Introduction
San Diego may be famous for its sunshine and beaches, but does that same shine extend to its real estate market today? With national headlines dominated by soaring home prices and record-low affordability, good real estate deals can feel increasingly out of reach—but is that truly the case in San Diego? Beneath the surface, a more layered narrative is unfolding—one shaped by constrained inventory, steady demand, zoning limitations, and a shifting rental landscape.
This article unpacks the current forces driving San Diego’s housing market. From appreciating home values to policy-driven supply issues, we examine the key dynamics shaping today’s conditions. In particular, we take a closer look at how the recent spring season has unfolded, which neighborhoods are emerging as standouts, and what the latest data says about affordability, buyer behavior, and long-term risks.
Whether you’re a first-time homebuyer preparing to make a down payment or an investor searching for your next opportunity, the insights in this article aim to provide a clear picture of where the market stands—and where it might be headed. San Diego’s housing landscape is constantly evolving, and understanding its complexities is essential to making informed decisions.
Overall Market Performance
While San Diego is not experiencing the dramatic housing boom it had post-pandemic, it has remained remarkably steady—perhaps signaling a shift toward market maturity. As of April 2025, the median sale price stood just under $990,000, marking a 2.6% year-over-year increase. Though not explosive, this growth reflects solid underlying stability, especially given the current high-interest-rate environment.
Single-family homes continue to lead in value, averaging over $1 million, compared to condos and townhomes at approximately $675,000. This price gap highlights a consistent preference for privacy, even as affordability pressures mount.
Sales activity picked up in late spring, with 926 homes sold in April—a notable 8.4% increase from the previous year. Homes are now spending more time on the market, averaging 21 days compared to just 15 days in April 2024. While the pace has slowed slightly, this remains a strong performance by historical standards. Bidding wars have cooled since the pandemic peak, yet 4 in 10 homes are still selling above asking price—clear evidence of a competitive environment for buyers.
Overall, the market appears to be experiencing a soft landing rather than a downturn. Buyers are becoming more selective and strategic in response to elevated mortgage rates, but the market continues to move—just with a more measured rhythm.
Supply Trends
Supply remains one of the most significant challenges preventing San Diego from easing ongoing price pressures. Although sales activity picked up in the spring, inventory levels continue to hover near historic lows. As of April 2025, there were just 2,783 active listings—a marginal 0.7% increase year-over-year. This translates to only 2–3 months of inventory, well below the 5–6 months typically seen in a balanced market.
The shortage is largely structural. Many homeowners are effectively “locked in” by ultra-low mortgage rates secured during the pandemic-era stimulus period—a dynamic known as the “lock-in effect.” With current mortgage rates in the 6–7% range and many homeowners holding rates as low as 3–4%, few are incentivized to sell. This has led to a sharp drop in new listings and kept inventory critically tight, further inflating property values.
To address the shortage, San Diego has ramped up permitting efforts. In 2023, the city issued roughly 9,700 new home permits—an 82% increase year-over-year. Notably, Accessory Dwelling Units (ADUs) accounted for 1,348 of those permits, surpassing single-family home approvals and highlighting a shift toward infill and density-focused development as a supply strategy.
Yet, progress still falls short of long-term goals. The city must build around 108,000 new units between 2020 and 2029 to meet state mandates. By the end of 2023, only 25,700 units had been approved, and by 2025 that figure had dropped to just 10,624. Decades of underbuilding—driven by restrictive zoning, local resistance to upzoning, and physical barriers like limited land, military zones, and protected areas—continue to hold back supply growth.
Adding to the challenge are escalating construction, permitting, and labor costs, which are deterring developers from launching new projects. As a result, the market is seeing a pivot away from traditional single-family homes toward multifamily and rental-oriented developments.
In summary, while San Diego has made noticeable efforts to address its housing shortage, the progress so far is modest relative to the scale of the problem. The region continues to grapple with entrenched structural barriers, the lock-in effect, and development cost hurdles—all of which keep new supply well below what’s needed.
Demand Trends
Although affordability remains a challenge, buyer demand in San Diego continues to be fundamentally strong—held back more by limited inventory than a lack of interest. After slowing in late 2024 amid economic uncertainty and mortgage rates surpassing 7%, demand began to recover in early 2025, fueled by slightly lower interest rates and an uptick in spring listings.
By April 2025, sales volume climbed to 926 units—an 8.4% year-over-year increase—highlighting that buyers are still very much engaged. However, today’s market is a far cry from the frenzy of 2021. Buyers are now more cautious, price-sensitive, and willing to walk away from listings they view as overpriced.
This shift is clearly reflected in the data: only 39% of homes sold above asking in spring 2025, down from roughly 50% the year prior. At the same time, 33% of listings required a price reduction before selling—up 12 percentage points year-over-year. The average sale-to-list price ratio has edged down to 99–100%, signaling a market where negotiations are tighter and buyers hold more leverage.
The current climate is best described as selectively aggressive. Homes that are well-priced, move-in-ready, and located in desirable neighborhoods still attract strong interest. Yet, there’s a growing pool of stale listings, as buyers are increasingly willing to wait or make lower offers rather than rush into a deal. The average time on market has extended to about three weeks, with contingencies and closing cost negotiations becoming more common.
