San Diego Forecast

Hunch: ‘Rebalancing’ might take longer than expected.

Executive Summary

San Diego housing market exhibits a pronounced -2.38% YoY price decline with 3,245 unit surplus inventory, creating a buyer-favorable landscape with 29.6% of listings showing price cuts (+50.3% YoY) – significantly outpacing the national increase of 17.4%. Market segments reveal contrasting realities with strategic pockets of opportunity.

Rating and 12-Month Price Forecast: Parcl Labs initiates coverage of San Diego with a Bullish rating, forecasting a 12-month price of ($596.1/sq ft, +3.1%) – just clearing our 3% threshold for a bullish designation. While a 29.6% price-cut share currently indicates buyer leverage, this Bullish outlook anticipates a market shift, supported by ongoing rebalancing. We will review this forecast if current headwinds persist.

San Diego’s absorption rate has fallen to 0.482 as supply (6,262 units) substantially outpaces demand (3,017 units), creating a 0.537 supply-demand gap – significantly wider than the national gap of 0.326. Price cuts have reached a 12-month high at 29.6%, signaling accelerating market rebalancing.

Extreme submarket divergence exists with premium ZIP 92129 showing severe correction signals (supply +137.5% YoY, prices -9.0% YoY) while Imperial County demonstrates robust appreciation (+41.5% YoY) against San Diego County’s -1.1% YoY price decline.

ZIP-level data exposes the most pronounced correction signals in premium neighborhoods, with ZIP 92129 registering a 137.5% supply increase against a 7.0% demand decline, creating a 144.5% market gap that has driven prices down 9.0% year-over-year to $1,351,000. This premium market deterioration contrasts sharply with pockets of resilient demand in ZIPs 92117, 92114, and 92056, which registered exceptional transaction growth of 28.4%, 19.8%, and 15.1% respectively. These localized demand growth areas represent tactical opportunity zones for investors seeking counter-cyclical appreciation potential amid the broader market deceleration, highlighting the importance of granular sub-market analysis in the current transitional environment.

Mid-market property segments command significant yield premiums over luxury (Mid-Century Starter: 5.28%, 1980s Suburban: 5.17% vs. Luxury Estate: 3.64%), with Vintage Family homes showing persistent buyer advantage (supply-demand gap: 0.1203) as other segments approach equilibrium.

We really should break down every sub-market.

Inventory Watch

The number of homes for sale between La Jolla and Carlsbad is 15% above the highest count in 2024 – which was in mid-July.

Where will we be next month?

I thought many would be giving up by now, but instead more are pushing to get out. Are they aware of the difficulty, and that half won’t be selling this year?

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All Or Nothing

The current chaos combined with the decline of the buyer-agent is causing buyers to stay on the couch – unless they see a compelling deal online. With high rates and prices, you can’t blame them for being very picky!

Yet there are still lucky sales happening. Ones that you wouldn’t think had any chance of selling but they end up closing over list anyway with a buyer-agent who has only closed 1-2 sales in the last 12 months. It is a very treacherous environment!

https://x.com/shawngorham/status/1933371286761451703

Happy Birthday Donna!

Natalie wrote the thoughts above in our most recent newsletter, and others remarked how true it was in their experience too.

She carries the load around the house too. It became obvious this weekend that I’ve never operated the vacuum cleaner before.

You are a phenomenal woman, and I’m honored to be your husband – and glad you are spending your life with me! Happy Birthday Donna!

Olde Carlsbad Classic

Here’s another example of how sellers are making decisions these days.

It was time for our clients to sell the family homestead. Bless her heart, their Mom lived a happy life there through to the end, just like many around Olde Carlsbad. What a great place to spend the last 60 years of your life!

Like many, the house really hasn’t been touched – it’s all original. How much do you spend to prepare it for sale….if any? There is a decent ocean view…through the power lines. The lot is large enough to split and you can add the ADUs….and be into it for another $1,000,000 to $2,000,000? I sold the house three doors to the north and you can see that they’ve added the ADU. But they paid under $500,000 in 1999 – and when you buy right you don’t mind spending the money.

4030 Sunnyhill Dr., Carlsbad 92008

3 br/2 ba, 1,994sf

YB: 1960

Lot size: 26,100sf (0.60-acre lot)

SP: $2,000,000

As we were getting ready to go on the open market, the sellers were approached by a family friend. My list price was going to be $2,200,000 at the end of April, which is about the time that the chaos and uncertainty was really starting to affect the market.

Do you gamble and go on the open market? None of these 1/2-acre lots have sold for a long time, and we speculated that there is some pent-up demand, but at what price? This is a pure fixer which turns off most buyers, but could the builders/flippers be interested? At what price?

Our clients took the sure thing.

I had dreams of the open-house extravaganza of the year, and maybe of the decade, but it was the right move – the uncertainty was too high. I had my hands full with two appraisals, but they came in at value, and we closed as agreed.






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Notes For 2026 Sellers

For those potential sellers who are already writing off 2025 and plan to sell in the new year instead, note how the selling season has been starting sooner than ever. Peak pricing last year in Coastal North was in February, and this year it was January (scroll over):

The buyers’ enthusiasm tapers off after March:

If you do everything right, you should sell in the first 2-3 weeks:

Think the additional inventory this year was bad? There will be truckloads next year! Beat the rush and get out early – or just sell now!

Selling Success Rate

The takeaways from the graph above will be different for different people.

Not suggested:

  • Those who did negotiate probably didn’t get much of a discount.
  • Most buyers and sellers were satisfied their agent was worth it.
  • Better agents are prevailing.

Why is it important to Get Good Help?

The failure rate will be higher this year.

In normal markets, we’ve had a success rate of 60% to 65% of the listings closing escrow successfully. During the frenzy, it was as high as 80%! But look at what we’re faced with now.

NSDCC Total Sales/Total Listings

2024: 1,837/2,831 = 65%

2025: 716/1,549 = 46%

Obviously, this year is incomplete but I did include all of the current pendings to approximate this year’s conditions. It’s unlikely that the success rate will be improving through the second half of 2025.

It’s likely that MOST of the sellers this year will be unsuccessful.

What’s for sure? There will be a load of listings in 2026.

Over List, May

Almost one-third of last month’s buyers paid over the list price…..for the fourth month in a row! Either sellers are being smart about pricing attractively, or a fair amount of the buyers and buyer-agents haven’t gotten the memo about the tougher market conditions.

Sales and pricing are holding up too.

The median sales price is almost identical to last May, and sales were higher:

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