San Diego home prices rose modestly in May but real values continue to decline when factoring in rising inflation.
The San Diego metropolitan area’s home price increased 0.94% annually in May, according to the S&P Cotality Case-Shiller Indices report released Tuesday. The increase was, however, erased by annual inflation of 3.8% in the region in May.
The situation is not unique to San Diego.
Home values across the country fell in real terms for the 12th consecutive month with May’s 4.2% inflation rate more than 3 percentage points higher than the 1.1% national home price gain.
“Inflation is just taking a bite out of the entire nation, within and outside of real estate, and it’s one of the unfortunate detractors from the home buying or selling season that we were looking for this spring,” said Anthony Smith, senior economist at Realtor.com. “Even though there’s inflation and higher mortgage rates, the response has been from sellers to price a bit lower initially, and so with that, I think we’re seeing more activity happen.”
Smith described the San Diego market as sturdy and, as is typical, in line with national trends, but he flagged easing momentum in price gains in recent months.
“On a month-over-month basis, San Diego was down point 0.1% before the seasonal adjustment,” Smith said. “San Diego has had two consecutive months of declines, which is during one of the more stronger seasonal windows of the year.”
The Case-Shiller index tracks repeat sales of identical single-family houses as they turn over through the years. The report uses a three-month rolling average and is often seen as a strong indicator of the economy as a whole.
In May, San Diego ranked 8th among 19 reported metro areas in terms of annual price growth, ahead of cities with price declines like Las Vegas, down 1.86% annually, and Seattle, down 1.83% annually. Chicago was the top gainer, up 6.93% annually. New York ranked second, with home prices up 4.23% annually. Detroit was left off the index because of reporting delays.
Chicago’s outsized home price gains can be attributed, in part, to the market’s affordability, Smith said.
“Our current median listing price in San Diego is $929,000, and to compare, the Chicago median is $394,000. So it definitely has a lot more room to play with,” the Realtor.com economist said.
Mortgage rates, which remain high, are also a major factor limiting overall activity in the San Diego market, Smith said.
The average 30-year, fixed-rate mortgage rate hit a low this year of 5.98% in late February, according to Freddie Mac. The rate was 6.76% on Tuesday after hitting a 12-month peak of 6.85% last week, according to Mortgage News Daily.
Locally, buyers have a stronger negotiating posture than sellers, though they aren’t in a position to “steal” homes, said Mark Goldman, a real estate analyst with C2 Financial Corp.
“If you think of a gauge, where at one end is an extreme buyer’s market and at the other end is an extreme seller’s market, the needle continues to move more toward a buyer’s market, but it’s still approaching equilibrium,” Goldman said.
Overall, the San Diego housing market remains healthy and stable, with values holding steady, he said.
“I don’t see any strong indicators that show me that prices are expected to decline, or that buying a house is going to be cheaper in the next six to 12 months,” Goldman said. “My advice would be, if you need a house for your family to live in, and you plan to be in it for several years, you should probably consider buying one.”
There were 8,221 homes listed for sale in San Diego County in May, according to the Redfin Data Center. That compares to 8,710 at the same time last year, 6,412 in 2024 and 4,491 in 2023.