Will the San Diego County Housing Market Crash?

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Will the San Diego Housing Market Go Down?

San Diego County, like any other housing market, is subject to a number of factors that can affect the stability and value of its housing market. Here we will discuss what factors could lead to a housing market crash in the area, and the factors currently in play why we think it is unlikely to crash.

What is a housing market crash?

A housing market crash is a significant decline in the value of housing prices, often accompanied by a decrease in demand for housing and a rise in the number of foreclosures.

A housing market crash can be caused by a number of factors, including overbuilding, economic downturns, high unemployment, and changes in interest rates and lending practices.

During a housing market crash, home values may decline rapidly, making it difficult for homeowners to sell their homes and for new buyers to enter the market.

This can lead to a decrease in the overall value of homes in an area and a decrease in the overall health of the economy.

Some factors that may lead to a housing market crash in San Diego County include:

Economic downturns

A recession or economic downturn can lead to a decrease in demand for housing and a decline in home values.

High unemployment rate

High unemployment can lead to a decrease in demand for housing and a decline in home values.


As we write this, there is lack of construction of new homes in San Diego County since 2010. However, if there ever was an oversupply of housing here, it can lead to a decrease in demand and a decline in home values.

According to data from the US Census Bureau, the number of housing permits in San Diego County has fluctuated over time, reflecting changes in the local economy and housing market.

Historically, the number of housing permits in San Diego County reached its highest level in the mid-2000s, during a period of strong economic growth and high demand for housing. During this time, the number of housing permits issued in the county reached over 15,000 per year, representing a significant increase from the levels seen in previous decades.

However, the housing market in San Diego County, like many other regions in the United States, was impacted by the financial crisis of 2008. As a result, the number of housing permits issued in the county dropped significantly in the years that followed, falling to below 5,000 per year.

Some experts estimate that San Diego County needs anywhere from 59,000 to 140,000 new units to catch up from deficit from the past 30 years.

In recent years, the number of housing permits in San Diego County has started to recover, reaching levels similar to those seen in the mid-2000s. In 2021, the number of housing permits issued in the county was estimated to be over 10,000, a significant increase from the lows seen during the financial crisis.

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Interest rates

As interest rates continue to rise, it can become more expensive for buyers to finance a home, which can lead to a decrease in demand and a decline in home values.

Mortgage payments table illustration as interest rates rise.

Stricter lending standards

If lending standards become stricter, it can be more difficult for buyers to obtain mortgages, which can also lead to a decrease in demand and a decline in home values.

Distressed Home Sales

Distressed home sales, such as foreclosures and short sales, can increase the likelihood of a housing market crash for several reasons:

  1. Supply and demand: An increase in distressed home sales can create a surplus of housing supply, causing home prices to decrease and potentially triggering a housing market crash.
  2. Market sentiment: When there is a high number of distressed sales, it can have a negative impact on market sentiment and consumer confidence, leading to decreased demand for homes.
  3. Neighborhood effects: Distressed home sales in a neighborhood can lower the value of other homes in the area and decrease demand for those homes, contributing to a housing market crash.

On the other hand, San Diego County, CA has a strong and stable housing market, and there are a number of factors that contribute to this.

Some of the top reasons why San Diego County’s housing market is unlikely to crash

Low inventory

A low inventory can lead to a lack of supply and can increase the demand for housing which will drive the prices up in the long term even as it experiences softening of home prices in the short term.

This is the current total number of homes for sale in San Diego County:

When it comes to housing, the Census data shows that San Diego County is home to over 1.3 million housing units. The majority of these units are single-family homes, but the county also has a significant number of apartments and other multi-family dwellings.

Lack of New Construction Homes

San Diego County is far-behind its goals to increase new home construction likely because of:

  • High land costs: San Diego is a popular area with high demand for housing, which can drive up the cost of land and make it more difficult for builders to acquire land to build on. As a result of high land costs, developers have focused on building high-density condos, leading to a shortage of single-family homes.
  • Zoning and land-use regulations: Local zoning and land-use regulations can restrict the amount of land that is available for new construction, or make it difficult or expensive to build new homes.
  • Lack of available labor: A shortage of skilled labor in the construction industry can slow the pace of new home construction. The pandemic has made this problem even worse.
  • Conservation efforts
  • It is worth noting that even with more relaxed state laws on building ADUs (accessory dwelling units) or 2-4+ units on certain single family zoned lots in California, we have yet to see improvement on new inventory.

Here is a link to the available new homes for sale in San Diego County.

Limited land supply

San Diego County is a coastal area with a limited amount of land available for development, which helps to prevent overbuilding and keeps housing prices relatively stable.

