San Diego County home sales crashed in September at one of the highest rates in the nation as mortgage rates neared a three-year high.
A new report from Zillow said pending home sales in San Diego County fell 13.1% in September from the same time a year ago. A pending sale refers to a transaction where the buyer has accepted an offer, but the deal hasn’t been finalized. It is often one of the first indicators of a market downturn.
San Diego had the fifth-largest drop in pending home sales in the nation during September, out of the 20 largest metro areas.
Los Angeles had the biggest drop, down 15.5%. It was followed by Seattle (down 15.4%), Washington, D.C. (down 14.3%), and Baltimore (down 13.8%). San Francisco, in the middle of an artificial intelligence tech boom, had the smallest drop at 4.5%.
“Sky-high mortgage rates and the usual fall slowdown teamed up to chill housing activity in September,” said Zillow chief economist Mischa Fisher.
It is likely rising mortgage rates were already affecting the market before the latest pending sales data. Zillow said closed sales in San Diego County were down 9.3% annually in September, which was tied for the second-biggest drop in the nation. September’s closed sales likely covered transactions started in August or late July.
Only Atlanta had a bigger drop in closed sales, down 11.2%. San Diego was tied with Providence, R.I., also down 9.3% annually.
Fisher noted that the average 30-year, fixed-rate mortgage was 7.28% at the end of September, according to Freddie Mac data. That was the highest level for rates since November 2023, and he reasoned it scared off numerous potential buyers.
In late February, the average mortgage rate was 5.98%, meaning monthly costs for most purchases have significantly risen.
San Diego County’s median single-family home price has been around $1 million for most of the year. Assuming 20% down ($200,000), the monthly payment would have been about $5,160 if the purchase was made in late February. Using late September mortgage rates, the monthly cost would be closer to $5,850.
Freddie Mac announced Thursday that average mortgage rates had risen to 7.40%, which was its highest in nearly three years. Lisa Sturtevant, chief economist at Bright MLS, said higher rates have also scared off sellers — as evidenced by a drop in listings — because they typically need to buy a new home after a sale.
“Higher rates are holding back both demand and supply this fall, so it is unlikely that there will be significant downward pressure on home prices,” she said.