San Diego Housing Market Shifts as 2025 Comes to a Close
As 2025 nears its end, San Diego’s housing market is clearly entering a new phase. After an energetic start to the year marked by sharp price gains and competitive buyer activity, recent months tell a different story. Cooling prices, shrinking inventory, and improving market speed suggest the market is recalibrating rather than weakening — and both buyers and sellers need to adjust their expectations accordingly.
San Diego home prices extended their downward trend in October 2025, with the median sale price settling at $985,000. This reflects a 2.48% year-over-year decline and marks the second straight month of annual price softening. Prices have gradually stepped down from summer highs — $1,040,000 in July, $1,025,000 in August, and $990,000 in September — indicating a sustained market adjustment rather than a short-lived dip.
This shift stands in sharp contrast to the early months of the year, when prices surged more than 11% year-over-year in January. That rapid appreciation has given way to a more balanced environment, largely due to elevated inventory levels and buyer hesitation throughout the summer. For buyers, this has translated into increased leverage and fewer bidding wars, while sellers are being forced to price more strategically.
While prices have softened, inventory has begun moving in the opposite direction. Active listings declined again in November 2025, falling to 5,025 homes — down nearly 4% from October. This marks the third consecutive monthly drop since inventory peaked in July, signaling that the oversupply seen earlier this year is steadily correcting.
Although inventory remains higher than last year by roughly 12%, this gap has narrowed significantly compared to the 25% to 40% year-over-year increases observed during the spring and summer. The shift aligns with typical seasonal behavior, as fewer homeowners list properties during the holiday season. This pullback in supply could provide a stabilizing effect on prices as the market moves into early 2026.
Another notable change is the improvement in how quickly homes are selling. In October 2025, properties spent a median of 25 days on the market, down from 26 days in September and 27 days in August. While this pace is still slower than last year’s market — about 25% longer than October 2024 — the trend suggests buyer activity is beginning to pick up again.
This renewed momentum likely reflects a combination of reduced competition from other buyers who paused their searches earlier in the year and sellers who are adjusting prices to align with current market realities. Homes that are well-priced and well-presented are regaining attention, even as overall conditions remain more measured than in previous years.
One of the most telling indicators of the market’s direction is Months of Supply Inventory (MSI). Historically, around three months of supply signals a balanced market. Falling below that threshold typically favors sellers.
By October 2025, San Diego’s MSI had dipped to 2.9 months, nudging the market back into seller’s market territory for the first time since spring. This tightening reflects a meaningful shift: inventory is declining faster than demand, reversing the buyer-favorable conditions seen earlier in the year. Compared to last summer’s dramatic year-over-year MSI increases, today’s supply levels are only modestly higher than last year — a sign that the market is stabilizing rather than weakening.
For buyers, the aggressive negotiating window seen during the summer may be narrowing. While prices are still lower than their peak and competition remains manageable, shrinking inventory means fewer options heading into the winter months.
For sellers, conditions are improving. Reduced inventory, faster sales, and a return to seller-favorable supply levels suggest that properly priced homes could perform well even during the slower holiday season. Sellers who remain active may benefit from less competition and more serious buyers.
San Diego’s housing market is not collapsing — it’s recalibrating. After months of adjustment, the combination of declining inventory, improving sales pace, and tightening supply points to a market that is regaining balance. As 2025 comes to a close, both buyers and sellers should stay informed, act strategically, and be prepared for continued shifts as the market moves into the new year.
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