It actually looks fungal as opposed to the sod webworm I occasionally get. However, you've a much different climate than I have, so the species might not be at all the same.

Regardless, it doesn't seem to be doing any damage at all. Until it does, fungus or webworm, I tend to ignore.

You do have some lesions. Check Mycelium. Also research the "spot" diseases.

Not sod webworm. That does not mean you do not have sod webworms in your lawn though.

It looks like dollar spot, but the lesions do not match dollar spot's usual shape. Which unfortunately seems to be true with all fungi. Pictures can distort color. If it has a reddish tint to it, its Red Thread. Greyish then grey snowmold. With the lesions I can see from the picture, I would put my money on Brown Patch, which produces white mycelia also.

Brown patch has the potential to kill off large sections of your lawn. So avoid watering late in the day and try and bag grass clippings for a while. A fungicide is an option also.

You really need to also post type of grass, what part of state, month the picture was taken, etc

Pic was taken the day of the post. I'm in sacramento and the grass is tall fescue. I haven't been watering lately because it's actually kind of damp back there due to the shade the trees provide this time of year. As the days grow longer and the sun gets higher up in the sky the grass has a LOT more sun and grows quite thick. It just hasn't taken off this year yet.

I mowed low in late fall and over seeded and the grass hasn't filled in

Should I spray something for fungus? Or should I wait and see if it goes away once the weather warms up? I also haven't fertilized yet his year and I'm not sure when to start. I use organic fertilizers and I'm trying to be organic in general.

Different fungi prefer different species of grass. Brown patch prefers Tall Fescue. I live on the east coast and usually Brown Patch only starts noticeably killing the grass its in during the hot, humid months of July, August, and September. During the other cooler months, the grass tends to outgrow the damage caused by Brown Patch. BP also has a slower growth rate during the cooler months, so that helps in those months.

I do not know what the growth rates for lawns are in Ca. Would reckon that if your grass is growing (its not here in PA), then it will outgrow the fungus. However if a brown spot appears (a bull's eye pattern is the classic sign of patch disease) and shows no sign of abating, then a fungicide would be recommended. I really do not see it getting out of control with your daily highs below 65 degrees though.

Some pesticide free options.

Bagging grass clipping is recommended as that reduces its spreading (ie one way it spreads is by one infected grass blade touching another). They say to wash your mower blades as supposedly the spores can hitch a ride on the mower blades also, but that sounds a bit extreme to me. If your turf is compacted, that really promotes fungi growth and damage. So consistent Core Aeration each fall really helps reduce fungi damage.

http://www.cals.ncsu.edu/plantpath/extension/fact_sheets/Turfgrass_-_Managing_Brown_Patch_in_Tall_Fescue_Landscapes.htm

What John said. You could try 1 tbsp baking soda, 1 tsp any liquid soap in 1 gallon of water. Mix well, then lightly water the areas with the fungus. Save or discard the rest of the mix.

Baking soda is a cheap, very wide spectrum fungicide. However, the spores of the disease will still survive throughout the lawn and can re-surge.

What morph said, except where he said, 'what John said.' I don't think anything John said would be that helpful. I get a fungal disease every year - EVERY year. I don't know where the bag is for my mower, but the diseased spots always remain very localized. Morph's suggestion of using baking soda and soap will work. Baking soda is a non selective fungicide. The bad news there is that your soil requires tens of thousands of species of fungi to remain healthy. So I would be very reluctant to use it. It will work, but it will cost you later on. If you decide to use any fungicide, about 3 weeks later, it would help your soil if you were to scatter a very light dusting of compost. Rate would be less than 1 cubic yard per 1,000 square feet.

I'm not sure why compaction would have any effect on fungal disease. Furthermore, compaction only happens on golf courses and football fields. Unless you have continual traffic on saturated soil, then you don't have a compacted soil. You might have hard soil, but that's completely different. And neither one would cause a disease to spread.

My go-to solution for my annual disease spots is ordinary corn meal. After about 3 weeks the grass comes in healthy and stays that way. App rate is 20 pounds per 1,000 square feet. I generally do the entire lawn, because corn meal will green up the areas where you apply.

For your case, have you had a lot of rain this season to slog up your soil? If so that is likely the cause. Once it dries out the situation may clear up by itself. That would be my starting point - leave it alone but watch it very carefully for spreading. And don't even think about watering for a full month after that last time it rained. Let the soil surface dry out completely.

Compacted soil can result in stressed turf.
Stressed turf is more susceptible to fungal disease.
Therefore, aeration will cure/prevent fungal disease.
It's a false logic that has arisen due to misinterpretation of two known, but not necessarily related facts.