Introduction
Chad Dannecker: Hi, I'm Chad Dannecker with Dannecker & Associates at Compass, coming to you with your late August San Diego housing market update.
Interest Rates
So first off in the news, we've got our 30-year fixed-rate mortgages. As you can see here, they've kind of crept back up to about $6.75\%$ to $6.8\%$. Of course, with our high cost of housing here in San Diego, that interest rate creep really starts to slow the market down, and we'll get into that here a little bit in some future slides.
Active Listings Inventory YOY
Active listings right now—kind of interesting. So here you go, we've got 2025 and then here 2026. So we peaked last year in July with our inventory, and right now we're actually climbing still, so it's going to be kind of a late peak this year in terms of our active inventory.
We've still got plenty of inventory as compared to '23, '24, '22, and '21. But as you can see here, we're still about a thousand homes off the three-year average prior to COVID, so we're still kind of in that stage of just not getting back to what would be a normal real estate market with regards to inventory.
Demand Year-Over-Year
So our demand year-over-year: You can see our interest rates—last year, our interest rates started high in the spring and then they kind of came down over summer and into the fall. This year, we started low at the beginning of the year, and then rates shot up, and you can see our demand was much higher here in the spring. It really shot up quickly in January. You can see we really got peak demand by February, and then it got a little bit greater between April and May.
Our interest rates, of course, shot up after the war in Iran started, and it's just been trailing down ever since. So demand's a little lower right now than it was last year. We've got about 400 less home sales on the market year-to-date over the same time last year.
Expected Market Time
Our expected market time right now, with our inventory still creeping up and demand going down, of course, our expected market time is still increasing. So the expected market time right now, we're sitting at about 107 days, so up over last year, but not really that far off—not tremendous. It's just right now the energy of the market's a little bit slower, just with everything going on with Iran, some volatility in the stock market, and just some negativity in the system right now.
Automated Valuation Models Like Zestimate & AI
So, automated valuation models: When I talk to many of my clients in a casual conversation and say, "Hey, do you guys have any idea of the value of your home right now? Would you be interested in knowing?" A lot of times, people will say to me, "Oh no, I already know. I went on Zillow, Realtor.com, Redfin, or ChatGPT/Gemini and checked."
Those are all very useful, valuable tools that can save a lot of time. The interesting thing is that Zillow's Zestimates specifically for San Diego County—for homes that aren't listed (because once an agent or broker lists a home, Zillow automatically adjusts its Zestimate based on the listing price)—Zillow is, on average, $6.2\%$ above or below the real home value.
When you look at entry-level homes in our coastal markets at $2 million or $3 million, you're talking about a $120,000 to $180,000 variance in either direction. That's a pretty big gap. If you really want to know what your home is worth, reach out to a trusted real estate professional. Here is what AI and automated valuation models miss:
Property Condition & Upgrades: Overall condition, recent remodels, and quality of interior upgrades.
Lot Characteristics: Usable lot space, cul-de-sac location, busy street placement, or steep embankments/canyons.
Views & Privacy: Premium views versus neighboring homes overlooking your yard.
Layout & Craftsmanship: Functional vs. obsolete floor plans and general build quality.
Nuisances & Location Nuances: Proximity to fire stations, hospitals, or high-noise areas.
Seller Motivation & Market Perception: Current buyer sentiment, presentation/staging, and competing listings.
National Housing and Economic Trends
Moving to macro and national housing trends that move markets across the country:
Markets Expect Fed Hikes in 2026: Markets expect the Fed to hike rates in 2026, projecting increases from around $3.63\%-3.72\%$ in August up to $4\%$ in October and $4.37\%$ in January.
Inflation Fears Push Rates Higher: Persistent inflation fears, oil/gas prices, and rising packaging costs continue to squeeze household budgets.
AI Boom Hits San Francisco Housing Market: SF saw a massive surge, with 44 transactions in June closing at least $1 million above ask price due to high-paid tech and AI engineers. While San Diego has major employers like Qualcomm and Apple, we aren't seeing that extreme hyper-boom; SF remains the epicenter.
National Employment & Unemployment: Employment continues to grow slowly, bringing stability. Unemployment signals remain very low nationally and locally in San Diego County, providing a strong cushion for the housing market.
NAR Existing Home Sales: Sales volume remains down roughly $40\%$ compared to pre-COVID 3-year averages. Homeowners who locked in $2.2\%-3.65\%$ rates during 2020–2022 are staying put, keeping overall sales transaction volume low.
Sales Price Growth & New Construction Slowdown: Home sales price growth stays slightly positive (San Diego home values were up $3.8\%$ trailing just behind $4.2\%$ inflation). Meanwhile, new construction starts and permits are down significantly—especially large 300–500 unit or condo projects—leaving mostly smaller infill developments.
Conclusion
I'm Chad Dannecker with Compass. One quick tip if you're searching for homes: Zillow does not carry $100\%$ of active listings. About $2\%$ of San Diego County listings are not syndicated to Zillow. Check sites like Compass.com, Redfin, or Realtor.com so you don't miss out on the perfect property.
Hope you have a great day. Thanks, I'm Chad Dannecker!
