.59%, while the national average increased 1.36%, placing San Diego among the worst-performing major metros in the country.

This isn't just about falling home prices. The San Diego housing market is facing what major brokerages Redfin and Compass have dubbed "The Great Housing Reset" - a convergence of three negative trends that haven't occurred simultaneously in 15 years:

  • Home prices declining for six straight months
  • Rents falling for six consecutive months (first time since 2010)
  • Inventory surging 66.6% year-over-year

According to Times of San Diego, this triple threat is creating urgent financial pressure on homeowners who are watching their equity evaporate while carrying costs mount. Nicholas Godec of S&P Dow Jones Indices stated that "October's data show the housing market settling into a much slower gear," noting that "elevated mortgage rates, paired with inflation that continues to outpace home price gains, have intensified affordability pressures."

For San Diego County homeowners in Pacific Beach, La Jolla, Mission Beach, North Park, Golden Hill, and surrounding neighborhoods, the question isn't whether the market has changed - it's how to respond strategically to protect your financial position.

The Case-Shiller Index Tells the Story: Six Months of Decline

The S&P CoreLogic Case-Shiller Home Price Index is the gold standard for tracking housing market trends, and the October 2025 data paints a clear picture of sustained decline in San Diego.

Monthly Decline Pattern

According to PR Newswire and Bubbleinfo.com, San Diego's decline pattern includes:

  • October 2025: -0.10% (sixth consecutive monthly decline)
  • September 2025: -0.9% (non-seasonally adjusted)
  • August 2025: -0.70%
  • July 2025: -0.69%
  • June 2025: -0.32%
  • May 2025: -0.08%

Year-Over-Year Performance

While the monthly declines may seem modest individually, the cumulative effect is significant. San Diego's -0.59% year-over-year decline stands in stark contrast to the national average gain of 1.36%. This places San Diego in a cluster of underperforming metros including Atlanta, Dallas, Denver, Las Vegas, Miami, Phoenix, Portland, Seattle, and Tampa - all experiencing year-over-year price declines.

What This Means for Homeowners

For a median-priced San Diego home valued at $1,027,000 according to SoFi, a 0.59% decline translates to approximately $6,059 in lost equity over the past year. While San Diego homeowners reported one of the lowest underwater rates among major metros at just 1.1% in Q3 2025 according to ATTOM Data, California homeowners lost an average of $33,000 in equity in the year ended September 2025.

The key concern isn't the current 1.1% underwater rate - it's the trajectory. With six consecutive months of price declines, inventory surging, and mortgage rates hovering at 6.22%, homeowners who purchased at peak prices in 2022-2023 are watching their equity cushion shrink monthly.

San Diego Rents Hit 15-Year Low: The Rental Market Collapse

Perhaps even more striking than home price declines is the collapse in San Diego's rental market - a phenomenon that hasn't occurred in 15 years.

Historic Rental Decline

According to the San Diego Union-Tribune, San Diego County has not seen average rent decline on an annual basis since the end of 2010. The current six-month consecutive decline represents a historic market shift with profound implications for property investors and landlords.

Current Rental Statistics

As reported by OBRAG and RentCafe:

  • Average rent: $2,520 per month (down 0.3% year-over-year)
  • Alternative measure: $2,952 per month (down 1.42% year-over-year)
  • One-bedroom apartments: Down 6.3% annually
  • Two-bedroom apartments: Down 4.8% annually

Vacancy Rate Surge

The rental decline is driven by a massive supply influx. San Diego County's apartment vacancy rate reached 5.7% by late 2025 - the highest level since 2009 - compared to a historic low of 2.64% in 2021. According to NBC San Diego, vacancies rose from 2.7% at the end of 2021 to 5.9%, the highest level seen in 15 years.

