San Diego home price has biggest monthly drop since Great Recession

© (Ana Ramirez/The San Diego Union-Tribune) Home prices are dropping in San Diego County. Pictured: People enjoy Pacific Beach on Fourth of July. (Ana Ramirez/The San Diego Union-Tribune)

San Diego home prices are dropping at a pace not seen since the Great Recession.

Home prices were down 2.5 percent from July to August, said the S&P Case-Shiller Indices released Tuesday. The San Diego metropolitan area — which includes all of San Diego County — hasn't had a drop that big since July 2008.

San Diego isn't alone, as the nation is experiencing a housing market slowdown brought on by rising mortgage rates. The biggest monthly drops, which are seasonally adjusted, belonged to San Francisco (down 3.7 percent) and Seattle (down 2.9 percent).

West Coast markets are experiencing the biggest slowdowns as many buyers continue to seek out more affordable options in the South and other areas, wrote CoreLogic deputy chief economist Selma Hepp.

"Differences still exist by geography," she wrote in her analysis, "with affordable areas in South and Southeast continuing to thrive as out-migration from more expensive markets persists."

Home prices were still up 12.7 percent annually in the San Diego metro, the eighth highest in the survey's 20-city index. Yet that is a big change from March when prices were up 30 percent in a year.

Miami had the biggest annual jump, 28.6 percent, followed by Tampa at 28 percent and Charlotte at 21.3 percent. The lowest gains, which would still be considered high in normal times, were Washington, D.C. at 7.4 percent and San Francisco at 5.6 percent.

The Case-Shiller Indices take into consideration repeat sales of identical single-family houses — and are seasonally adjusted — as they turn over through the years. The index is typically about two months behind and uses a three-month rolling average.

San Diego is still more expensive than the fastest appreciating home markets. Redfin said the median sale price in August for a single-family home was $900,000. That compares to $550,000 in Miami, $399,000 in Tampa and $410,000 in Charlotte.

Zillow senior economist Nicole Bachaud said rising mortgage rates would continue to eat into affordability. Higher mortgage rates mean bigger monthly payments, making the income required to qualify even larger.

"Price growth will likely continue to moderate," she wrote, "and in the short-term, prices will likely continue to fall."

The interest rate for a 30-year, fixed-rate mortgage was 5.22 percent in August, said Freddie Mac, up from 2.84 percent the year before. Interest rates have continued to grow since then. As of Tuesday morning, the rate for a 30-year mortgage was 7.14 percent, said Mortgage News Daily.

Nationwide home prices were still up 13 percent annually in August, the index said. Yet that was down 2.6 percent from the previous month and the largest monthly drop in the history of the index.

“Price gains decelerated in every one of our 20 cities," wrote Craig J. Lazzara, managing director at S&P Dow Jones Indices. "These data show clearly that the growth rate of housing prices peaked in the spring of 2022 and has been declining ever since.”

In Case-Shiller records going back to 1987, the biggest monthly drop for the San Diego metro was 3.39 in February 2008. The biggest annual drop was 26.7 percent in October 2008.

It would still take a lot of deceleration before San Diego prices noticeably change for many buyers. The region experienced some of the fastest-growing home prices in the nation during much of the pandemic. The median sale price for a single-family home was around $670,000 in February 2020 before lockdowns started, increasing to $900,000 by August.

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S&P Case-Shiller Indices

Annual price growth by metro area

Miami: 28.6 percent

Tampa: 28.0 percent

Charlotte: 21.3 percent

Dallas: 20.2 percent

Atlanta: 20.1 percent

Las Vegas: 17.5 percent

Phoenix: 17.1 percent

San Diego: 12.7 percent

New York: 12.3 percent

Los Angeles: 12.1 percent

Denver: 12.0 percent

Cleveland: 11.5 percent

Boston: 11.4 percent

Chicago: 11.3 percent

Seattle: 9.9 percent

Detroit: 9.7 percent

Portland: 8.6 percent

Minneapolis: 7.6 percent

Washington: 7.4 percent

San Francisco: 5.6 percent

Nationwide: 13 percent

This story originally appeared in San Diego Union-Tribune.