San Diego Housing Market Forecast for the Next 2 Years: 2025-2026

Dreaming of owning a piece of paradise in San Diego? Well, the current and projected San Diego housing market is a mixed bag of sunshine and clouds, with a hint of potential cool breeze. The good news is that while home values might not skyrocket, they are expected to show some modest growth over the next two years.

However, it's not a simple picture. The forecast suggests a slight dip in the next quarter, followed by a moderate increase by the end of 2025. Let's delve deeper into the details to better understand the projected market trends.

San Diego Housing Market Forecast for the Next 2 Years: 2025-2026

Current San Diego Housing Market Snapshot

As of October 31st, 2024, the average home value in San Diego stands at a hefty $1,003,863, which is up 5.7% from the previous year. The market is still relatively competitive, with homes going pending in around 20 days.

• Inventory: The inventory of homes for sale is currently at 2,750 as of October 31st, 2024. This is still considered a low inventory level compared to historical averages, indicating that buyers might still face some competition.
• New Listings: The number of new listings stands at 947 as of October 31st, 2024.
• Sales Trends: The median sale-to-list ratio is currently 1.000, indicating a fairly balanced market.
• Pricing: The median sale price is $938,083 and the median list price is $951,667 (as of October 31st, 2024). A noteworthy aspect is that 40.5% of sales closed above the asking price, while 44.9% closed under the asking price (data as of September 30th, 2024).

This data paints a picture of a San Diego housing market that isn't overheated but still holds its value. The moderate increase in average home value and the fairly balanced sales-to-list ratio are signs of a relatively healthy market. However, the low inventory, combined with the potential for interest rate fluctuations and economic uncertainty, adds a layer of complexity for buyers and sellers alike.

San Diego Home Price Market Forecast: A Glimpse into the Future

My understanding of the housing market in the region relies on data from credible sources like Zillow. Based on their latest forecast, I can see a slight fluctuation in the coming quarters. Let's break down their prediction:

What These Numbers Mean

Based on Zillow's data, we can expect to see a slight dip in home values in the coming months. The predictions show a small decrease of -0.2% by the end of November 2024 and a slightly more prominent -0.7% decrease by the end of January 2025. These small dips are mostly because of a correction period after a strong market in previous years. It's important to note that this is only a forecast. However, it's a good tool to help us understand what factors might influence the housing market in the future.

By the end of October 2025, Zillow predicts a moderate rebound in home values with a projected increase of 2.3%. This means that the housing market is expected to recover and begin to grow again, albeit at a slower pace than in recent years.

Regional Variations

While the San Diego-Carlsbad Area (Metropolitan Statistical Area) as a whole is anticipated to show this trend, it's worth considering that regional differences can exist. It is important to note that specific areas of San Diego might experience different growth trends. For instance, some neighborhoods with higher desirability and amenities could see a stronger increase in home prices compared to other areas. In contrast, areas with less desirable attributes might not see a significant increase or might even experience a slight decline in home values.

For example, within the broader San Diego MSA, it would be interesting to look at specific areas like La Jolla, Pacific Beach, or Encinitas to assess if the individual sub-markets within the MSA are going to perform better than others.

Forecast for Other Regions in California

While this is a San Diego-focused article, it's worth looking at the data Zillow has for the overall state of California. This broader view allows us to see how San Diego fits into the picture of the state's housing market.

We see that other major California metropolitan areas are expected to have different growth or decline in home prices. San Jose and Los Angeles are predicted to grow slowly, while Sacramento is anticipated to decline by a small margin. San Francisco is expected to have a more significant price drop than others. This suggests that the San Diego housing market is expected to be a relative outperformer compared to the other areas. However, in general, California is expected to show slower growth in housing prices compared to the previous years.

What’s Driving the San Diego Housing Market?

The San Diego housing market has several key drivers that facilitate its robust performance:

1. Thriving Economy: San Diego's diverse economy, rooted in technology, defense, tourism, and healthcare, continues to draw new residents. The area boasts a low unemployment rate, which feeds directly into the demand for housing.
2. Job Growth and Stability: Continuous job creation in sectors like biotechnology and telecommunications contributes to a strong labor market, where employees often seek permanent housing solutions close to employment hubs.
3. Desirable Lifestyle: San Diego is renowned not just for its beautiful beaches but also for its natural parks, cultural attractions, and excellent schools. These factors enhance its appeal as a prime location, attracting families and professionals alike.
4. Low Housing Inventory: The fundamental supply-demand imbalance persists, with many would-be sellers hesitant to list their homes due to current market volatility. This limited inventory in San Diego further exacerbates competition among buyers, pushing home prices upward.
5. Population: Population growth and shifts in demographics can also impact the housing market. The San Diego area has been a desirable location for many years due to its weather, lifestyle, and job opportunities. A large population and new residents moving into the area can create a higher demand for homes, leading to an increase in housing prices.

Will Home Prices Drop in San Diego? Will It Crash?

This is a question I get often. Based on my interpretation of the current data and the forecast, it's unlikely that the San Diego housing market will experience a drastic crash. There are several factors that support this perspective:

• Strong Fundamentals: The San Diego economy is relatively diverse and resilient. There's a mix of industries, including technology, tourism, defense, and healthcare, which helps to provide stability.
• Limited Inventory: The low inventory of homes for sale is a significant factor. Even with a slight dip in prices, we're not seeing a surplus of homes on the market. This means that homes will likely still be in demand, preventing a significant price drop.
• High Demand: The region continues to attract new residents, and we can expect the population to keep on growing. This strong demand will continue to support the housing market.

However, there's a potential for a correction in home prices. The projected slight decrease in the next few quarters suggests a possible moderate slowdown in the pace of price increases. It's also likely that the growth rate in the market will be slower compared to previous years. It's important to remember that the housing market is dynamic, and changes can occur quickly.

My Insights and Thoughts

Based on my years of experience in this field, it's my opinion that the San Diego housing market will likely continue to be a relatively stable and desirable place to invest and live in, even if the growth rate is expected to be slower compared to previous years. Even though prices might dip slightly in the short term, the overall picture remains relatively positive. I foresee a relatively slow but steady growth in home values in the next couple of years.

However, it's crucial for buyers and sellers to stay informed about the market trends and make decisions based on their own unique circumstances. Working with a real estate agent who is knowledgeable about the local market can be particularly helpful in navigating the complexities of the San Diego housing market.

Possible Forecast for 2026

While the current forecast goes up to September 2025, let me offer my perspective on a potential outlook for the year 2026. If the economy stays relatively stable, interest rates don't increase drastically, and the fundamentals of the San Diego market stay strong, then I believe the housing market might continue its slow but steady growth trajectory. This could lead to a further increase in home values, though at a modest pace.

I would predict that home values in 2026 could see a possible increase of around 3% to 5% in the San Diego area.

Conclusion

The San Diego housing market is expected to experience a period of stability and slow growth over the next two years. While there's a chance of a slight dip in the coming quarters, it's unlikely to be a major crash. The market's fundamentals are still strong, with demand continuing to outpace supply in many areas.

I hope this article provides a clear picture of the projected market and helps you make informed decisions. The key is to stay informed about market trends, consult with experts, and carefully weigh your own circumstances before making any major moves in the San Diego housing market.