While 21 California Counties See Price Drops, San Diego Stands Strong: Why Our Market Continues to Outperform
The latest housing market data from the California Association of Realtors has revealed a striking tale of two markets across the Golden State. While 21 counties are experiencing year-over-year price declines, with some areas seeing drops as steep as 19.2%, San Diego continues to demonstrate the market resilience and stability that has made it one of California's most sought-after real estate destinations. This divergence tells a compelling story about what separates thriving markets from struggling ones, and why San Diego remains a smart choice for both homeowners and investors.
The Statewide Picture: A Market in Transition
California's housing market is experiencing a significant recalibration, with the statewide median home price reaching $884,050 in July 2025, representing a modest 0.3% decline from the previous year. However, this statewide figure masks dramatic variations between different regions, with some counties experiencing double-digit declines while others continue to see appreciation. Understanding these regional differences provides crucial insights for anyone considering real estate decisions in California.
The cooling trend extends beyond just prices. Statewide home sales decreased 4.1% from July 2024, and pending sales have declined for eight consecutive months. The median time to sell a home has increased from 20 days to 28 days year-over-year, indicating a shift from the frenzied seller's market that characterized much of the pandemic era to a more balanced environment where buyers have increased negotiating power.
These changes reflect several converging factors that are reshaping California's real estate landscape. Elevated mortgage rates, which peaked above 7% earlier in the cycle, have significantly impacted buyer affordability and demand. Economic uncertainty, both nationally and globally, has caused many potential buyers to adopt a wait-and-see approach. Additionally, housing inventory has been increasing in many markets, giving buyers more options and reducing the intense competition that drove rapid price appreciation in recent years.
The Counties in Decline: Understanding the Patterns
The 21 counties experiencing price declines represent a diverse cross-section of California's geography and economy, but several patterns emerge when examining the data closely. Trinity County leads the decline with a staggering 19.2% year-over-year price drop, followed by Mendocino County at 15.0% and Plumas County at 14.6%. These rural and semi-rural counties often lack the economic diversity and population density that provide market stability during challenging periods.
Northern California counties feature prominently among the declining markets, with Del Norte, Napa, and Nevada counties all experiencing significant price reductions. Even some traditionally strong markets are showing weakness, with Napa County, known for its wine industry and proximity to the San Francisco Bay Area, seeing a 12.1% decline. This suggests that even markets with strong underlying fundamentals can experience corrections when broader economic pressures intensify.
Perhaps most notably, several counties in the Central Valley and Inland Empire are experiencing declines, including San Joaquin County at 9.4%, Kern County at 5.6%, and San Bernardino County at 2.2%. These areas experienced some of the most dramatic price appreciation during the pandemic years as buyers sought more affordable alternatives to coastal markets, making them particularly vulnerable to corrections as market dynamics shifted.
Even some traditionally resilient markets are showing signs of stress. Los Angeles County, the state's largest real estate market, experienced a 0.4% decline, while Alameda County, which includes Oakland and much of the East Bay, saw a 2.3% drop. These declines in major metropolitan areas reflect the broader challenges facing California's housing market and highlight the significance of San Diego's continued strength.
San Diego's Resilient Performance: The Numbers Tell the Story
While many California counties struggle with declining prices, San Diego continues to demonstrate the market fundamentals that have made it one of the state's most desirable real estate destinations. The region's median home price has maintained its upward trajectory, reaching $1.1 million for detached homes, representing continued appreciation in a market environment where many areas are seeing declines.
San Diego's performance becomes even more impressive when viewed in the context of the broader California market. While the statewide median declined 0.3% year-over-year, San Diego has continued to see positive price appreciation, demonstrating the strength of local demand and the limited supply that characterizes our market. This divergence reflects fundamental differences in economic diversity, population growth, and development constraints that favor San Diego over many other California markets.
The region's resilience extends beyond just price performance. Sales activity in San Diego has remained relatively stable compared to the dramatic declines seen in many other California markets. While transaction volumes have moderated from pandemic-era peaks, the decline has been less severe than in many other regions, suggesting that buyer demand remains robust despite broader market challenges.
