San Diego Housing Market Sees Seasonal Price Dip and Inventory Growth

San Diego’s real estate market continues to evolve as we approach the end of 2024. Recent trends show a complex interplay between home prices, inventory levels, and mortgage rates. Let’s take a closer look at the current state of the housing market in San Diego County and what it means for buyers, sellers, and investors.

1. Home Prices: A Mild Decline After Record Highs

San Diego County saw a record-breaking median price of $1.05 million for single-family homes in June 2024. Since then, prices have experienced a modest decline, following the typical seasonal pattern of a peak in summer and a mild drop in the fall. 

- October 2024 Market Snapshot: October marked the 17th consecutive month of year-over-year price growth for single-family homes. While prices have softened slightly, they remain near historic highs due to strong demand and limited supply.

- High Mortgage Rates and Prices: Elevated mortgage rates have dampened market activity but have not significantly reduced home prices in Southern California. Buyers and sellers seem more comfortable with rates closer to 6% but tend to retreat from the market as rates approach 7%. 

What to expect: Home prices may continue to decline slightly over the next three months but are unlikely to drop dramatically due to the persistent imbalance between supply and demand.

2. Inventory: Growing but Still Below Pre-Pandemic Levels

Inventory has been a critical factor shaping San Diego’s housing market. The county’s inventory saw dramatic drops during the pandemic but has been on a steady rise in 2024, reaching its highest level since May 2020.

- Key Trends:  

  - Inventory has increased by 90% from January to October 2024.  

  - Despite this growth, current inventory levels remain 27% below pre-pandemic averages.  

  - October inventory increased—a rare event for the month—indicating a possible shift toward more balanced seasonal patterns.

While inventory is growing, it’s still insufficient to fully meet demand, particularly in the context of high mortgage rates that deter both buyers and sellers.

3. Sales Activity: Slowed by Mortgage Rate Volatility

The rise in mortgage rates from September to October 2024 has had a noticeable impact on sales activity. The market tends to slow as rates approach 7%, with buyers hesitant to commit to higher monthly payments and sellers less motivated to list their homes. 

- Seasonal Patterns Return: 2024’s inventory, sales, and new listings are beginning to resemble typical seasonal trends, albeit at lower levels than in previous years. Sales are expected to pick up again in January, provided rates stabilize or decline.

4. Market Balance: Months of Supply Inventory (MSI)

The Months of Supply Inventory (MSI) metric provides insight into the market's supply-demand balance. In October, San Diego’s MSI rose to 3.3 months, the highest level since 2020 and above California’s long-term average of three months. 

- What This Means:  

  - An MSI below three months indicates a seller’s market (more buyers than sellers).  

  - An MSI above three months indicates a buyer’s market (more sellers than buyers).  

  - At 3.3 months, the market is considered balanced, providing equal opportunities for buyers and sellers.

A balanced market offers a more predictable environment for both parties, reducing the urgency to make quick decisions.

What Does This Mean for Buyers and Sellers?

- For Buyers:  

  Rising inventory and a balanced market create more opportunities to negotiate better deals. However, high mortgage rates mean affordability remains a challenge. Consider locking in rates if they stabilize closer to 6%.  

- For Sellers:  

  While demand has softened, home prices remain historically high. Sellers should price competitively and work with experienced agents to attract motivated buyers.

Stability in an Evolving Market

San Diego’s real estate market is stabilizing after years of dramatic fluctuations, with inventory levels growing and the market nearing balance. While high mortgage rates are slowing activity, they haven’t significantly impacted prices, which remain near all-time highs. For buyers and sellers, understanding these dynamics is essential for navigating the market effectively.

The coming months are expected to bring further adjustments as inventory continues to rise and mortgage rates fluctuate. Working with a knowledgeable real estate professional will help you stay ahead of the trends and make informed decisions tailored to your goals.