San Diego Housing Market Update: January 2025

The San Diego housing market remains resilient as we enter 2025, with trends pointing to a balanced market despite elevated mortgage rates and seasonal inventory shifts. Single-family home prices have seen mild seasonal declines, inventory is in a much stronger position compared to prior years, and buyers and sellers are adjusting to current market conditions.

Here’s a look at the key factors shaping the housing market and what to anticipate in the months ahead.

Home Prices: Seasonal Declines Amid Strong Demand

Single-family home prices in San Diego County reached an all-time high of $1.05 million in June 2024, driven by high demand and limited inventory. While prices have softened slightly since then, December marked the 19th consecutive month of year-over-year price growth.

Key Insights on Price Trends:

• Mild Seasonal Decline: December’s slight month-over-month price drop aligns with typical seasonal patterns.

• Continued Price Growth: Despite high mortgage rates, prices have remained stable due to sustained demand in Southern California.

• Looking Ahead: Minor price contractions are expected in January 2025, followed by a rebound in the spring and summer months.

The Role of Mortgage Rates in the Market

High mortgage rates have significantly influenced both supply and demand in 2024. Rates fell between May and September but surged again in the fourth quarter, approaching 7%.

Impact of Mortgage Rates:

• Rates near 6% saw greater buyer and seller activity compared to rates closer to 7%.

• Elevated rates have slowed sales volume but have not drastically impacted prices, as buyers adapt to the new normal.

• Sales are expected to remain slow in early 2025 if rates stay high.

Inventory Trends: Growth in 2024 Sets the Stage for 2025

Inventory levels have been a defining factor in the San Diego housing market. From a sharp 79% decline between July 2019 and January 2022, inventory levels rebounded in 2024, growing by 41%.

Seasonal Inventory Patterns:

• Historical Trends Resurface: Unlike 2023, inventory levels in 2024 followed typical seasonal patterns, peaking in summer and declining in winter.

• Improved Market Position: The 41% increase in inventory throughout 2024 places the market in a stronger position entering 2025.

• Challenges Remain: Low inventory combined with high rates continues to slow overall market activity.

Market Balance: A Healthy Supply-Demand Relationship

The Months of Supply Inventory (MSI) metric reflects a balanced market in San Diego County.

MSI Highlights:

• December MSI: Rose to three months, indicating a balanced market where neither buyers nor sellers have a distinct advantage.

• Long-Term Average: A three-month MSI aligns with California’s historical norms.

• Trends to Watch: Fluctuations in inventory and mortgage rates may impact MSI and market dynamics in early 2025.

Opportunities for Buyers and Sellers in 2025

The San Diego housing market remains robust as we head into 2025, despite challenges like high mortgage rates and limited inventory. Seasonal patterns have returned, and a balanced market creates opportunities for both buyers and sellers:

• For Buyers: Increased inventory and stable prices provide more options and less competition. Working with a knowledgeable agent can help navigate elevated rates and secure the right home.

• For Sellers: A balanced market means homes priced competitively are likely to sell, especially as demand picks up in the spring.

By staying informed and partnering with real estate professionals, buyers and sellers can confidently navigate the market in the coming year.