Thinking about buying or selling a home in sunny San Diego? Understanding where the market is headed is crucial, right? So, here’s the lowdown: The San Diego housing market forecast for the next 2 years suggests a slight cooling. While a crash isn’t expected, modest price decreases are anticipated throughout 2025 and into 2026, although gains can occur from 2025 before a fall. This is according to the latest data and forecasts from real estate experts. Let’s dive into the numbers and see what they really mean for you.
San Diego Housing Market Forecast for the Next 2 Years – What's Ahead?
Key Takeaways
Why is the San Diego-Carlsbad Housing Market So Important?
First, let's acknowledge why the San Diego-Carlsbad housing market is so significant within California. San Diego isn't just another city; it's a major economic hub with a diverse population, beautiful weather, and a strong job market, particularly in tech and the military. This makes it a highly desirable place to live, which of course fuels demand for housing.
As a lifelong Californian, I've seen firsthand how the San Diego market can influence the real estate trends across the state. What happens here often sets a tone for other areas. This city’s attractiveness and economic stability mean that even small shifts in the market can have a ripple effect across the region.
What’s Driving the Growth of the San Diego Housing Market?
The San Diego housing market has several key drivers that facilitate its robust performance:
- 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.
- 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.
- 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.
- 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.
- 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.
Current State of the San Diego Housing Market
Before we jump into the future, let's take a quick snapshot of where we are right now. As of today, the average home value in San Diego-Carlsbad is approximately $941,517. That's a hefty price tag, no doubt! But here's something interesting: that figure is down about 1.6% over the past year. Also, homes are going to pending in about 19 days
What does this tell us? Well, it suggests that the market isn't as red-hot as it was a year or two ago. Buyers might have a little more breathing room!
The Forecast: A Closer Look
Now, let's get to the nitty-gritty. Zillow, a major player in the real estate data game, has released its forecasts for the San Diego area, and I've summarized the key points below. Keep in mind that forecasts are just educated guesses based on current trends, and the market can always surprise us.
Here's what Zillow is projecting for the San Diego housing market:
| Timeframe | Predicted Home Value Change |
|---|---|
| July 31, 2025 | -0.7% |
| September 30, 2025 | -2.1% |
| June 30, 2026 | -1.5% |
As you can see, Zillow anticipates a gradual decline in home values over the next year (until June 2026) The biggest drop is expected around September 2025. This doesn't mean the sky is falling, but it's something to be aware of.
How Does San Diego Stack Up Against Other California Cities?
It's always helpful to put things in context. So, let's see how San Diego's projected housing market compares to some other major metropolitan areas in California:
| City | Forecast Change by July 2025 | Forecast Change by September 2025 | Forecast Change by June 2026 |
|---|---|---|---|
| San Diego, CA | -0.7% | -2.1% | -1.5% |
| Los Angeles, CA | -0.4% | -0.9% | -1.3% |
| San Francisco, CA | -1.0% | -3.2% | -6.1% |
| Riverside, CA | -0.5% | -1.3% | -0.9% |
| Sacramento, CA | -0.7% | -2.1% | -3.7% |
| San Jose, CA | -1.0% | -2.6% | -4.0% |
| Fresno, CA | -0.3% | -1.0% | -1.2% |
| Bakersfield, CA | -0.3% | -0.8% | -0.1% |
A few things stand out here. San Francisco seems to be facing the steepest projected decline, while Bakersfield is holding up relatively well. San Diego falls somewhere in the middle, suggesting a more moderate correction.
National Trends and Expert Opinions
It's not just about San Diego; the national housing market plays a role too! Lawrence Yun, the Chief Economist for the National Association of Realtors (NAR), has some interesting insights. He believes “brighter days may be on the horizon” for the U.S. housing market.
Here are some key predictions from Yun:
- Existing Home Sales: Expected to increase by 6% in 2025 and a further 11% in 2026.
- New Home Sales: Projected to rise by 10% in 2025 and another 5% in 2026.
- Median Home Prices: Forecasted to rise modestly, by 3% in 2025 and 4% in 2026.
- Mortgage Rates: Anticipated to average 6.4% in the second half of 2025 and drop to 6.1% in 2026.
Yun emphasizes the impact of mortgage rates, calling them a “magic bullet” because they influence buyer affordability and demand. If mortgage rates do indeed come down, it could give the housing market a significant boost.
Although there are differences in opinion, the general agreement is that the housing market will not crash and that appreciation can still be expected.
Will Home Prices Drop in San Diego? Will it Crash?
Okay, let's address the elephant in the room: will San Diego home prices crash? Based on the data and expert opinions, a crash seems unlikely. A more realistic scenario is a period of price correction or stagnation. Zillow's forecast suggests a gradual decrease, but that doesn't mean prices will plummet overnight.
The factors that could influence this include:
- Interest Rates: If mortgage rates stay high or rise further, it could dampen buyer demand and put downward pressure on prices.
- Inventory: An increase in the number of homes for sale could give buyers more options and lead to more negotiation power.
- Economic Conditions: A strong economy generally supports housing prices, while a recession could have the opposite effect.
My Thoughts and a Possible Forecast for 2026
Here's my take, based on my experience and insights into the San Diego market. While I see the potential for continued price declines throughout much of 2025, I also believe that the market will start to stabilize towards the end of 2025 and into 2026.
For 2026, I wouldn’t be surprised to see a slight rebound in home prices in San Diego. The NAR is optimistic that we are heading towards greener pastures by 2026. We could see, at the very least, a flattening out of the prices. The expected drop in mortgage rates could definitely help, as would increased home sales.
San Diego remains a desirable place to live, with a strong job market, beautiful weather, and plenty of attractions. These factors should help support housing values in the long run. The limited inventory is also going to continue playing a role. As long as there are not enough homes for the current number of buyers, home values will not crash.
So, my unofficial forecast for 2026 is a period of either stagnation or moderate growth in San Diego home prices.
What Does This Mean for Buyers and Sellers?
If you're a buyer, this could be good news. You might have more time to shop around, negotiate a better deal, and potentially find a home at a slightly lower price than you would have a year or two ago; however, do not wait too long as there is a good chance that home values will rebound.
If you're a seller, it's important to be realistic about your expectations. Don't overprice your home, be prepared to negotiate, and focus on highlighting the unique features and benefits of your property. Keep in mind the market is shifting, and it's no longer a guaranteed seller's market.
No matter which party you are, having up-to-date, relevant information about the San Diego housing market is critical. Be sure to speak with a local real estate professional.
Conclusion
The San Diego housing market forecast for the next 2 years points to a period of adjustment rather than a dramatic crash. Prices are expected to experience declines during the course of 2025, before rebounding in 2026. Factors like interest rates, inventory levels, and the overall economy will play a crucial role in shaping the market's trajectory.
Disclaimer: Housing market forecasts are never a guarantee. They are based on current data and trends, which can shift over time. Always do your own research and consult with qualified professionals before making any real estate decisions.
Recommended Read:
- San Diego Housing Market: Prices, Trends, Forecast
- Is San Diego’s Housing Getting Very Expensive: Experts Predict
- San Diego Housing Market Booms With 9.4% Growth: Expert Predictions
- San Diego Housing Market Predictions: Soaring and Expensive!
- San Diego Housing Market Predictions: Prices Skyrocket 11.4%; What's Next?
- Is San Diego Real Estate a Good Investment?
