Inflation spiked.
What it means for San Diego.

March CPI: Record gas prices meet sky high expectations

The March consumer price index met its very high expectations with headline inflation surging to 3.3% year over year (+0.9% month over month), driven overwhelmingly by higher energy prices in the fallout from the Iran war. Gasoline alone rose 21.2% seasonally adjusted on the month, the largest increase since the series began in 1967, accounting for nearly three quarters of the overall monthly price increase.

Core inflation, which strips out volatile food and energy prices, actually came in a hair softer than expected at 2.6% (+0.2% MoM). That is the number the Fed watches most closely, and by that measure, the picture is less alarming than the headline suggests.

None of this was a surprise to forecasters, markets, or policymakers. But it underscores the month to month whiplash consumers and investors have been experiencing since the start of the Iran war and the resulting geopolitical and supply chain shocks. This is a significant acceleration from February's 2.4% headline reading. And even though the numbers were expected, that does not make them any easier for consumers to stomach.

The Fed, the PCE, and why this is not just an energy story

Even if the Fed looks through today's energy price inflation report, it cannot ignore the rising core in February's PCE and the still elevated core in March's CPI taken together. Markets are now putting the probability of a pause through the end of the year at 65%, up from 15% just a month ago. Rate hikes are not explicitly on the table, but they represent a credible threat.

Lost in the oil shock narrative is ongoing tariff inflation, which adds yet another layer of upside risk to prices in the months ahead. The good news is that mortgage rates actually ticked down this week to 6.37%, snapping a five week streak of increases, largely in response to ceasefire signals bringing down Treasury yields. A reminder that resolving geopolitical uncertainty is one of the most direct paths to lower borrowing costs.

San Diego County: The foundation

Against that macro backdrop, here is where San Diego County stands heading into spring. The countywide median listing price is $899,900, down 5.17% year over year, a meaningful pullback from peak pricing but one that reflects composition shifts as much as demand weakness. Active listings have grown 4.13% year over year to 9,202, giving buyers more room to breathe than they had a year ago.

The three year picture tells a more balanced story. Active listings are up nearly 48% over three years, which explains why the pace of appreciation has moderated. But prices per square foot are still up 5.28% on that same horizon, meaning the underlying value of San Diego real estate has held. This is a market in recalibration, not retreat.

Carmel Valley (92130): Still the market to watch

Carmel Valley operates in an entirely different tier from the county median. The median listing price sits at $2,099,000, more than twice the county figure. The market hotness score from Realtor.com is 88 out of 100, ranking 92130 at #598 nationally. Homes sell in a median of 27 days, which is 40 days faster than the U.S. average. Listings get 1.64 times more views than the national average.

The inventory story in Carmel Valley is the most important number on that table. Active listings are down 24.24% year over year. Supply is tightening even as the county overall sees inventory grow. That structural constraint is what keeps Carmel Valley insulated from the broader softening visible at the county level. When good homes come to market here, they move.

Homes sold at 1.7% below asking in February, which is not a distressed market; it is a calibrated one. Sellers who price accurately are transacting. Those who come in with 2024 expectations are sitting. The distinction matters more than the headline number.

Spring outlook: Confidence is the variable

The big housing story heading into spring is how wavering consumer confidence and purchasing power will affect demand. Higher gas prices are a real tax on household budgets. When people feel squeezed at the pump, they hesitate on large financial decisions. That hesitation shows up in showing activity, offer volume, and ultimately in how long homes sit.

For Carmel Valley specifically, the buyer pool is driven by employment in the Torrey Pines corridor and UCSD, by school district quality, and by a lifestyle that does not have a direct substitute. Those are durable demand drivers. They do not disappear when gas costs $5.94 a gallon. But they can slow the pace of decision making, which is precisely what the days on market data is telling us right now.

The path to a more active spring market runs through the same place it always does: geopolitical resolution, lower Treasury yields, and mortgage rates that give buyers room to breathe. At 6.37%, we are not there yet. But the direction of travel this week is encouraging.