As we cross the halfway mark of 2025, San Diego’s real estate market stands at a critical crossroads. At Team Kolker Wendlandt, we’re keeping a close eye on the data and the story it tells is one of uncertainty, shifting leverage, and big potential depending on what happens next with interest rates.
So, where do things stand? And more importantly, what’s coming next?
📉 A Slower Market Built on Higher Rates
Mortgage rates remain the biggest driver of today’s housing activity. After starting the year above 7%, rates dipped into the high 6's in February and have remained stuck in the 6.6%–6.99% range since then. That stickiness has kept buyer demand low and affordability out of reach for many would-be homeowners.
Pending sales (demand) sits at 1,759, just below this time last year and only marginally below 2023 levels. But it’s a far cry from the pre-pandemic norm of over 3,200 pending sales at midyear.
📈 Inventory Is Up, Way Up
While demand has remained relatively flat, inventory has climbed dramatically. More homeowners are choosing to list their homes compared to the past two years, though we’re still not back to pre-COVID numbers.
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Active inventory is up 86% from the beginning of the year
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There are 46% more homes on the market than this time last year
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Market time has jumped to 106 days, the slowest early July pace in over a decade
Buyers now have more options and more negotiating power. Sellers, take note: pricing strategy matters more than ever.
🔁 Two Possible Futures: It’s All About Rates
The remainder of 2025 depends entirely on where mortgage rates go from here. We see two potential scenarios:
🔒 Scenario 1: Rates Stay Elevated (6.5%–7%)
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Demand remains sluggish
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Inventory continues to rise slowly
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Market time increases
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Home values COULD decline modestly month-over-month
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Buyer leverage strengthens
📉 Scenario 2: Rates Drop (Below 6.5% and Hold)
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Demand surges, especially from Millennial and Gen Z buyers
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Inventory peaks sooner and begins to tighten
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Market time shrinks
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Home values stabilize or begin climbing again
The wildcard? Signs of economic slowdown such as job market cracks, weakening consumer sentiment, or a softening GDP could trigger Federal Reserve rate cuts, which in turn could bring relief to buyers and fuel a late year rebound.
🏡 What About the Luxury Market?
San Diego’s luxury segment ($2M+) is showing subtle signs of momentum:
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Luxury inventory is flat, but demand is up 7%
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Market time dropped from 209 to 196 days, the biggest decline since February
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$2M–$4M homes are moving faster than higher-end brackets
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Homes above $6M still face extended timelines (597 days on average)
Luxury buyers seem slightly more confident, perhaps spurred by improving consumer sentiment or optimism around long-term appreciation.
🔎 Key Takeaways for Buyers & Sellers
📌 For Buyers:
Now is the time to be strategic. With more inventory, longer market times, and increasing seller flexibility, the window is open for smart negotiations especially if you're shopping under 6.5% interest.
📌 For Sellers:
The market has shifted. Proper pricing, compelling presentation, and a strong marketing plan are crucial. Homes that are turnkey and well-positioned are still moving, but patience and flexibility go a long way.
📌 For Investors:
More choices and slower market movement mean more leverage. Keep your eye on the rates, when they fall, pent-up demand will follow fast.
📊 Final Stats at a Glance (July 2025)
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Inventory: 6,199 homes (up 46% YoY)
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Pending Sales: 1,759 (down 5% YoY)
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Expected Market Time: 106 days (highest since tracking began in 2012)
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Luxury Market Time ($2M+): 196 days (down from 209)
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Distressed Sales: Still minimal—only 0.5% of inventory
At Team Kolker Wendlandt, we believe in keeping our clients ahead of the curve with data-driven insights, neighborhood expertise, and a pulse on San Diego’s evolving market. Whether you’re looking to buy, sell, or simply explore your options, we’re here to help you navigate what’s next. Please reach out, we would love to chat it out with you.
📞 Let’s talk strategy: 619-566-8106
📧 team@kolkerwendlandt.com
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