National housing statistics can be useful for understanding broad trends, but they don’t always describe what buyers and sellers are experiencing in San Diego County. Nationally, the number of homes for sale has recovered substantially from the exceptionally low levels of a few years ago. Locally, inventory remains much tighter than the national inventory level reported by the National Association of REALTORS®.
San Diego’s larger market shift came in 2025. The market slowed from the stronger conditions we saw in 2024, but instead of a significant drop in prices, fewer homeowners put their homes on the market. That limited supply helped keep prices stable. So far in 2026, many of our market indicators have changed relatively little from last year.
By several measures, 2026 has actually been slightly stronger than 2025, although conditions remain considerably slower than they were two years ago. I discussed that longer-term change in more detail in What Makes a Listing Stand Out in 2026.
Stable Prices, Softer Demand
Limited supply has helped support local home prices even as buyer demand has weakened and homes have become more difficult to sell in some parts of the market. Higher inventory, particularly if it comes with further weakening in buyer demand, would put more pressure on sellers. We are not there yet, but current conditions appear less stable than the price numbers alone might suggest.
I am also seeing some homes stay on the market in smaller local markets where similar properties were selling more readily earlier this year. That is another reason to look beyond median prices when evaluating the current market.
What This Means for Buyers and Sellers
Buyers have more negotiating room than they did a couple of years ago, but that does not mean they have abundant inventory or that every seller is vulnerable. Well-priced homes in good condition can still sell quickly.
What has changed is buyer selectivity. Buyers are more willing to pass on homes that feel overpriced or need work, and I am also seeing them ask for more during repair negotiations. For sellers, that makes condition, preparation and realistic pricing more important than they were in the tighter market of a few years ago.
For buyers, the slower pace can provide more time to evaluate a property and negotiate terms. But limited inventory still means the right home may attract significant interest, particularly when it is well priced and presented.
What Could Change Later This Year
One factor to watch is the labor market. The July employment report was considerably weaker than expected, and employment estimates for May and June were also revised downward. The decline in the unemployment rate was accompanied by fewer people participating in the labor force, adding to signs that employment conditions may be weakening.
A weaker labor market could reduce pressure on the Federal Reserve to raise interest rates later this year. That does not mean mortgage rates will automatically decline. Mortgage rates are influenced by the bond market, inflation expectations and the broader economic outlook, not just Federal Reserve policy. However, expectations for slower economic growth can put downward pressure on longer-term interest rates and, in turn, mortgage rates.
Lower mortgage rates could improve affordability, but the reason rates fall matters. If they decline because the economy and employment are weakening, some buyers may also become more cautious about making a major financial commitment. The benefit of lower borrowing costs could be partly offset by weaker buyer confidence and demand.
That is what I’ll be watching during the second half of the year. San Diego County entered midyear with stable home prices, limited inventory and softer buyer demand. Those conditions could continue, but changes in employment, mortgage rates or inventory could shift the market.