Strong population growth

San Diego County is a popular place to live. As more people move to the area, the demand for housing increases, which helps to keep prices stable.

San Diego is home to a large and growing pool of highly skilled and educated workers in fields such as computer science, engineering, and biotechnology. The presence of top-ranked universities such as the University of California, San Diego, and San Diego State University, as well as several research institutions, helps to attract and retain talented workers who move here from other states or from up north (Bay Area).

Here is a link to United State Census Quick Facts for San Diego County

Growing job market

The region has a diverse job market, including technology, biotechnology, defense and military, healthcare, tourism, trade, transportation, and utilities, providing a range of employment opportunities.

San Diego is also an underreported hub for cutting-edge tech and life sciences innovation. Despite being less known than regions like Austin and Denver, San Diego companies raised more venture capital dollars than those two regions combined in 2020. San Diego is home to hundreds of cutting-edge companies, is a top 3 life sciences region and has a thriving health tech industry and defense industry.

The region has a highly collaborative community and is well-supported by top tier universities and world-class research institutes. The region is seizing the opportunity to grow intelligently and inclusively, with companies like Apple, Amazon, and Google expanding there.

By supporting its innovation economy, San Diego will leverage its success and create high-paying jobs, which then supports a strong housing market in the long run.

Relatively Low interest rates

A relatively low-interest rate environment makes it more affordable for people to buy homes, which helps to keep demand for housing high.

Strong economic indicators

San Diego County has a strong economy with low unemployment rate, growing GDP and rising income levels which can lead to strong demand for housing.

Persistent High Demand

Due to its desirable location and lifestyle

San Diego County is a desirable location with beautiful beaches, good weather, and a variety of recreational activities which makes this area one of the best places to live in the country.

San Diego’s beaches, cultural attractions, good schools, dining, shopping, and friendly community further enhance the region’s high quality of life and desirability as a place to live.

The beautiful beaches in San Diego contribute to a higher quality of life by providing opportunities for outdoor recreation, connecting people with nature, and promoting a healthy lifestyle.

  1. Outdoor recreation: The mild climate and scenic coastline in San Diego County allow for a wide range of outdoor activities, including swimming, surfing, fishing, hiking, and more.
  2. Connection with nature: Spending time at the beach and in the surrounding natural areas helps to reduce stress and improve well-being.
  3. Healthy lifestyle: Outdoor recreation and exposure to nature promote physical activity and a healthy lifestyle. The opportunities for an active, outdoor lifestyle are especially attractive to families and individuals of all ages.


San Diego County’s climate is considered desirable due to its mild and sunny weather, with low humidity and temperature variations. The average temperatures range from 60-70°F (15-21°C) in the winter to 70-80°F (21-27°C) in the summer, making it a perfect location for outdoor activities. The area receives less rainfall than other parts of California, allowing for more days of sunshine and outdoor recreation. The mild climate attracts tourists, retirees, and new residents to the area, making it a desirable location to live and work.

Lower utility bills: With warm weather for much of the year, residents do not need to spend as much on heating and cooling as in other regions with more extreme climates. This becomes an important factor when energy prices soar as they have done recently.

Although San Diego has its share of climate change-risks such as wildfires, it is located outside of tornado alley and experiences few natural disasters such as hurricanes and severe snowstorms.

These factors, combined with the region’s other attractions, help to explain why demand for housing in San Diego County is historically high.

Lack of affordable housing

San Diego County has a shortage of affordable housing, which means that the supply is unable to meet the demand. This can lead to increased competition for available homes and help to keep prices stable.

It’s worth noting that these factors are not the only ones that can affect the housing market, and their impacts are not mutually exclusive. Additionally, the real estate market is a complex system, and it is challenging to predict with certainty the future of the market.

Here is the link to the latest housing market update for San Diego County.

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Realtors® Jean and Ken Tritle at DreamWell Homes Realty

Contact Jean and Ken Tritle, a husband and wife real estate broker/agent team at DreamWell Homes Realty.

Call or Text: 760-798-9024

Email: jeanken@dreamwellhomes.com

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DreamWell Homes Realty is a locally owned San Diego husband and wife real estate team. Jean and Ken Tritle offer their home buyer and seller clients the best professional and personalized real estate representation with unparalleled service and guidance. For more information, please call or text Jean and Ken Tritle at 760-798-9024. Thank you! DreamWell Homes Realty CA DRE# 01777754. Mailing address: 1902 Wright Place, 2nd Floor, Carlsbad, CA 92008 | San Diego County, California.