San Diego housing indicators

As California’s housing market in 2025 moves on from the chaotic pandemic economy, it is important to note the San Diego County housing market never fully recovered from the 2008 recession and financial crisis before the 2020 recession, financial crash and pandemic slammed the region’s economy. Home sales volume remained low throughout the elongated recovery of the 2010’s, as did job creation.

The pandemic economy of 2020-2021 distorted sales activity during the period, inflating sales volume, pricing of sales and, to a lesser degree, rental property rent rates, until mid-2022 when all real estate activity began its current decline as fiscal and monetary stimulus ended. 

Mortgage rates were deliberately dropped to historic lows in the pandemic economy as the Federal Reserve stepped up to fund the entire mortgage-backed bond market as the lender of last resort since Wall Street froze financially.

The readily abundant low-cost mortgage funds were rocket fuel for home sales volume – and prices – until the pandemic economy was abruptly cut off. Record-low interest rates maximized buyer purchasing power and prices sellers were able to get in 2020-2021. Homebuyer fear-of-missing-out (FOMO) on a dwindling MLS inventory as turnover abruptly slowed also fueled San Diego’s rapid home price increases.

As interest rates abruptly reversed course in 2022, buyer purchasing power was slashed and cooled both buyer and seller attitudes about acquiring property. Ownership turnover worsened to further strangle MLS inventory which accelerated property price increases to ever greater, unsustainable heights.

In 2025, the low level of inventory is slowly building for the annual spring homebuyer season as turnover ticks up while buyer demand is flat at best. Every year in the cyclical spring buying season, real estate sales volume and prices rise, peak, then decline through October/November.

The current trend and the current economic policies now deeply rooted in worldwide political and economic confusion, suggest prices in the next few months are likely to start to drop for two or three years through 2027.

Going forward, expect sales volume and occupancies in all types of property to continue to slip annually, extending the trend underway in sales volume since the peak in mid-2022.

Declining prices will likely bottom around 2028 regardless of the outcome of the current trade uncertainty. An initial arrival of speculators and investors will then produce a short-term pick up in sales volume and a modest price bump before settling into a bottom for pricing. Later, property prices will start to rise as buyer-occupants sense the pricing bottom has set in, and they return to buy, as they do in every recovery period.

Expect downward pressure on prices for all types of property due to a rise in the cost of mortgage funds during the decade ahead. Mortgage rates are set to trend upward in the foreseeable future.

View the charts below for current activity and forecasts for the San Diego housing market.

Updated May 7, 2025. Original copy posted March 2013.

Home sales volume slows

Chart update 3/26/25

In 2025, San Diego home sales volume, now seriously weakened by the current international trade war, is stuck at 2/3rds of the heights seen in 2019 during the last normal year before the pandemic recession.

Echoing statewide trends, San Diego experienced a typical decrease in total home sales volume in 2018-2019 as the Millennium Boom recovery lost momentum. Then in 2020, home sales volume instantly reversed course with the fiscal and monetary stimulus required for individuals and businesses to finance their way through the pandemic period. 2021 ended with home sales volume 9.2% above a year earlier.

But the rising action of the pandemic years ended with a sales volume crash in 2023. In total, 23% fewer sales closed in San Diego County in 2023 compared to 2022. Also, 2023 closed with 37% fewer sales than during 2019 (the last “normal” year for sales volume).

Dragged down by the double whammy of rapidly rising mortgage rates and fast rising property prices, homebuyer enthusiasm waned significantly. Today, sales volume is trending flat with an additional downward influence for 2025-2026 brought on by the debilitating trade war taxes. Compared to the last “normal” year for home sales volume, 2024 was 33% below 2019.

That said, home sales volume for 2024 rose 6% from 2023. For the year to date, 2025 is 2.3% below 2024 as of February and will likely fail to produce a full spring bounce in sales volume.

Builders facing the trade taxes on materials and a reduction in the migratory labor force are not likely to get excited about building SFRs at any rate beyond completing starts underway. The last experiment in trade war taxes suggests a steep drop in property sales of all types, together with a huge adjustment in pricing from the need for property to house people and businesses.

A complete recovery will be reached only after end user demand is buttressed by an increase in the number of jobs paying a sufficient salary. Expect 2028 to be the year for a recovery period to take California real estate out of the shadow real estate recession that commenced in 2022.

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California home sales volume

Inventory rises from historic lows

Chart update 3/26/25

Multiple listing service (MLS) inventory has risen from the historic low reached at the end of 2021, stressing availability while driving prices up. After plateauing in 2023 following two years of steep decline (minus a brief bump in 2022 when supply briefly exceeded buyer demand), for-sale inventory in San Diego for February 2025 averaged a significant 39% above a year earlier.

