Is the real estate market going up or down?  

San Diego Real Estate Market Update: Prices Dip in Q2, More Softening Expected Before Stabilization

The Downtown San Diego real estate market continued its gradual correction in the second quarter of 2025, with home prices declining 5.8%. While this may sound steep, it’s important to keep the bigger picture in perspective: year-to-date, prices are down just 3%, a modest dip considering the broader economic context and the exceptional run-up in values over the past several years. Click here to see a 20 year price history chart.

📉 What’s Driving the Decline?

The primary factor behind the softening market remains high mortgage interest rates, which have kept many buyers on the sidelines. Demand has cooled, and sellers are adjusting expectations accordingly. Properties are sitting longer, and price reductions have become more common—especially in the higher price brackets and urban condo market.

As it stands, we’re projecting another 3% decline in Q3, with the market expected to stabilize in Q4, barring any major economic surprises.

🕰️ When Will Prices Start Rising Again?

The key to a sustained rebound in home values lies in one factor: mortgage rates. Until rates fall below 6%—a threshold many consider psychologically and financially significant—buyer enthusiasm will likely remain muted. The earliest realistic window for this drop appears to be sometime in 2026, based on current Fed outlooks and inflation trends.

📍 What This Means for Buyers and Sellers

  • Buyers: This is a rare window of opportunity to enter the San Diego market with less competition, more negotiable sellers, and increased inventory—conditions we haven’t seen in years. If you’re planning to buy and hold, today’s softening market may offer excellent long-term value.

  • Sellers: Pricing strategy and presentation are everything right now. Overpricing will only lead to extended time on market and price reductions. If you’re planning to sell in the next 6–12 months, talk to an agent who understands this market and can help you position your property correctly from the start.

🔍 Final Thoughts

The Downtown San Diego real estate market is adjusting—not crashing. After years of rapid growth, a measured correction like this one is healthy. While we may see a few more quarters of softness, fundamentals remain strong, and long-term demand for San Diego housing remains robust.

If you’d like specific data for your neighborhood or want to discuss whether it’s the right time to buy, sell, or hold, feel free to reach out to me at 619-606-2596. Knowledge and timing are more important now than ever.