San Diego's rental market also continues to demonstrate strength, with average rents maintaining their upward trajectory even as some other California markets see rental price moderation. This rental market strength provides additional support for real estate values and demonstrates the continued desirability of San Diego as a place to live and work.
The Fundamentals Behind San Diego's Strength
San Diego's continued outperformance relative to other California counties reflects several fundamental advantages that provide both short-term resilience and long-term growth potential. The region's economic diversity stands as perhaps the most important factor, with major industries including biotechnology, defense, tourism, technology, and international trade providing multiple sources of employment and economic stability.
The presence of major employers like Qualcomm, UC San Diego, Scripps Health, and numerous biotechnology companies creates a stable employment base that supports housing demand even during challenging economic periods. Unlike counties that depend heavily on single industries, San Diego's diversified economy provides resilience against sector-specific downturns and creates multiple drivers of population and job growth.
San Diego's geographic advantages also contribute significantly to its market strength. The region's coastal location, favorable climate, and proximity to both Los Angeles and the Mexican border create unique lifestyle and business advantages that are difficult to replicate. These geographic factors contribute to continued population growth and business relocations that support housing demand.
The region's development constraints, while sometimes criticized for limiting housing supply, also provide important support for property values. Geographic barriers including the ocean, mountains, and international border, combined with strict zoning regulations and environmental protections, limit the potential for dramatic increases in housing supply that could pressure prices downward.
San Diego's status as a major tourist destination also provides economic stability and diversification that many other California counties lack. The tourism industry, while cyclical, provides a significant economic base that supports employment and business activity throughout the region. This tourism economy also creates demand for short-term rental properties and second homes that provides additional support for real estate values.
Investment Implications: Why San Diego Remains Attractive
For real estate investors, the contrast between San Diego's continued strength and the declines seen in 21 other California counties provides compelling evidence of the region's investment attractiveness. While some investors might be tempted by the lower prices available in declining markets, San Diego's resilience suggests better long-term prospects for both appreciation and rental income.
The counties experiencing the steepest declines often face fundamental challenges that may persist beyond the current market cycle. Rural counties with limited economic diversity, areas dependent on single industries, and regions with weak population growth trends may struggle to recover their previous price levels even when broader market conditions improve. In contrast, San Diego's strong fundamentals suggest that any temporary price moderation is likely to be followed by continued appreciation as market conditions stabilize.
San Diego's rental market strength provides additional investment appeal, particularly for investors seeking current income in addition to long-term appreciation potential. The region's continued population growth, driven by job creation and lifestyle preferences, supports rental demand across multiple property types and price points. This rental demand provides downside protection during market corrections and upside potential during growth periods.
The region's luxury market segment also demonstrates particular strength, with high-end properties continuing to attract buyers from other California markets and out-of-state locations. This luxury market strength reflects San Diego's appeal to high-net-worth individuals and provides additional support for overall market values.
Strategic Considerations for Buyers and Sellers
The divergent performance between San Diego and declining California counties creates different strategic considerations for buyers and sellers in our market. For buyers, San Diego's continued strength means that waiting for significant price declines may not be a viable strategy, particularly given the region's supply constraints and continued demand from both local and out-of-area buyers.
However, the moderation in market pace does provide buyers with more time to make decisions and potentially more negotiating power than was available during the peak seller's market conditions of recent years. Buyers who are prepared to act quickly when attractive properties become available may find opportunities that were not available during more frenzied market periods.
For sellers, San Diego's relative strength provides confidence that properly priced and marketed properties should continue to attract buyer interest. However, the changing market dynamics do require more strategic pricing and marketing approaches than were necessary when buyer demand significantly exceeded supply.
The contrast with declining markets also highlights the importance of accurate pricing based on current market conditions rather than peak values from previous years. Sellers who price aggressively based on outdated comparables may find their properties sitting on the market longer than expected, even in San Diego's relatively strong market environment.