Impact on Landlords and Property Investors

For investment property owners in San Diego County, this creates a financial squeeze:

  1. Declining rental income as tenants negotiate lower rates
  2. Rising vacancy periods with competition from new apartment construction
  3. Falling property values reducing refinancing options
  4. Mortgage payments at 6%+ that may exceed rental income

Many landlords who purchased investment properties in 2021-2023 are discovering that their rental income no longer covers their mortgage, property taxes, insurance, and maintenance costs. This creates distressed sale scenarios where cash buyers provide the fastest exit strategy.

Inventory Surge: 66.6% Year-Over-Year Increase Creates Buyer's Market

While falling prices and rents grab headlines, the inventory surge is the most significant structural shift in San Diego's housing market.

Historic Inventory Growth

According to Reventure App and Pacific Keys Realty, San Diego experienced the highest year-over-year growth in active listings among major U.S. metros, with inventory rising 67% in March 2025 from 2,611 homes in 2024 to 4,351 homes for sale.

By May 2025, San Diego officially entered a buyer's market using the Months of Supply Inventory (MSI) metric. MSI rose to 3.4 months, surpassing the 3-month benchmark that separates a balanced market from a buyer-driven one.

Days on Market Surge

The inventory surge has dramatically increased how long homes sit on the market:

  • Current: Median time on market is 28 days (November 2025)
  • Previous Year: 20 days
  • Detached homes: 27 days on market (up 35% from 20 days)
  • Attached homes: 37 days (up 27.3% from 29 days)

Traditional listings that sold in 10-15 days during 2021-2022 now require 30-60+ days to find buyers.

What This Means for Sellers

In a market with 66.6% more inventory and homes taking 40% longer to sell, sellers face several challenges:

  1. Competition: Your home competes with 4,351 other listings
  2. Price Pressure: Buyers have leverage to negotiate significant discounts
  3. Carrying Costs: Extended listing periods mean months of mortgage, tax, insurance, and maintenance payments
  4. Appraisal Risk: Even when buyers make offers, appraisals often come in low due to falling comps
  5. Financing Fall-Through: With mortgage rates at 6.22%, many buyers lose financing approval during escrow

Mortgage Rates at 6.22%: The Affordability Crisis

Elevated mortgage rates are the primary driver behind San Diego's housing market correction, creating an affordability crisis that price declines alone cannot solve.

Current Mortgage Rate Environment

Mortgage rates are expected to hover around 6.30% through 2025 and 2026, with economists forecasting rates between 6.0% and 6.3% by year-end 2026.

The Affordability Math

For a median-priced San Diego home at $1,027,000:

  • 20% down payment: $205,400
  • Loan amount: $821,600
  • Monthly payment at 6.3%: Approximately $5,092 (principal + interest only)
  • Total monthly cost: $6,500-7,000 (including taxes, insurance, HOA)

Using the standard 28% debt-to-income ratio for housing costs, a household would need an annual income of approximately $278,000-300,000 to afford a median-priced San Diego home. This far exceeds the median household income in San Diego County.

Impact on Distressed Sales

Elevated mortgage rates create distressed sale scenarios:

  1. Divorce situations: Couples cannot refinance to buy out one spouse
  2. Job relocations: Cannot sell quickly without taking losses
  3. Estate settlements: Heirs cannot afford to keep inherited properties
  4. Investment properties: Negative cash flow forces sales
  5. ARM resets: Adjustable-rate mortgages resetting at 7-8% make payments unaffordable

For homeowners facing these situations, traditional listings requiring 60-90 days to close (if they close at all) create mounting financial pressure. Cash buyers offering 7-14 day closings provide certainty and speed that traditional buyers cannot match.

Neighborhood-by-Neighborhood Analysis: Where Prices Are Falling Fastest

The housing market correction isn't uniform across San Diego County. Different neighborhoods are experiencing varying degrees of price pressure.

Pacific Beach: 11% Price Decline Despite Limited Inventory

Pacific Beach median home prices fell 11% year-over-year to $1,250,000 by January 2026, despite a severe inventory shortage with only 45 listings. This counterintuitive dynamic demonstrates that affordability constraints drive declines even when supply is limited.

