San Diego Home Prices Hit 8.7x Income Ratio: Affordability Crisis Explained
TL;DR
San Diego's median home price of $985,092 is now 8.7 times the median household income of $112,933—near the highest ratio in history. This affordability gap is pricing out average families, slowing the market, and forcing homeowners facing financial pressure to explore alternative selling options like cash offers.
San Diego's housing market has reached a critical tipping point. As of October 2025, the median home price of $985,092 is a staggering 8.7 times higher than the median household income of $112,933. This ratio puts San Diego near its all-time worst affordability levels—matching the 2004 housing boom when homes cost 9.7 times median income, and approaching the pandemic peak of 10 times in spring 2022.
What does this mean for you as a San Diego homeowner? Whether you're struggling with mortgage payments, inherited a property you can't afford to maintain, or facing life changes like divorce or relocation, understanding this affordability crisis is crucial. The widening gap between home prices and wages isn't just a statistic—it's reshaping who can buy homes in our county and creating new challenges for those who need to sell quickly.
In this analysis, we'll break down the numbers behind the 8.7x ratio, examine how it compares historically and nationally, explore which neighborhoods are most affected, and discuss practical solutions for homeowners who need liquidity in this challenging market.
Breaking Down the 8.7x Income-to-Price Ratio
The 8.7x ratio tells a stark story: a typical San Diego family earning $112,933 annually would need nearly nine years of their entire gross income—before taxes, food, or any living expenses—to purchase a median-priced home at $985,092. By comparison, the national average shows homes priced at about five times median income, making San Diego nearly 75% less affordable than the rest of the country.
This gap didn't happen overnight. San Diego economist Ray Major points to a structural issue: "San Diego lacks large corporate headquarters, so incomes have been weak for decades." While tech hubs like San Francisco and Seattle saw wage growth match housing appreciation during the 2010s, San Diego's economy—built on tourism, healthcare, and military—generated slower income gains even as coastal desirability drove prices higher.
The math is unforgiving. To afford a median-priced home in San Diego County using conventional lending standards (28% of gross income toward housing), you'd need to earn approximately $258,000 annually. That's more than double the actual median household income, creating a fundamental mismatch between who lives here and who can buy here.
Real Impact on Homeowners
This disparity has real consequences. First-time buyers are locked out entirely. Middle-income families who could've purchased a starter home five years ago now face a choice: stretch financially beyond recommended limits, move to more affordable counties, or resign themselves to permanent renting. For existing homeowners, it means you're sitting on significant equity—but also facing a market where finding qualified buyers takes longer than ever.
How San Diego Compares Nationally and Historically
San Diego's 8.7x ratio stands out even among expensive coastal markets. Los Angeles County's ratio hovers around 7.5x, while Orange County sits at approximately 8.2x. Only the San Francisco Bay Area consistently exceeds San Diego's affordability challenges, with some counties reaching 10x or higher.
| Period | Price-to-Income Ratio | Market Condition |
|---|---|---|
| 2004 Housing Boom | 9.7x | Peak before 2008 crash |
| Spring 2022 (Pandemic Peak) | 10.0x | Highest ratio on record |
| October 2025 (Current) | 8.7x | Near historic worst levels |
| U.S. National Average | 5.0x | SD is 75% less affordable |
What's different now? The current crisis is compounding rather than correcting. Unlike 2008, when foreclosure waves forced prices down, or 2022, when rising rates quickly cooled demand, today's market is experiencing a slower grind. As Nicholas Godec of S&P Dow Jones Indices noted, conditions represent "the weakest since early 2023," with "mortgage rates stubbornly elevated and affordability at multi-decade lows."
September 2025 marked the fourth consecutive month of declining prices, with the median falling 0.85% annually to $975,000 for single-family homes. Yet this modest correction barely dents the affordability gap. Even if prices dropped 10%—a significant decline—the ratio would still exceed 7.8x, well above the national average and historical norms for sustainable markets.
