San Diego home sales hit 27,117 in 2025 - homeowners locked in 3% mortgages choosing remodeling over moving

San Diego Home Sales Hit 27,117: Third-Lowest Since 1988 as Move-Up Market Dies

San Diego County recorded just 27,117 home sales in 2025—the third-lowest year on record since 1988. With homeowners locked into 3% mortgages and current rates at 6.19%, the move-up market has frozen. Pacific Beach and La Jolla homeowners are choosing strategic remodeling, ADU construction, and home expansion over selling—saving hundreds of thousands in transaction costs and mortgage interest.

The Move-Up Market "Kind of Died"

Pacific Beach Builder reports that San Diego County recorded just 27,117 home sales in 2025—the third-lowest year on record since 1988, according to data released February 19, 2026. Only the 2008-2011 financial crisis and the 1991-1993 recession saw fewer transactions. The culprit? "The move-up market kind of died," explained Bill McBride, author of the economics blog Calculated Risk. "Everyone is sitting on these 3% mortgages."

With current 30-year fixed mortgage rates hovering around 6.19% as of December 2025, homeowners who locked in rates between 2.5% and 3.5% during 2020-2022 face a painful reality: selling means losing a financial advantage worth hundreds of thousands of dollars over a 30-year loan term. Real estate agent Raylene Brundage told the San Diego Union-Tribune that roughly half of California's agents conducted zero transactions over two years. The housing market isn't just slow—it's frozen.

The Remodel vs. Move Math: Why Expansion Wins in 2026

Let's run the numbers. Assume you own a $1.2 million home in Pacific Beach with a 3% mortgage and need 500 more square feet for a growing family or home office. Here's what moving versus remodeling actually costs:

Moving Costs (Typical Scenario)

Realtor commission (5-6%): $60,000-$72,000 on a $1.2M sale
Buyer closing costs (1-3%): $12,000-$36,000 on new purchase
Moving expenses: $5,000-$8,000 for professional movers
Rate differential over 30 years: Refinancing from 3% to 6.19% on a $900K loan costs approximately $348,000 more in total interest payments
Total real cost: $425,000-$464,000 over the loan lifetime

Remodeling Costs (Same 500 SF Addition)

Second-story addition (500 SF at $350-$450/SF): $175,000-$225,000
Garage conversion to living space (at $120-$180/SF): $60,000-$90,000
Detached ADU (at $180-$280/SF after coastal premium): $90,000-$140,000 for 500 SF
Construction disruption: 3-9 months depending on scope
Total investment: $60,000-$225,000 depending on project type

The math is stark: even a premium second-story addition costs roughly half what you'd spend moving when you factor in transaction costs and decades of higher mortgage payments. And unlike moving, remodeling adds equity to your existing property while preserving that precious 3% rate.

Top Home Expansion Options for Locked-In Homeowners

Pacific Beach and La Jolla homeowners have several strategic expansion options that make financial sense in 2026's rate environment:

ADU Construction for Rental Income: Build a detached 600-800 SF ADU and generate $2,000-$3,500 monthly rent in La Jolla or Pacific Beach. Construction costs run $180,000-$280,000 after coastal premiums, but rental income offsets rising property taxes and insurance. New 2026 coastal permitting rules make this easier than ever.
Second-Story Additions: Perfect for growing families needing 2-3 additional bedrooms. Costs range from $300-$450/SF in coastal neighborhoods, with 6-9 month construction timelines. Adds significant resale value while keeping your existing location and school districts.
Garage Conversions: The fastest, most affordable option at $120-$180/SF. Convert a two-car garage into a 400 SF master suite, home office, or guest quarters in just 3-4 months. Ideal for homeowners who park on the street anyway.
Aging-in-Place Modifications: Add a ground-floor bedroom suite, accessible bathroom, or elevator for multi-generational living. Costs $80,000-$150,000 but eliminates future moving costs and preserves independence for aging parents.
Coastal Expansion Permits: Pacific Beach, La Jolla, and Mission Beach properties require Coastal Development Permits for major additions. Timeline adds 4-8 months but is still faster than the 6-12 month selling/buying cycle—and you stay in your neighborhood.

