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San Diego Home Prices Dip in October, Signaling Market Normalization

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  Published in House and Home on Tuesday, November 18th 2025 at 17:05 GMT by NBC 7 San Diego

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San Diego Home Prices Dip Again in October – What the Numbers Really Mean

For the fourth consecutive month, the San Diego housing market has shown a modest decline in home prices, according to the latest data released by the San Diego Association of Realtors (SDAR). While the dip is small—just a handful of percentage points from September—many industry insiders are treating it as a sign that the market, which has been in a state of accelerated growth for the past five years, is finally starting to normalize. Below, we break down the key figures, explain the forces behind the trend, and look at how San Diego’s performance stacks up against national averages.

1. The Core Numbers

Sources: SDAR October 2024 Home Price Index; National Association of Realtors (NAR) Data

The headline figure—a decline from $1,080,000 to $1,040,000—represents a 3.7% drop, which is statistically significant but not alarming. What’s more striking is that this decline occurs against a backdrop of rising inventory and longer market cycles. The number of active listings grew by 5.1%, giving buyers more options, while the months‑of‑supply metric moved to a “sub‑seasonal” range of 5.2 months, a level that historically signals a market shifting from a seller’s advantage to a more balanced environment.

2. Why the Dip?

2.1 Rising Mortgage Rates

Mortgage rates have been a primary driver of the price change. According to the U.S. Treasury and the Federal Reserve’s latest data, the average 30‑year fixed mortgage rate hovered around 7.5% during October. This is nearly 1.5 percentage points higher than the 6.0% average that prevailed during the height of the 2023 boom. Even a small rate increase can dampen buyer enthusiasm, especially for high‑end San Diego properties where a 1% jump translates to an additional $20,000–$25,000 in monthly payment.

2.2 Increased Supply

The SDAR’s data indicate a modest but steady rise in inventory. The market has added roughly 200 new listings each month over the past four months, which has contributed to longer days on market and a slight price correction. Local real estate agents say that many homeowners, who previously held off on selling due to the “seller’s market” conditions, are now choosing to list once rates normalize and buyers’ appetite cools.

2.3 Local Economic Factors

San Diego’s economy remains strong, with low unemployment rates (3.2% as of September) and a steady influx of tech talent from nearby Silicon Valley and the Inland Empire. However, the city’s population growth rate has plateaued at around 1.0% in the past year, which is lower than the 1.5% average seen during the pandemic. Slower growth can also temper price inflation.

3. Contextualizing with National Trends

To understand whether San Diego is following the national trajectory or diverging from it, SDAR linked to a National Association of Realtors (NAR) report that shows the U.S. median sale price fell by 2.6% in October 2024. While San Diego’s dip is slightly less than the national average, the city’s absolute price levels remain higher than the national median of $400,000. The NAR data also highlight that the national inventory increased by 9.3% month‑over‑month, whereas San Diego’s increase was 5.1%, suggesting that San Diego’s supply is still comparatively limited.

Furthermore, the NAR’s “Housing Market Outlook” indicates that many metros are entering a “softening” phase, where price gains will slow but not reverse entirely. The consensus is that prices will likely trend lower by 1–3% in the next quarter, which aligns with the SDAR’s own projections.

4. Neighborhood‑Level Dynamics

The article also points out that not all San Diego neighborhoods are experiencing the same trend. In the luxury market—particularly in La Jolla, Del Mar, and the Point Loma Peninsula—median prices remained flat or even rose slightly in October. Conversely, in suburban areas such as El Cajon, Santee, and National City, median prices fell by 5–7%. These local variations underscore the heterogeneity of the San Diego market: while coastal and high‑end markets remain resilient, more affordable or “mid‑range” segments are more susceptible to rate‑induced dampening.

5. Expert Opinions

• Dr. Maya Sanchez, SDAR President: “We’re seeing a mild correction, but it’s not a recession. The market is still very strong, with a healthy balance of buyers and sellers. The dip is an expected response to the higher rates, and it gives us more realistic prices for buyers who were being priced out in the summer.”

• Ben Kim, Senior Realtor at Pacific Homes: “From a sales perspective, we’re seeing that buyers are taking longer to decide, and the competition between buyers is cooling. That’s why the median price per square foot has dropped. The good news is that the market is becoming more affordable for the average family.”

• Laura Patel, Housing Economist, UC San Diego: “When you look at price elasticity, the San Diego market shows a lower elasticity compared to national averages, meaning that price changes have less impact on volume. But the rising inventory will gradually increase elasticity, and we anticipate a slight further decline in prices if interest rates stay high.”

6. What Buyers Should Expect

1. Higher Mortgage Payments: Even though price drops may slightly ease the burden, the higher mortgage rate offset much of the savings.
2. More Choice: Buyers will have a broader range of homes to choose from as inventory rises.
3. Longer Negotiation Periods: Sellers may hold out for a better offer, so buyers may need to be more patient and flexible.
4. Potential for Future Gains: The market is moving toward a more balanced state, potentially opening up value opportunities for first‑time buyers or those looking to upgrade.

7. What Sellers Should Expect

1. Reduced Price Expectations: A 3–5% price dip is typical in this market cycle, so sellers should adjust their asking prices accordingly.
2. Extended Market Time: With inventory up, homes may stay on the market for 4–5 weeks longer than in the boom years.
3. Staying Competitive: Offering home warranties or flexible closing dates can help attract buyers in a more price‑sensitive environment.

8. The Road Ahead

The SDAR’s outlook for the next quarter predicts a modest price decline of around 1–2%, driven mainly by the continued presence of higher mortgage rates and a slight uptick in inventory. The real estate community remains optimistic that the San Diego market will continue to recover, given the city’s strong fundamentals—robust job growth, a steady stream of new residents, and limited land supply.

If interest rates hold above 7%, the price correction may be deeper and more prolonged. Conversely, if rates begin to soften, we could see a resurgence in sales volume and a rebound in prices, especially in high‑end coastal markets.

9. Final Takeaway

San Diego’s home prices dipped again in October, marking a small but statistically significant adjustment in the market. While the decline is modest compared to the broader national trend, it signals a move toward a more balanced market that reflects higher mortgage rates and increased inventory. Buyers and sellers alike should be prepared for a gradual cooling of prices and a shift in market dynamics that prioritizes choice, negotiation, and realistic pricing. Whether you’re buying, selling, or simply watching the market, keeping a close eye on the coming months will be essential—especially as San Diego’s unique mix of luxury and affordability continues to define its housing landscape.