The buyer landscape today is largely composed of high-income earners, dual-income households, and move-up buyers with equity. First-time buyers, on the other hand, are facing steep barriers—not just from other buyers, but from investors, who now own approximately 1 in 4 entry-level homes in San Diego. With monthly mortgage payments up nearly 82% since 2020, many first-time buyers are being priced out or choosing to rent instead.
Still, demand remains latent and ready to reemerge. A significant drop in mortgage rates could quickly rekindle buyer competition and drive prices higher. In fact, 22% of San Diego home purchases in 2024 were made with all cash, a clear indicator that well-capitalized buyers remain active—particularly in the most sought-after neighborhoods.
Affordability
If there’s one factor most threatening San Diego’s long-term housing accessibility, it’s affordability. By nearly every metric, the situation is dire. As of Q1 2025, the median home price is approaching $990,000, while the median household income is just around $90,000—resulting in a staggering price-to-income ratio of 10x, nearly double the national average. This makes San Diego one of the least affordable housing markets in the country.
Only 17% of California households can afford the state’s median-priced home, and San Diego mirrors that harsh reality. For comparison, about 50% of households nationwide can afford their local median. In San Diego County, a buyer would need to earn approximately $266,800 annually to qualify for a typical single-family home—nearly three times the area’s median income.
The monthly burden on buyers is heavy. A $950,000 home with 20% down at a 6.5% interest rate leads to a mortgage payment of roughly $5,500—consuming 50–60% of the average household’s pre-tax income. Renting offers limited relief: median rents hover around $2,800, with two-bedroom units often exceeding $3,000, which still absorbs around 40% of income.
These affordability pressures are reshaping buyer behavior. First-time buyers are increasingly sidelined, relying on family support or remaining renters for longer periods. Many are relocating to more affordable areas like Temecula or even Tijuana in search of relief. Meanwhile, long-term homeowners benefit from Prop 13’s low property taxes and are reluctant to trade in their low mortgage rates—further constraining inventory and intensifying upward pressure on prices.
San Diego’s homeownership rate now sits around 54–55%, well below the national average of 65%. For many, the path to owning a home now depends on substantial savings, dual incomes, or proceeds from a previous property sale.
Temporary affordability improvements seen in late 2024—spurred by modest price dips and 4% wage growth—were short-lived. Without significant gains in income or a meaningful expansion in housing supply, affordability will remain the defining—and most difficult—challenge in San Diego’s real estate landscape.
Rental Market Trends
San Diego’s rental market—long seen as a fallback for those priced out of homeownership—is now starting to show signs of strain. As of spring 2025, median asking rents sit at approximately $2,800 per month, placing the city about 47% above the national average and ranking it among the most expensive rental markets in the country, alongside cities like Boston and Washington, D.C.
One-bedroom units typically rent for $2,200–$2,400, while two-bedrooms average around $3,000. Larger properties become even more cost-prohibitive: three-bedrooms are nearing $4,200, and four-bedrooms often exceed $5,500 per month. On a per-square-foot basis, renters are paying around $3.04—making even modest spaces expensive relative to local incomes.
However, signs of a shift are emerging. After more than a decade of near-uninterrupted rent increases, San Diego saw a 3% year-over-year rent decline as of May 2025—the first annual drop in years. This softening coincides with a rising rental vacancy rate, which climbed to roughly 5.2% in late 2024, the highest level since the pandemic.
This cooling trend is largely driven by increased supply. A wave of new multi-family developments —including mid-rise buildings and ADUs—has started to ease the pressure. As more units become available and renters hit their affordability ceilings, landlords are offering incentives like free months of rent or reduced security deposits to attract tenants.
Still, renting remains financially demanding. A $3,000 two-bedroom consumes about 40% of the median household’s pre-tax income, leaving little capacity for savings or a future home purchase. While renters may now have slightly more negotiating power, the broader environment continues to be one of high costs and limited financial relief.
In summary, San Diego’s rental market is beginning to cool—but remains far from affordable. For renters, the recent decline in prices provides some welcome breathing room. For landlords and investors, it signals that years of unchecked rent growth may finally be slowing—at least for now.
Neighborhood-Level Insights
San Diego’s housing market is far from uniform. From high-end coastal enclaves to sprawling suburban hubs, each neighborhood follows its own trajectory when it comes to pricing, buyer demand, and future growth potential.
La Jolla:
In La Jolla, exclusivity remains the defining characteristic—and the primary driver of its premium home prices. As of April 2025, the median sale price reached $2.6 million, marking an 11% year-over-year increase. This affluent coastal community continues to attract both local elites and international buyers, despite razor-thin inventory levels that rarely exceed 100 active listings. The housing stock is dominated by luxury single-family homes with ocean views and strict development restrictions.
Even at these elevated price points, demand remains strong. Well-located properties—including $2 million fixers—can still spark bidding wars. Homes take longer to sell here, averaging around 35 days on market, but buyer appetite hasn’t diminished. While long-term climate concerns such as coastal erosion linger, they’ve yet to meaningfully dampen demand.