Neighborhood-by-Neighborhood Price Analysis
The affordability crisis hits different San Diego neighborhoods with varying intensity. Premium coastal areas have actually appreciated despite the broader slowdown, while mid-market neighborhoods show more vulnerability.
La Jolla
The luxury market remains resilient. Home prices jumped 6.3% year-over-year to a median of $2.4 million in September 2025. At this price point, buyers need household incomes exceeding $650,000—a threshold only the wealthiest 2-3% of county residents can meet.
La Jolla's appreciation reflects the "K-shaped" recovery economist Lisa Sturtevant describes, where high-end properties decouple from broader market struggles.
Pacific Beach
This popular coastal neighborhood tells a different story. Prices fell 4.3% year-over-year to a median of $1.3 million in August 2025. Pacific Beach has historically attracted young professionals and first-time buyers trading size for location, but at current prices—requiring roughly $340,000 in annual income—this segment can't compete.
The 4.3% decline signals weakening demand at the entry-level luxury tier.
North Park
The urban core showed surprising strength with prices up 5.1% to a median of $943,000 in July 2025. North Park's relative affordability (compared to coastal zones) and walkable lifestyle continue attracting buyers who've been priced out of beach communities.
Yet even here, the required income of approximately $245,000 exceeds median earnings by 117%.
Mission Valley
While specific recent data wasn't available, this centrally located area typically trends closer to county medians around $930,000-$950,000, still requiring incomes well over $200,000 for conventional financing.
The pattern is clear: whether you own in an appreciating luxury neighborhood or a declining mid-market area, the affordability crisis affects your selling timeline and buyer pool. Fewer qualified buyers mean longer days on market—currently averaging 41 days, up 46% from last year's 28 days.
Why This Matters for Homeowners Right Now
If you're a homeowner considering selling, the 8.7x affordability ratio directly impacts your experience in three critical ways:
1. Longer Selling Timelines
With only 29% of San Diego County homes selling above asking price (down from 71% in April 2022), the seller's market has definitively ended. Properties now sit on the market for 41 days on average—and that's the median, meaning half take even longer. If you're facing time-sensitive situations like foreclosure prevention, estate settlement, or divorce proceedings, traditional listing timelines may not align with your needs.
2. Smaller Buyer Pool
When homes require $258,000 in annual income but the median household earns $112,933, you're marketing to a fraction of potential buyers. San Diego County is tracking toward one of its slowest sales years on record with just 20,504 transactions through September 2025. Fewer buyers mean more negotiation leverage on their side, particularly if your property needs repairs or updates that further limit the already-small qualified buyer pool.
3. Financing Challenges
With mortgage rates averaging 6.30% for 30-year fixed loans as of late September 2025, buyers face monthly payments of approximately $6,050 on a median-priced home (assuming 20% down). Add property taxes and insurance, and total housing costs exceed $7,500 monthly—requiring the aforementioned $258,000 income using conservative lending ratios. Many potential buyers who could've qualified at 3% rates in 2021 simply can't anymore, even if their incomes have grown.
Special Hardship for Distressed Homeowners
These factors create particular hardship for homeowners dealing with financial distress, life transitions, or inherited properties. If you're behind on payments, going through a divorce, managing a deceased relative's estate, or relocated for work, you can't afford to wait months hoping for the perfect traditional buyer.
The K-Shaped Housing Market and Wealth Gap
Economist Lisa Sturtevant's observation about a "K-shaped" market reveals a troubling divergence. While luxury properties in areas like La Jolla continue appreciating—up 6.3% year-over-year—the mid-market and entry-level segments that traditionally built middle-class wealth are stagnating or declining.
This split creates what Sturtevant calls "a wider wealth gap" that delays wealth-building opportunities for younger generations. Historically, homeownership served as the primary wealth-building vehicle for American families. You bought a modest starter home, built equity, and traded up over time. That ladder is breaking.
Example: Young Family in 2015 vs. 2025
Consider a young family earning $120,000—slightly above the county median. In 2015, when the median home price was approximately $475,000, they could realistically purchase with 10% down and manageable monthly payments.