Today, inventory remains low compared to 2019 and 2020 due primarily to owner reluctance to sell, not due to an overabundance of buyers.

The winter months typically see the lowest inventory of homes for sale, peaking around mid-year as the cyclical return of buyers takes place.

Looking forward, expect for-sale inventory to continue to climb in 2025. As for-sale inventory grows, extending the average length of time on the market, sellers are forced to reduce pricing to attract mortgage-funded homebuyers back to the broker offices to acquire property.

The Fed’s task to reduce consumer inflation while maintaining current employment levels is progressing irregularly. The current culprit is the chaotic trade war tariff disruption. As a result, indicators point to a continuing downturn in the housing market activity until around the 2028 period.

The seller’s market which fully reversed to a buyer’s market by mid-2022 continues. The process of this shift from a seller market to a buyer market was introduced by the beginning of a roughly 30-year half cycle of generally rising interest rates on all types of lending.

Today, homebuyers are responding with an increased reliance on a wait-and-see approach to buying. The present global disruptions in commerce have everyone’s attention. Thus, buyers are increasingly more aware of real estate market conditions and are becoming more financially cautious and less willing to buy without significant reduction in seller pricing or mortgage rates.

Turnover rates flounder following moratoriums

Chart update 3/26/25

The percentage of San Diego County homeowners who moved in 2023, the most current figure, fell back from the previous year to continue the downward slide following a peak in turnover in 2016. Increased mortgage rates in 2013 without a comparable drop in seller pricing caused most of the attitude shift away from relocating.

For homeowners with a low-rate mortgage, selling and acquiring an upgrade became too costly. The general economy ranging from the economic recession setting in, the pandemic upheaval and the trade wars also triggered caution about taking on additional mortgage debt.

However, the percentage of renters who moved in 2023 was higher than in 2022 and 2019 due to a meaningful drop in home pricing by sellers and a plateauing of mortgage rates. Since 2006, when renter turnover peaked at 32% or an average renter turnover every three years, the rate of renter turnover has declined in a constant trend. With 2023 reaching a 19% turnover or once every five years, this downward trend will most likely continue on exiting the pandemic economy and entering the tariff trade wars economy.

Further, low and declining turnover rates are indicative of increasingly cash-strapped households that simply cannot afford to or are uncertain about moving, whether they are homeowners or renters. When turnover trends lower, home sales volume and service provider fees for transactions decrease.

While the trends in San Diego are similar to the rest of the state, the magnitude of decline in turnover rate in San Diego County has not suffered as much compared to the rest of Southern California. This is partly due to a better jobs outlook and San Diego’s large military population on which the trade wars will have a positive effect for San Diego and traditionally experiences high rates of turnover. Agents with mortgage training (MLOs) gain an “in” with this population as they are familiar with the various benefits available to military renters and homeowners such as Veteran’s Administration (VA)-guaranteed and CalVet mortgages, then can advertise their services as experts.

Expect a consistent increase in the frequency of turnover to likely arrive only after a recovery sets sometime after 2028. California OAG efforts to force cities and counties to greatly increase the permitting of residential construction as recently legislated (ADUs, parceling, planning) will eventually increase housing starts rapidly. Further, after we pass through the current real estate recession – which set in mid-2022 and persists in 2025 without an end in sight – San Diego will experience an economic recovery for real estate sales and leasing transactions for all types of property.

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Homeownership plummets

Chart update 3/26/25

In the years following the Millennium Boom, San Diego County’s homeownership rate followed the general statewide and national trend of decline with no end to the decline able to be forecast. 2024 year’s end placed homeownership rate in San Diego county at 55% in contrast to the homeownership rate peak at 63% in 2006.

The current post-covid rise in home prices due exclusively to a lack of property available for sale – resale or new construction – has forced a huge part of first-time homebuyers and turnover homeowner out of the market, giving cash-heavy investors and the few cash buyer-occupants the upper hand.

The housing market bounce back from the current real estate recession cannot be reliably forecast until the global trade wars settle down with durable tariff rates. Further, a loss of jobs is expected through the 2026 period, or later, due to uncertain business conditions, taxes on imported material for consumers and manufacturers, increased inability to export, etc.

Do not expect the rate of homeownership to fully return to the inflated heights seen in 2007 anytime soon. The rate was elevated by unfettered access to easy money resulting in the 2008 Great Recession. In response, mortgage regulations were reinstated in 2010 with enforcement of ability-to-repay (ATR) rules to protect society from destabilizing types of mortgage lending.

Home price’s seasonal bounce

Chart update 3/26/25

The price of housing in San Diego County began to plunge in mid-2022, down 2%-5% (depending on price-tier) by May 2023. However, throughout 2024 home prices experienced a slow steady rise as mortgage rates declined during the spring homebuying cycle. As of January 2025, low- and high-tier home prices were 4% and 5% above a year earlier and mid-tier prices 1% higher than a year earlier.