La Jolla: Luxury Resilience Weakening

La Jolla's luxury market initially resisted the broader correction, with median home prices at $2.4-2.8 million. However, homes in La Jolla now sell after 48 days on market compared to 30 days last year - a 60% increase.

North Park: 4-5% Decline in Urban Core

North Park homes were listed for a median price of $789,000 in January 2026, representing a 4% decrease from January 2025.

Golden Hill, City Heights, and Southeast San Diego

Neighborhoods in the $500,000-700,000 range traditionally served first-time buyers, but even these "affordable" areas struggle as monthly payments at 6.3% rates push buyers out of qualification ranges.

Cash Buyers vs. Traditional Listings: Why Speed Matters in a Declining Market

In a market characterized by falling prices, surging inventory, and extended days on market, the choice between traditional listings and cash offers takes on new significance.

Days on Market: Cash vs. Traditional

Traditional Listing:

  • 82 days total from listing to closing
  • 45 days on market finding a buyer
  • 35 days to close escrow
  • Risk of financing fall-through extends timeline

Cash Offer:

  • 7-14 days total from offer to closing
  • Most cash sales in San Diego closing in 7-21 days
  • No financing contingency risk
  • Guaranteed closing date

The Cost of Waiting in a Declining Market

With San Diego home prices falling 0.10% monthly, every month you wait costs money:

Median $1,027,000 home:

  • Monthly decline: $1,027 (at 0.10%/month)
  • 3-month traditional listing: $3,081 in lost value
  • Carrying costs: $6,500-7,000/month (mortgage, taxes, insurance)
  • Total 3-month cost: $22,500-24,000

When Cash Offers Make Sense

Cash offers are particularly attractive for:

  1. Distressed properties: Homes needing $50,000+ in repairs
  2. Estate settlements: Heirs wanting fast liquidity
  3. Divorce situations: Need to split proceeds quickly
  4. Job relocations: Cannot carry dual mortgages
  5. Financial distress: Foreclosure risk, mortgage delinquency
  6. Investment properties: Negative cash flow situations
  7. Market timing concerns: Worried about continued price declines

FAQ: San Diego Housing Market Decline 2025-2026

How long will San Diego home prices continue to fall?

Most experts predict stabilization in 2026 with modest appreciation of 1-4%, rather than continued sharp declines. According to the San Diego Real Estate Hunter, San Diego's market is protected by chronic undersupply, strict lending, and high owner equity, which prevent a housing crash. However, the "Great Housing Reset" described by Redfin suggests a multi-year normalization period rather than a quick recovery. If mortgage rates remain at 6%+ and inventory continues growing, modest declines could persist through mid-2026 before stabilizing.

Why are San Diego rents falling if there's a housing shortage?

San Diego rents are falling despite the overall housing shortage because of a massive apartment construction boom that flooded the rental market with new supply. The apartment vacancy rate surged from 2.7% in 2021 to 5.9% by late 2025 - the highest level in 15 years. This represents the first annual rent decline since 2010. While single-family home inventory remains limited, new apartment buildings opened simultaneously across the region, creating oversupply in the rental segment.

Should I wait to sell my San Diego home until prices recover?

The decision depends on your specific situation and timeline. If prices continue falling at 0.10% monthly, waiting 12 months could cost you $12,000+ on a median-priced home, plus $78,000-84,000 in carrying costs (mortgage, taxes, insurance). According to multiple forecasting sources, the market is entering a multi-year normalization period, meaning "recovery" to 2022 peak prices may take 5-7 years. If you have financial pressure, need to relocate, or own an investment property with negative cash flow, waiting may be costlier than selling now.

What is the 66.6% inventory surge and how does it affect sellers?