The Role of Interest Rates and Economic Factors
Understanding San Diego's resilience requires examining how the region responds to broader economic pressures, particularly interest rate changes that affect all California markets. While elevated mortgage rates have impacted buyer affordability throughout California, San Diego's high-income demographics and strong employment market provide some insulation from rate-related demand destruction.
The region's substantial existing homeowner equity also creates opportunities for buyers to make larger down payments or purchase with cash, reducing the impact of higher mortgage rates. Many San Diego homeowners who purchased or refinanced during the low-rate environment of recent years have built significant equity that can be leveraged for future purchases.
San Diego's appeal to out-of-state buyers, particularly from higher-cost markets like the San Francisco Bay Area, also provides some insulation from local economic pressures. These buyers often bring substantial equity from previous home sales and may be less sensitive to mortgage rate changes than local first-time buyers.
The region's international appeal, particularly to buyers from Asia and Latin America, provides another source of demand that is less dependent on U.S. mortgage market conditions. This international buyer interest has historically provided support during domestic market downturns and continues to be a factor in San Diego's market resilience.
Looking Forward: Positioning for Continued Success
As California's housing market continues to evolve, San Diego's fundamental advantages position the region for continued outperformance relative to many other California counties. The factors that have driven the region's resilience during the current market cycle are likely to persist and potentially strengthen over time.
The region's continued job growth, particularly in high-paying technology and biotechnology sectors, should support housing demand even if broader economic conditions remain challenging. Major planned developments and infrastructure investments, including transportation improvements and business district expansions, provide additional drivers of future growth.
San Diego's appeal to remote workers and businesses seeking alternatives to higher-cost markets like San Francisco and Los Angeles also provides long-term growth potential. The region's quality of life advantages, combined with relatively lower business costs compared to other major California markets, make it an attractive destination for business relocations and expansions.
Climate change considerations may also increasingly favor San Diego relative to other California regions. The area's relatively stable climate, lower wildfire risk compared to many inland areas, and coastal location may become increasingly valuable as climate-related risks become more prominent in real estate decision-making.
The Broader California Context
San Diego's outperformance occurs within the broader context of California's evolving real estate landscape, where traditional patterns of growth and decline are being reshuffled by changing economic and demographic trends. The state's high cost of living, regulatory environment, and tax structure continue to drive some residents and businesses to other states, but this outmigration has been selective rather than universal.
Markets that have maintained their appeal to high-income residents and growing industries have continued to perform well, while areas that depended primarily on affordability advantages or single industries have struggled. San Diego's position in the former category reflects its success in building a diversified, high-value economy that can compete effectively for residents and businesses.
The contrast between San Diego and declining counties also illustrates the importance of long-term planning and investment in economic development, infrastructure, and quality of life amenities. Counties that have invested in these areas have generally maintained their market strength, while those that have not have become more vulnerable to economic and demographic pressures.
Conclusion: San Diego's Enduring Appeal
The tale of 21 California counties experiencing price declines while San Diego maintains its strength provides a compelling illustration of what separates thriving real estate markets from struggling ones. San Diego's combination of economic diversity, geographic advantages, development constraints, and quality of life amenities creates a foundation for continued market resilience that many other California counties lack.
For buyers, sellers, and investors, this divergence reinforces the importance of focusing on markets with strong fundamentals rather than simply seeking the lowest prices or highest recent appreciation rates. San Diego's continued strength in a challenging market environment demonstrates the value of these fundamentals and suggests continued outperformance as market conditions evolve.
As California's housing market continues to adjust to new economic realities, San Diego's position as one of the state's most resilient and desirable markets appears secure. The region's ability to maintain price appreciation and market activity while many other counties struggle provides confidence for anyone considering real estate decisions in our market.
The coming months will likely bring continued volatility and regional variation in California's housing market. However, San Diego's track record of resilience and the fundamental factors that drive this resilience suggest that our market will continue to provide opportunities for both homeowners and investors seeking stability and long-term growth potential in California real estate.
For detailed information on the 21 California counties experiencing price declines, visit the original article at Norada Real Estate.