The same family today faces a $985,092 median price, requiring a $197,000 down payment for 20% down (to avoid PMI) or accepting higher monthly costs with a smaller down payment that still exceeds $100,000.
For homeowners, this K-shaped dynamic means your property's value trajectory increasingly depends on its market segment. Own a luxury property? You're likely still appreciating. Own a mid-market home needing repairs or updates? You're competing for a shrinking pool of qualified buyers with growing leverage to demand concessions, repairs, or price reductions.
This reality particularly affects inherited properties. If you've inherited a family home that needs updating to compete in today's market, you face a difficult choice: invest tens of thousands in renovations to attract buyers, or accept a lower price reflecting the property's condition. For many inheritors—especially those managing estates from out of state—neither option is appealing, making alternative selling methods increasingly attractive.
Alternative Selling Options in an Affordability Crisis
When traditional buyers need $258,000 in income and take 41+ days to close, homeowners facing urgent situations need alternatives. The affordability crisis has expanded the role of cash buyers and direct purchase companies as a practical solution for specific circumstances.
When Cash Offers Make Sense
Cash buyers serve a legitimate function for homeowners who can't wait months for traditional sales. Common situations include:
- Pre-foreclosure: If you're behind on payments and facing foreclosure timelines, a 7-14 day cash close can prevent credit damage and potentially preserve some equity.
- Inherited properties: Out-of-state heirs often prefer quick, as-is sales over managing repairs, showings, and months-long escrow from a distance.
- Divorce settlements: When both parties want clean, fast separation of assets, cash offers eliminate the uncertainty of traditional buyer financing falling through.
- Relocation: Job transfers or family emergencies requiring immediate moves make extended listing periods impractical.
- Property condition issues: Homes needing significant repairs or code violations that limit the conventional buyer pool.
Understanding the Trade-off
Cash offers typically come at 10-20% below retail market value. This isn't arbitrary—cash buyers assume the carrying costs, repair expenses, and market risk that traditional buyers avoid. For a $900,000 home, that might mean accepting $720,000-$810,000 depending on condition and market factors.
The question isn't whether cash offers pay less—they do. The question is whether speed, certainty, and convenience outweigh the price difference for your specific situation. If you're two months from foreclosure, losing $90,000 in equity but avoiding foreclosure's credit damage (and potential deficiency judgment) may be the better financial choice. If you've inherited a property needing $75,000 in deferred maintenance, accepting $765,000 cash instead of hoping for $900,000 retail (minus $75,000 repairs and 6% commission) nets similar proceeds with far less hassle.
Due Diligence on Cash Buyers
The affordability crisis has attracted both legitimate buyers and predatory operators. Vet any cash offer carefully: verify proof of funds, check business licensing, review the purchase agreement with an attorney, and understand all fees and obligations. Reputable cash buyers provide transparent offers, don't charge junk fees, and give you time to consult with advisors before committing.
What the Data Suggests for 2025-2026
Market indicators point to continued affordability challenges through 2026, though the pace of change remains uncertain. Home prices fell for four consecutive months through December 2025, with the median dropping 0.85% annually—the slowest national price growth in over two years at just 1.3%.
This represents a correction, not a collapse. San Diego's inventory remains constrained relative to demand, preventing the price crashes some markets experienced in 2008. Only 39 foreclosures are currently listed in San Diego County at a median of $932,000—far below historical distress levels. About 2.5% of homes (roughly 16,000 properties) are underwater, one of the lowest rates nationally.
Factors Shaping Affordability Over the Next 12-18 Months
Mortgage Rates
If rates decline toward 5.5%, affordability improves marginally—monthly payments on a median home would drop from $6,050 to approximately $5,600. That helps but doesn't solve the fundamental income mismatch.
Wage Growth
San Diego's median income growing 4-5% annually would require nearly a decade to meaningfully improve the ratio, assuming flat home prices—an unlikely scenario in a supply-constrained coastal market.
