An Analytical Look at the 2025 Real Estate Market

The 2025 real estate market marked a transition year. After several years defined by volatility, rapid appreciation, and emotionally driven decisions, the market began to normalize. Rather than sharp swings, 2025 was shaped by recalibration, steadier demand, and a renewed focus on fundamentals.

This shift didn’t signal weakness. It signaled a market adjusting to higher interest rates, tighter inventory, and more informed buyers and sellers.

A Market Moving at a More Measured Pace

One of the most noticeable changes in 2025 was pace. Homes continued to sell relatively quickly by historical standards, but the urgency that defined prior years faded. Buyers were no longer forced into split second decisions, and sellers could no longer rely on momentum alone.

This slowdown created space for analysis. Comparable sales mattered more. Neighborhood specific trends carried more weight. Pricing strategies became intentional rather than aspirational. The market rewarded accuracy and preparation, not optimism.

Price Stability Over Price Acceleration

Price movement throughout 2025 was modest. In many markets, including San Diego, median prices softened slightly year over year. This was not a downturn, but a stabilization following several years of outsized growth.

What became increasingly clear was price sensitivity. Homes priced correctly attracted attention and activity. Homes priced ahead of the market often stalled, regardless of condition or location. The gap between well positioned listings and poorly positioned ones widened, reinforcing the importance of disciplined pricing.

Inventory Began to Normalize, Not Expand

Despite changing buyer behavior, inventory remained constrained. Supply increased compared to the tightest years of the past cycle, but not enough to create oversupply.

This balance prevented meaningful price declines. Demand didn’t disappear, it became more selective. Buyers prioritized value, condition, and long term fit. Sellers who understood this shift were better able to align expectations and outcomes.

Negotiation Returned as a Core Skill

One of the most important structural changes in 2025 was the return of negotiation. Deals became more nuanced. Buyers sought concessions tied to financing, repairs, and closing costs. Sellers who anticipated this and built flexibility into their strategy performed better.

This environment favored experience and preparation. Transactions required thoughtful structuring rather than standardized approaches. The strongest outcomes came from data driven decisions, adaptability, and clear communication.

Mortgage Rates Began to Trend Down

Mortgage rates remained volatile throughout the year, but when you zoom out, the broader trend mattered more than the week to week noise. Overall, rates trended downward for much of 2025, with the most favorable levels appearing later in the year.

According to Freddie Mac, this shift allowed buyers to save thousands annually on a median priced home compared to earlier in the year. Redfin data further shows that a buyer with a $3,000 monthly budget could afford roughly $25,000 more home than one year earlier.

This improvement in affordability helped unlock demand that had been sitting on the sidelines.

Inventory Continued to Grow Toward Normal Levels

For several years, inventory was constrained by the lock in effect, homeowners were reluctant to give up historically low mortgage rates. In 2025, that began to ease.

Buyer Demand Quietly Rebuilt

Although buyer behavior appeared cautious throughout much of the year, underlying demand was building.

 

Mortgage Bankers Association data shows purchase applications consistently higher than the same period last year. This wasn’t a surge, it was a steady return. Economists from Fannie Mae, the MBA, and the National Association of Realtors all forecast moderate sales growth heading into 2026.

Where the Market Stands Today

Looking ahead, it’s important to understand not just where the market has been, but where it is right now.

Using live Altos Research data, which tracks pricing, inventory, and demand in real time, we can see a clearer picture of current conditions in San Diego.

The latest data shows prices have largely stabilized after modest year over year softening. Inventory remains tight but healthier than recent years, giving buyers more choice without creating oversupply. Buyer interest is steady and consistent, and days on market reflect a more balanced environment.

You can view the live San Diego market data here:
https://altos.re/r/c7c35442-5a38-4852-afd8-347410409241

The Bigger Picture

2025 was not a year of extremes. It was a year of normalization.

The market rewarded preparation, pricing discipline, and strategy. Buyers gained clarity. Sellers gained perspective. And the industry as a whole moved toward a healthier equilibrium.

Rather than chasing momentum, success in 2025 came from understanding fundamentals, staying informed, and making decisions grounded in data. That foundation sets the stage for steadier, more sustainable growth moving into 2026.