Watch for prices to fall back in the months ahead following spring’s seasonal bounce, ending in July.

A forecast of price expectations for the fall of 2025 and throughout 2026 is a risky call due to the chaotic lack of any certainty about economic conditions in California, the US and globally due primarily to the tariff war taxing products bought by manufacturers or consumers.

That said, it is most likely that sales volume will diminish as caution sets in among buyers and sellers over the uncertainty surrounding financial decisions in the foreseeable future. Price movement now depends on the quantity of owners who are willing or need to sell their property, which generally depends on the level of jobs. Since the economic factors in play as managed by the government suggest a recession-like turndown in 2025, expect property prices to follow and fall. Consumer inflation is a separate issue.

Multi-family construction leads the way

Chart update 3/26/25

Residential construction starts were mixed in 2024, rising 46% for single family residential (SFR) starts while faltering at +1% for multi-family starts. Until 2018, the recovery had been concentrated in multi-family starts, due to the increased demand for rental housing experienced during this recovery. Fueling this increased rental demand are:

• a demand shift from suburban living to city dwelling by the youngest generation of homebuyers, Millennials (Gen Y);
• an increased resistance to homeownership following the 2008 housing crash during which around 1.1 million California families lost or were forced to sell their homes due to foreclosure; and
• the higher barriers to homeownership due to the return of mortgage lending fundamentals which tightened standards for mortgage lending but eased the application process with MLOs.

Today, the general trend for SFR construction starts in San Diego County is still far below 2002-2004 numbers. The next peak in SFR construction starts depends on a return to certainty for costs of construction without the negative cost affect of the current trade wars taxing imports. When a return to stability in construction costs takes place, existing state legislation and OAG enforcement of public policy requiring cities to issue more permits will quickly accelerate housing starts.

However, multi-family housing starts in the next upturn will experience high levels as last seen in the mid-1980s, which then accommodated the arrival of Baby Boomers to the housing market.

Jobs near a peak after 20 years

Chart update 3/26/25

Before end users can provide sufficient buyer and renter support for a housing recovery, they need income in the form of jobs or wage increases. San Diego has outpaced the state’s jobs recovery since 2008, which is good news for San Diego’s housing industry.

Unlike other parts of the state with less stable employment markets, San Diego surpassed the level of jobs held prior to the 2008 recession well before the 2020 recession set in. However, due to 2020’s significant job losses and their recovery, jobs are now 28,100 above the pre-2020 recession peak as of January 2025. Job levels have probably peaked and will experience a slow decline in 2025 through 2026 held steadier than other parts of California due to the military employment stationed in the area.

Industry employment rises slowly

Chart update 3/26/25

In the housing industry, construction jobs have gradually regained numbers over the past decade of recovery from the 2008 recession, nearing a modest recovery. In contrast, the number of employed real estate professionals has remained low throughout the past recovery, rising slowly.

In the 2020 pandemic economy, both industries experienced a hit to job numbers, though both have bounced back fairly quickly compared to other industries — especially for real estate professionals. However, the real estate profession is experiencing a decline in sales, leasing and mortgage origination that will continue until California clears out the effects of the trade wars developing globally.

Per capita income now parallels consumer inflation

Chart update 3/26/35

The average per capita income in San Diego County is $79,100 as of 2023, the most recently reported Census year. This is an increase in income of 6.2% over the previous year. Income took a hit in San Diego during the 2008 recession, and it took three years for income to finally catch up to 2008 levels. That experience is likely to repeat in the 2025 to 2027 period based on existing and expected damage to the consumer and manufacturing communities inflicted by the trade wars with all our trading partners.

Per capita income in San Diego County is slightly lower than the state average and exceeds levels in the inland valleys.

The pace of personal income sets the annual rate of increase in sustainable  home prices and rental rates. Thus, buyer occupants and residential tenants ultimately determine pricing of homes and rental units  — buyers and tenants can only pay as much for housing as their income qualifies them to pay — nothing more, unless lenders and landlords want to take on more risky, less qualified individuals.

This financial rule was altered in the 2020-2021 pandemic period due to the interference of cash-heavy investors in the housing market, second home buyers, and record-low mortgage rates, which caused buyer purchasing power to jump, again all based on personal income. Rental rates did not get that parallel jump (33%) compared to home pricing in the pandemic economy as, again, rent is tied to income and rental occupants have no capacity for leveraging the purchase of an asset to occupy as housing

Do not expect per capita income to rise in the coming couple of years as job numbers are likely to decrease, though not as much as in other large cities.