The 66.6% year-over-year inventory surge means San Diego had 66% more homes for sale in 2025 compared to 2024 - rising from 2,611 homes to 4,351 homes. This represents the highest growth among major U.S. metros. For sellers, this means your home competes with 4,351 other listings, giving buyers significant negotiating leverage. Days on market increased from 20 to 28 days, with some neighborhoods seeing homes sit for 45-60+ days.

Are mortgage rates the main cause of San Diego's housing market decline?

Mortgage rates at 6.22-6.30% are the primary affordability constraint, but the San Diego Union-Tribune notes that rates alone don't explain the decline: "Home prices have gone up so much since the pandemic, without corresponding wage increases, that mortgage rates aren't a gigantic factor." For a median $1,027,000 San Diego home, monthly payments at 6.3% are approximately $6,500-7,000 total, requiring household income of $278,000-300,000.

Which San Diego neighborhoods are seeing the biggest price declines?

Pacific Beach experienced the steepest decline at 11% year-over-year, with median prices falling to $1,250,000 despite limited inventory. North Park saw 4-5% declines to a median of $789,000. La Jolla's luxury market proved more resilient but saw days on market surge 60% from 30 to 48 days. Downtown condos face steep declines due to apartment construction competition.

What is a cash home buyer and how do they differ from traditional buyers?

Cash home buyers are investors or companies that purchase properties without mortgage financing, typically closing in 7-14 days versus 80-82 days for traditional listings. Cash buyers typically pay around 70% of after-repair value. However, when you factor in 5-6% agent commissions, 2-3% closing costs, $10,000-30,000 in repairs and staging, and 2-3 months of carrying costs, traditional listings cost 9-10% of sale price. Cash buyers eliminate financing fall-through risk and listing period uncertainty.

Will San Diego experience a housing crash like 2008?

Most experts say no. According to San Diego Real Estate Hunter, "San Diego's market is protected by chronic undersupply, strict lending, and high owner equity - three forces that prevent the chain reaction you need for a true crash." Unlike 2008, current homeowners have substantial equity (only 1.1% underwater rate in Q3 2025), and lending standards are much stricter. However, the market is experiencing "The Great Housing Reset" - a gentle, multi-year correction rather than a crash.

How does the rental decline affect investment property owners?

The 15-year low in rents creates severe financial pressure for landlords who purchased investment properties in 2021-2023. With rents down 0.3-1.42% year-over-year and vacancy rates at 5.9%, many landlords face negative cash flow. One-bedroom rents declined 6.3% annually and two-bedroom rents fell 4.8%. For an investor with a $900,000 rental property purchased in 2022, monthly costs could be $5,500-6,000, while rental income might be $3,000-3,500 - a negative cash flow of $2,000-2,500 monthly.

What should I do if I'm underwater on my San Diego home?

While only 1.1% of San Diego homeowners were underwater in Q3 2025, six consecutive months of price declines are expanding this group. Options include: (1) Stay and make payments if you can afford it, waiting for market recovery (potentially 3-5 years); (2) Loan modification or refinancing if rates improve; (3) Short sale with lender approval if facing financial hardship; (4) Deed in lieu of foreclosure. If you purchased in 2022-2023 at peak prices with less than 10% down, consult a HUD-approved housing counselor.

Conclusion: Strategic Decisions in a Market Reset

San Diego's housing market is experiencing its most sustained correction since the Great Recession, with six consecutive months of price declines, falling rents for the first time in 15 years, and a 66.6% inventory surge creating a buyer's market.

For homeowners in Pacific Beach, La Jolla, Mission Beach, North Park, Golden Hill, and throughout San Diego County, the question isn't whether the market has changed - it's how to respond strategically. Understanding the math behind carrying costs, the trajectory of price declines, and the advantages of cash buyers versus traditional listings is critical to protecting your financial position.

Whether you choose to wait for market recovery or sell now depends on your specific financial situation, timeline, and risk tolerance. But one thing is clear: this isn't a temporary dip. It's "The Great Housing Reset" - a fundamental recalibration that will define San Diego real estate for years to come.

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