San Diego, CA, December 14, 2025
Homeowners in San Diego are increasingly facing negative equity, where mortgage debts exceed home values. This trend is driven by falling home prices and lax down payment practices among recent buyers. The recent Cotality Home Equity Report indicates 0.6% of local homeowners experienced negative equity in a market still grappling with affordability challenges. These factors may lead to financial strain, market instability, and even foreclosures as the situation develops.
San Diego Homeowners Face Rising Negative Equity Amid Falling Home Prices
San Diego, CA – An increasing number of homeowners in San Diego are experiencing negative equity, where they owe more on their mortgages than their homes are currently worth. This trend is attributed to declining home prices and the prevalence of low down payments among recent buyers.
Current Market Conditions
According to the latest Cotality Home Equity Report, 0.6% of San Diego homeowners had negative equity in the third quarter of 2025, marking a 0.14 percentage point increase from the previous year. Nationwide, the average stands at 2.2%, affecting approximately 1.24 million properties. Negative equity occurs when a homeowner’s mortgage balance exceeds the current market value of their property.
Factors Contributing to Negative Equity
The rise in negative equity is influenced by several factors:
- Declining Home Prices: The S&P/Case-Shiller Home Price Index reported a 0.9% decrease in San Diego home prices in September 2025, continuing a downward trend for the fifth consecutive month.
- Low Down Payments: Many first-time and lower-income buyers have utilized minimal down payments, increasing the risk of negative equity as home values decline.
- Affordability Challenges: The combination of high home prices and rising interest rates has made it more difficult for buyers to build sufficient equity in their homes.
Implications for Homeowners and the Market
The increase in negative equity poses several challenges:
- Financial Strain: Homeowners with negative equity may find it difficult to sell or refinance their properties, potentially leading to financial hardship.
- Market Uncertainty: A higher incidence of negative equity can contribute to market instability, affecting both buyers and sellers.
- Potential for Foreclosures: In severe cases, negative equity may lead to foreclosures, further impacting the housing market.
Looking Ahead
As the housing market continues to adjust, it is crucial for homeowners to monitor their equity positions and consider consulting with financial advisors to explore options. Staying informed about market trends and understanding the factors influencing home values can help homeowners make informed decisions during this period of market fluctuation.
Key Features of the San Diego Housing Market
| Feature | Details |
|---|---|
| Median Home Price | $975,000 as of September 2025 |
| Negative Equity Percentage | 0.6% of homeowners in the third quarter of 2025 |
| Home Price Decline | 0.9% decrease in September 2025 |
| Market Trend | Fifth consecutive month of price declines |
| Affordability Challenges | High home prices and rising interest rates affecting buyers |
Frequently Asked Questions (FAQ)
What is negative equity?
Negative equity occurs when a homeowner owes more on their mortgage than their property is currently worth.
How does negative equity affect homeowners?
Homeowners with negative equity may face challenges in selling or refinancing their properties, potentially leading to financial difficulties.
What factors are contributing to the rise in negative equity in San Diego?
The rise in negative equity in San Diego is influenced by declining home prices, low down payments, and affordability challenges.
What are the implications of increased negative equity for the housing market?
Increased negative equity can lead to financial strain for homeowners, market uncertainty, and a potential rise in foreclosures, all of which can impact the housing market.
What should homeowners do if they are facing negative equity?
Homeowners facing negative equity should monitor their equity positions and consider consulting with financial advisors to explore available options.
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