Chula Vista:
On the other end of the spectrum, Chula Vista offers relative affordability and suburban charm. With a median sale price of approximately $808,000 in April 2025—15–20% below the county average—it appeals to first-time buyers, military families, and move-up homeowners.
The area has actively embraced development, with ongoing growth in communities like Eastlake, Otay Ranch, and Millenia. These neighborhoods offer a steady supply of new townhomes and single-family homes in the $500K–$900K range. As a result, Chula Vista frequently tops the county in monthly sales volume due to its comparatively abundant inventory.
Homes typically sell within 25–30 days, with room for light negotiation. The rental market is also robust, particularly around military bases, where four-bedroom rentals average $3,500–$3,800—lower than many northern suburbs.
Looking forward, large-scale projects such as the $1 billion Bayfront redevelopment and a proposed university campus are poised to transform western Chula Vista, boosting long-term appeal and enhancing property values.
Investor Landscape
San Diego has long attracted real estate investors, but the landscape in 2024–25 has shifted. While the era of fast flips and speculative buying has cooled, investors still represent a significant portion of the market—especially in the entry-level segment.
In Q2 2024, roughly 24% of homes sold in San Diego County were purchased by investors, one of the highest rates in the country, second only to Miami. These buyers range from small private equity firms and individual landlords to rental-focused LLCs. Notably, around 25% of homes in the bottom third of the market were acquired by investors, intensifying competition and pricing pressure for first-time homebuyers.
In total, investors purchased over $2.3 billion worth of residential property during that quarter, with a focus on single-family homes, condos, and townhomes. However, with home price appreciation slowing and renovation costs rising, profit margins for flippers have tightened. Many are now breaking even, and overpriced resales are increasingly met with resistance from today’s more cautious buyers.
As a result, investor strategy has pivoted toward long-term rental plays—particularly in centrally located neighborhoods where demand remains steady. With mortgage rates lingering between 6.5% and 7%, investors are now prioritizing rental yield and cap rate resilience. In areas like Clairemont, for example, some are targeting older homes to renovate and resell, buying at $800K and aiming for a $1.1 million resale—though success depends heavily on execution.
Meanwhile, iBuyers have mostly retreated from the San Diego market due to ongoing volatility and high prices. While Opendoor maintains a small presence, the space is increasingly dominated by local and regional investors with longer-term holding strategies.
In short, San Diego remains a stronghold for real estate investors—but the game has changed. The days of easy flip profits have given way to a more disciplined, yield-focused approach, driven by high rents, low inventory, and the enduring appeal of long-term value.
Risks and Outlook
San Diego’s real estate market remains fundamentally stable, yet vulnerable in places. As we move through 2025, two major uncertainties stand out: climate risk and interest rate volatility.
Climate and Natural Disaster Risks:
San Diego’s picture-perfect climate belies the serious environmental challenges lurking beneath the surface. Wildfires remain a persistent threat, especially in inland areas like Poway and Santee. Historic events such as the 2003 Cedar Fire and the 2007 Witch Creek Fire serve as stark reminders of the destruction these disasters can bring. Today, homeowners in fire-prone zones are seeing rising insurance costs, policy cancellations, and in some cases, complete insurer withdrawal from California—making coverage both scarce and costly.
Earthquake risk is also ever-present. Although San Diego experiences fewer quakes than cities like Los Angeles or San Francisco, it sits near active fault lines like Rose Canyon. A significant seismic event, particularly in older buildings or densely populated urban zones, could have meaningful localized impacts.
Macro Risks: Interest Rates:
The most immediate threat to market momentum remains mortgage rates. With rates hovering around 6.5–7%, affordability is under strain. If rates move higher due to unforeseen Fed tightening or inflationary pressure, buyer demand could retreat—putting downward pressure on pricing.
Conversely, a drop in rates into the mid-5% range could spark a surge in pent-up demand. However, this would likely worsen inventory constraints due to the “rate lock-in” effect. With over 85% of California homeowners holding mortgages under 5% and nearly two-thirds under 4%, many are reluctant to sell and forfeit their low-rate loans. As a result, increased demand may not translate to increased supply, potentially driving prices even higher and compounding affordability issues.
Outlook:
San Diego isn’t headed for a correction, but it does appear to be entering a phase of cautious recalibration. Prices continue to edge upward, and sales activity is gradually rebounding. Yet persistent supply shortages, climate concerns, and macroeconomic uncertainty are forming a complex backdrop. For now, the market stands on solid ground—but with growing cracks that will require close attention.
Conclusion
San Diego’s real estate market presents a complex but compelling picture. Despite affordability challenges and supply constraints, the region demonstrates notable resilience and long-term potential. Prices remain high, but not inflated beyond fundamentals; demand persists, but with greater buyer discernment; and while rental and investor dynamics are evolving, opportunities still exist for those willing to navigate carefully. The market’s future hinges on key variables—interest rate trends, housing policy reforms, and climate resilience. For investors and buyers alike, San Diego may not offer easy wins, but it does offer strategic ones. In a city defined by scarcity and desirability, the next opportunity may not be obvious—but it’s certainly there for those who look closely.
