Why San Diegans aren’t jumping to buy homes, even with lower mortgage rates

The high cost of a San Diego home, even with lower mortgage rates, has scared off many potential buyers and slowed the market to a level not seen in years.

San Diego County’s median home price fell to $875,000, down 1.7% from the previous month, according to figures released Tuesday by Attom Data Solutions, which combines sales of single-family homes, townhouses and condos. San Diego County’s median, which has fallen two months in a row, is now down 3.2% from a peak this year of $903,890 in June.

There were only 2,385 home sales in September, making it the fourth slowest September in records going back to 1988. But it’s an improvement — up 11% — from the same time last year when the market ground to a halt.

David Ely, a finance professor at San Diego State University, said persistent inflation — for most items, not just housing — is now a factor to consider when debating a huge purchase, such as a house.

“People still have a sense that prices are very high and we have to be careful how we are spending our money,” he said. “It’s creating a sense of unease when they question if now is the time to make a major purchase.”

Mortgage rates have fallen and, in theory, made home prices more affordable. But it hasn’t kick-started the real estate market as many in the industry hoped. The average 30-year, fixed-rate mortgage rate was 6.3% in the last week of September, said Freddie Mac. That was down from a high of 7.04% in January.

A lower mortgage rate could make a considerable difference in buying, say, a $700,000 townhouse. The monthly cost, assuming 20% down, would have been around $4,100 a month in January, compared to $3,800 using September’s average rate.

However, Ely said other aspects of owning a home have increased, especially insurance, so it lessens the impact of a few percentage points off a loan. Average property insurance costs are up nearly 70% in the past five years, said ICE Mortgage Technology. Climate change, namely flooding in the South and wildfires in the West, has been a big contributor to the increase. Another factor is the rising cost of homebuilding materials, which is factored into insurance rates because it makes it more expensive to rebuild after a disaster.

It’s not just buyers weighing a purchase more closely, but potential sellers who are wondering whether now is the best time to list their property.

The number of homes for sale across San Diego County has fallen since the summer. There were 7,403 listings in June, the high point of the year, said the Redfin Data Center, but that figure had fallen to roughly 6,700 by September. It’s common for the number of listings to drop in the winter, but the current market might not motivate homeowners too much.

Raylene Brundage, a North County real estate agent, said potential sellers are hesitant to list because the buyer pool is smaller, and they have financial worries if they move. More than half of outstanding U.S. mortgages have a rate of 3% to 5%, said Realtor.com. Even if the buyer isn’t concerned about mortgage rates, Brundage said, they are likely looking at a large capital gains hit considering how much San Diego prices have risen.

Additionally, she said it has been a tad rougher for sellers who decide to list. Brundage said she recently had several homes go into contract, and the buyers then requested numerous repairs or credits to get the cost down before it closed escrow.

The median days on market for a San Diego County home was roughly 37 days in September, Redfin said, which includes the time it takes to sell or for a seller to de-list a property. The number of days on market hit a high of 42 in January and 41 in August. For context, the median number of days on market hit a four-year low of 8.5 days in early 2022.

There have been 20,504 home sales in San Diego County through September, which puts it on track to be one of the slowest sales years ever. The lowest year was 2023, with 25,317 sales, according to records dating to 1988. It was narrowly followed by 25,920 home sales in 2024.

The overall San Diego County median home price is still unchanged year-over-year, with some variation among home types. The median price for a single-family home was $975,000 in September, down from a peak of $1,040,000 in May, but still unchanged annually. The median for townhouses and condos was $690,000, down from a peak of $715,000 in July 2024, but up 2.2% annually.

Single-family homes are likely to be a rarer item as the years go on. Data from the state Department of Finance said that, as of January, San Diego County added 14,276 single-family homes since 2020 — compared to more than 40,000 of all other types, mainly condos, townhouses and apartments.

Here’s a look at median prices in September across the region:

Los Angeles County: Up 0.6% in a month to a median home price of $900,000; up 4.1% annually.

Orange County: A 2.6% monthly rise to a median of $1.18 million; flat year-over-year.

Riverside County: Down 1.4% monthly for a median of $586,500; also down 1.4% annually.

San Bernardino County: Flat month-over-month for a median of $520,250; unchanged annually.

San Diego County: Down 1.7% monthly to a median of $875,000; unchanged annually.

Ventura County: Up 1.1% monthly to a median of $838,000; up 1% annually.