Remote Work Patterns
Any reversal in remote work flexibility could reduce demand from out-of-state buyers, though San Diego's quality of life and climate provide enduring appeal.
Economic Recession Risk
A broader economic downturn could force prices lower quickly, but would also reduce buyers' purchasing power through job losses and tighter lending—potentially worsening affordability despite lower prices.
The most likely scenario involves continued slow price appreciation (1-3% annually) with persistent affordability challenges. For homeowners, this means the equity you've built remains substantial, but converting that equity to cash through traditional sales will continue requiring patience with longer timelines and more buyer leverage than the 2020-2022 seller's market.
Frequently Asked Questions
What does the 8.7x income-to-price ratio actually mean for San Diego homebuyers?
The 8.7x ratio means San Diego's median home price ($985,092) is 8.7 times higher than the median household income ($112,933). Practically, this means you need to earn approximately $258,000 annually to afford a median-priced home using conventional lending standards—more than double what the typical household actually earns.
How does San Diego's affordability compare to other California cities?
San Diego's 8.7x ratio is among California's worst, exceeded only by some San Francisco Bay Area counties (10x+). Los Angeles County averages around 7.5x and Orange County approximately 8.2x. Nationally, the average home-price-to-income ratio is about 5x, making San Diego nearly 75% less affordable than the U.S. overall.
Are San Diego home prices falling in 2025?
Yes, but modestly. Prices fell 0.85% annually through September 2025, marking the fourth consecutive month of decline. The median single-family home price dropped to $975,000. However, this correction is gradual—not the rapid crashes seen in 2008—because inventory remains constrained and foreclosure rates are historically low.
Which San Diego neighborhoods are most affected by the affordability crisis?
The crisis affects all neighborhoods but differently. Luxury areas like La Jolla (median $2.4M) continue appreciating (+6.3% year-over-year), while mid-market areas like Pacific Beach (median $1.3M) declined 4.3%. Even relatively affordable neighborhoods like North Park ($943K median) require incomes exceeding $245,000—more than double the county median.
How long does it take to sell a home in San Diego's current market?
The median days on market increased to 41 days in October 2025, up 46% from 28 days last year. Only 29% of homes sell above asking price (down from 71% in April 2022). Homes in premium condition and locations may sell faster, while properties needing repairs or in mid-market segments can take 60+ days.
What income do I need to afford a median-priced San Diego home?
You need approximately $258,000 in annual household income to afford San Diego's median-priced home of $985,092 using conventional 28% debt-to-income standards. With a 20% down payment ($197,000) and 6.30% mortgage rates, monthly housing costs exceed $7,500 including principal, interest, taxes, and insurance.
Should I consider a cash offer if I need to sell quickly?
Cash offers make sense for specific situations: pre-foreclosure, inherited properties, divorce settlements, urgent relocation, or homes needing major repairs. While cash offers typically run 10-20% below retail value, they close in 7-14 days versus 41+ days for traditional sales, with no financing contingencies, inspection repairs, or showing requirements. Evaluate whether speed and certainty justify the price difference for your circumstances.
Will San Diego home prices continue falling through 2026?
Most indicators suggest continued modest declines or flat prices through 2026, with annual changes likely ranging from -2% to +2%. The market lacks the foreclosure inventory that drove 2008's crash—only 39 foreclosures are listed countywide. However, affordability constraints, elevated mortgage rates around 6.30%, and reduced buyer demand will likely prevent significant appreciation until the income-price gap narrows.
Need to Sell Your San Diego Home Fast?
San Diego's 8.7x income-to-price ratio represents more than a statistical anomaly—it's a fundamental market shift that affects every homeowner's selling timeline, buyer pool, and proceeds. If you're facing financial pressure, life transitions, or inherited properties, this affordability crisis makes traditional selling timelines increasingly impractical.
Understanding your options—traditional listing, cash offers, or hybrid approaches—starts with honest assessment of your timeline, financial situation, and priorities. Get a fair cash offer in 24 hours. Close in as little as 7 days.
No obligation. No fees. No repairs needed.