Almost 80% of San Diego homeowners with mortgages have rates below 6%, and many locked in 3-4% rates during the pandemic. With inventory dropping from 7,446 homes in June to just 5,000 by December 2025, competition for available homes remains fierce—even as sales volumes crater. Homeowners who expand rather than move avoid bidding wars, preserve their rate advantage, and add value to an asset they already own.

Strategic Remodeling Beats Moving in 2026

The 27,117 sales figure tells a story: San Diego homeowners aren't moving because they can't afford to. But "stuck" doesn't mean "without options." Strategic remodeling, ADU construction, and home expansion let you solve space constraints without sacrificing the 3% mortgage that's worth more than gold in 2026's rate environment.

Ready to explore your expansion options? Pacific Beach Builder offers free 30-minute consultations where we calculate your personalized remodel-vs-move ROI using your specific mortgage rate, home value, and space needs. Discover why staying put and expanding is the smartest financial decision you'll make this decade.

Frequently Asked Questions

Should I sell my Pacific Beach home if I have a 3% mortgage?

Unless you're relocating for a job or experiencing major life changes, selling a home with a 3% mortgage rarely makes financial sense in 2026. Refinancing from 3% to today's 6.19% rate costs approximately $348,000 more in interest over 30 years on a $900K loan. Add realtor commissions (5-6%), closing costs (1-3%), and moving expenses, and you're looking at $425,000+ in real costs. Even an expensive remodel—a $200,000 second-story addition—costs less than half of what you'd lose by giving up your low rate. Almost 80% of San Diego mortgage holders have rates below 6%, which explains why sales hit the third-lowest level since 1988.

How much does a home expansion cost in Pacific Beach compared to moving?

Home expansion costs in Pacific Beach vary by project type: second-story additions run $300-$450 per square foot ($175,000-$225,000 for 500 SF), ADU construction costs $180-$280 per square foot after coastal premiums, and garage conversions range from $120-$180 per square foot ($60,000-$90,000 for 500 SF). Compare this to moving costs: 5-6% realtor commission ($60,000-$72,000 on a $1.2M home), 1-3% closing costs, $5,000-$8,000 moving expenses, plus the interest rate differential. Moving from a 3% to 6.19% mortgage costs $348,000 more over 30 years—making even premium remodeling projects cost half as much as selling and moving.

What's the fastest way to add space without selling in La Jolla?

Garage conversions are the fastest expansion option in La Jolla, taking just 3-4 months from permit to completion at $120-$180 per square foot. Detached ADUs take 6-9 months for coastal properties (including Coastal Development Permit processing), while second-story additions require 6-9 months. Compare this to the selling/buying timeline: listing preparation (2-4 weeks), market time (4-12 weeks), escrow (30-45 days), then finding and closing on your next home (another 8-16 weeks)—easily 6-12 months total. The advantage of remodeling isn't just speed: you add value to your existing property, avoid transaction costs, keep your 3% mortgage, and stay in your neighborhood and school district. In La Jolla, a 1-bedroom ADU generates $2,000-$2,800 monthly rent, helping offset property taxes and insurance.

Sources

Contact Pacific Beach Builder for Home Expansion Expertise

Pacific Beach Builder specializes in helping homeowners maximize their property value while preserving low mortgage rates through strategic remodeling, ADU construction, second-story additions, and garage conversions in Pacific Beach, La Jolla, and Mission Beach.

Our team has extensive experience with coastal zone expansion projects, from permit coordination to final inspection. We understand the unique financial considerations facing homeowners locked into 3% mortgages and provide transparent ROI analysis for every project.

Contact Pacific Beach Builder for a free expansion consultation:

Phone: +1-858-290-1842
Website: pacificbeachbuilder.com
Email: info@pacificbeachbuilder.com

Let's calculate your remodel-vs-move ROI and explore expansion options that make financial sense for your specific situation.