San Diego Housing Forecast Into 2024: Tight Inventory, Rising Prices

By some measures, San Diego is currently the hottest real estate market in California, as we head into the fall of 2023. A recent report from the San Francisco Chronicle, citing data from researchers at Zillow, showed that home prices in San Diego are currently rising faster than any other part of the state.

The 92103 ZIP code in particular, which is located just north of downtown San Diego, experienced the biggest six-month home price increase of any ZIP code in California. The typical house value in that area rose by more than 5% over the past six months alone.

Forecasts for the San Diego metro area housing market extending into 2024 suggest that prices will continue to rise through this year and into next. Tight inventory conditions have a lot to do with such predictions, along with steady demand from local home buyers.

Home Prices Rising Again in San Diego

As of summer 2023, house values in some portions of the state are either flat or declining. This is true for the city of San Francisco along with parts of the Los Angeles metro area. But that’s not the case in Southern California, where strong demand and low supply have turned prices north again.

According to an August 2023 report in the San Francisco Chronicle:

Data from real estate listings site Zillow reveals that out of the top 25 California ZIP codes with the largest home value increases over the past six months, 10 were in San Diego County. The 92103 ZIP code, just north of downtown San Diego, had the highest home value increase of all California ZIP codes in the past six months, at 5.7%.

Zillow’s senior economist Jeff Tucker said that the San Diego metro area is a popular destination for people relocating within the state and also from other parts of the country. He cited the city’s favorable climate, beaches, and diverse job opportunities among the key factors that make it “an attractive choice for relocation.”

The median home price in the San Diego-Carlsbad metro area peaked at around $912,000 last summer. But during the second half of 2022, home prices within the San Diego real estate market dropped as part of a nationwide cooling trend. House values hit a post-pandemic “bottom” in April 2023 and have been rising ever since.

According to Zillow, the median home value for the San Diego area has risen for the past four months in a row. Recent real estate market predictions for San Diego suggest that prices will continue to climb into 2024. And that seems logical, given the current supply-and-demand situation in the area.

Low Supply Levels Still a Factor

Just like home prices, the supply situation within the San Diego real estate market has experienced some ups and downs over the past few years. This metro area had a low level of housing supply going into the pandemic years, which depleted it even further.

Housing market inventory levels are often measured by a metric known as the “months of supply.” This is an estimate of how long it would take to sell all of the properties currently listed for sale at the current sales pace, assuming that no new listings come onto the market.

In the wake of a pandemic-fueled home buying surge, the San Diego real estate market bottomed out with a record-low 0.5-month supply of homes for sale. Supply levels rose during 2022, as part of the aforementioned real estate market cooldown. But then they begin dropping again in January 2023.

When this article was published, in early September 2023, the San Diego metro area had about a 1.5-month supply of homes for sale. That is well below historical norms for this particular metropolitan area, and it’s partly why San Diego real estate market forecasts predict continued price gains over the coming months.

In short, there are still plenty of buyers in the market but fewer homes to go around, and this is putting upward pressure on prices.

A Faster Pace of Home Sales

As you might have guessed, homes listed for sale across the San Diego metro area are selling more quickly today when compared to the start of this year. This is a direct extension of the inventory declines that have occurred over the past eight months or so.

As of August 2023, houses listed for sale in the area spent a median of 14 days on the market before going under contract. That’s a faster pace than the start of this year, and it almost matches the frenzied sales pace we saw during the pandemic years.

Anyone who is planning to buy a home in the San Diego area during the next few months or in 2024 should be prepared to hit the ground running. This is a relatively fast-moving real estate market, due to an ongoing imbalance between supply and demand.

Fewer Price Reductions These Days

Here’s another sign that the San Diego housing market is heating up again. According to an August 2023 report from Realtor.com, the number of price reductions made by sellers has declined over the past year. This kind of trend typically indicates a higher level of competition among buyers, along with multiple-offer scenarios.

Last month, only 11.8% of homes listed for sale in the San Diego-Chula Vista-Carlsbad metro area had a price reduction. That was 12 percentage points lower than a year earlier. In other words, there are fewer sellers slashing their asking prices today when compared to a year ago.

All of these trends point to a real estate market that is more competitive for buyers than it was at the start of the year. Tight inventory conditions, more than any other factor, have accelerated the pace of home sales in San Diego while putting upward pressure on prices.

Here’s a reasonable prediction for 2024, based on these and other trends:

Given the current supply-and-demand situation within the San Diego housing market, home prices could continue to rise for the foreseeable future. It also seems likely that this market will continue to favor sellers over buyers, due to an ongoing inventory shortage.

Southern California home buyers can increase their chance for success by making a strong initial offer, researching the market before entering it, and having their finances lined up ahead of time. It also helps to expand your search zone as much as possible.

Need a mortgage loan? Bridgepoint Funding is located in the San Francisco Bay area but serves the entire state of California. We offer a wide range of financing options including FHA, VA and conventional. Please contact us if you need a mortgage loan to buy a home in the San Diego area!