SAN DIEGO — Average home prices in San Diego officially reached seven digits for the first-time ever last month, according to newly released data from the California Association of Realtors (CAR).

In August, San Diego’s median home prices came in right at $1 million, rising about 3.2% from July and 12.8% from August 2022. The average also surpassed the previous record high in the region — about $975,000 — set just last year in April.

Across California, home prices similarly increased in August, hitting a 15-month high. According to CAR, average prices increased statewide by about 3.3% from July and 3% from last year.

As of August, the most affordable county in Southern California was San Bernardino with a median home price of $495,000. Although, that price is higher than it was last year by about 4%, according to CAR.

Two counties in Silicon Valley, San Mateo and Santa Clara, had the most expensive average home prices last month — about $1.95 million and $1.85 million, respectively.

Meanwhile, single-family home sales hit a seven-month low last month. Sales totaled 254,740, the trade association found — down 5.3% from July and 19% from August 2022.

Realtors attribute these changes to rising mortgage rates and the state’s ongoing scarcity of homes on the market. As a result, homes are sitting on the market for a shorter amount of time, with nearly 50% statewide selling for above their asking price amid high competition.

Locally, the lack of inventory over the last several years is one of the primary drivers of the surge in home prices.

According to San Diego real estate analyst Ken Kaplan, there was a slight uptick in the number of homes available on the market during the pandemic, hitting about 4,400 properties for sale between condos and single-family residences. As of this month, he explained that number has dropped to about 2,850.

“We’re seeing a reduction in the number of transactions because there is very little inventory and because the interest rates are a little higher than they were,” Kaplan said. “You’ve got (potential) sellers that have golden handcuffs on, who are not willing to take the plunge and sell … (because) it’s become less affordable to buy.”

San Diego is already considered one of the most competitive and expensive real estate markets in the country, according to real estate company Redfin, with most homes selling within 12 days of their listing this year.

In Southern California, Orange County was the only county to exceed San Diego in terms of expense, recording an average home price of $1.31 million last month. However, San Diego remained the most competitive market — both for home sales and apartment rentals.

This unaffordability in the housing market has also facilitated changes in the rental market as well, as residents often look to leasing an unit as a cheaper alternative.

Greater accessibility to affordable housing drives the price of competing rental units down, Kaplan said, setting off a chain-reaction that also prompts sellers to look at ways to adjust their prices to make them a more viable option.

Despite the continuing cost increases, there is some hope that a slow-down in the real estate market driven by a surplus of rental units could happen locally within the next year or two, given the investments that local officials have put towards expanding affordable housing with new developments.

As Kaplan explained, “if we can get more units on the market, (that) is going to create a surplus inventory of rentals, which would mean landlords would have to come off the price a little bit.”

“Then at that point, if it makes more sense to rent than buy, sellers are going to be sitting on the sidelines going, ‘Wait, we need to kind of adjust, so that we can bring people who are renting into buying'” he continued.

CAR officials are predicting that the market should improve slightly moving into the last quarter of the year.

“Mortgage rates should begin to ease, albeit gradually, in the next couple months, and provide a much-needed boost to both the supply and the demand sides of the housing market,” said CAR Senior Vice President and Chief Economist Jordan Levine.