In this final installment of my four-part series, San Diego Real Estate: State of the Market, I share my 2026 San Diego real estate market forecast, including mortgage rates, buyer and seller behavior, and expected home price trends, along with practical guidance on how to position yourself in the year ahead.
If you’d like to explore specific segments of the market, you can jump ahead to the full series below:
San Diego Real Estate: State of the Market Series
- Part 1: 2025 Market Report Card & Key Drivers
- Part 2: Why 2–4 Unit Properties Outperformed
- Part 3: Will San Diego See a Market Crash in 2026?
- Part 4: 2026 Market Forecast & Where to Win
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Mortgage rates will continue to be the primary driver of market activity. Rates have hovered around 6-6.25% since September, and actually touched 5.99% this past week.
They key variable for 2026 will be whether rates can remain in this range throughout the spring home-buying season (March-June), which we have not seen since 2022. If that happens, buyer demand will increase significantly.
To illustrate how sensitive affordability is to interest rates, a buyer targeting a $5,000/month principal and interest payment with 20% down can afford the following home prices at these interest rates:
- $940,000 at 7%
- $1,015,000 at 6.25%
- $1,101,250 at 5.5%
The increase in purchasing power as rates go down benefits both buyers and sellers.
Where Mortgage Rates Are Headed
My expectation is that rates will remain volatile over the next few months, likely fluctuating between 6% and 6.5%. By March, markets should have greater clarity around inflation and the potential impact of proposed tariffs.
The Federal Reserve’s long-term inflation target is 2%, and recent readings have been coming in at 2.7% or slightly higher. While inflation is still above target, these number have been better than expected, signaling that the runaway inflation of recent years is moderating.
At the same time, continued softening in the job market should apply downward pressure on mortgage rates, potentially offsetting any inflation-related volatility.
I’m optimistic that conditions will support mortgage rates remaining in the 6% range through June. We haven’t had a spring selling season with rates below 6.5% in three years, and even holding in the low-6% range would be enough to drive a meaningful increase in market activity. A move into the mid-5% range is possible, but far from guaranteed, and isn’t necessary for the market to regain momentum.
Many would-be sellers have delayed listing over the past two years due to market stagnation. As buyer activity picks up and affordability improves, more sellers are likely to re-enter the market, particularly those needing to make a move for lifestyle or financial reasons.
Overall, supply and demand should be relatively balanced, meaning both buyers and sellers can win in this market. Well-priced, well-located homes will still attract multiple offers, while buyers will benefit from more inventory, longer market times, and greater negotiating power than we’ve seen in recent years.
Certain proposed policies, such as mortgage portability or restrictions on corporate homeownership, could accelerate buyer and seller activity if implemented, though the likelihood remains uncertain.
More notably, there was a statement on social media this week indicating that the administration may initiate the purchase of $200 billion in mortgage-backed securities (MBS), which contributed to rates touching 5.99%. Sustained MBS purchasing during the pandemic is one reason rates stayed historically low, so if this policy is implemented meaningfully, it could be a true wildcard.
If rates were to fall into the mid-5% range, we would see a steep acceleration in the 2026 market.
Based on current data and market conditions, my predictions for San Diego County property values in 2026 are as follows:
- Detached single family homes: +3-4% in median price growth
- Condos & townhomes (HOAs): Flat to -2% median price change, driven by HOA costs and insurance pressures
- 2-4 unit properties (City of San Diego): +4-6% in median price growth, led by walkable, high-rent neighborhoods
We’re in for a busy spring and this is a great time to be a buyer in a market that is rebounding from a challenging couple of years.
Buyers who are serious about purchasing in 2026 should start preparing now so they can move quickly when the right opportunity arises, and before competition increases.
If you’d like help evaluating your options, building a smart buying strategy, or referrals to trustworthy lenders, you can book a strategy session using the button below.
Sellers should aim to be market-ready by March, and price their homes strategically to invite competition. Those purchasing replacement homes may find increased leverage for favorable terms, such as free rent-backs after closing, which have been rare in recent years.
If you’re considering selling, now is the time to start planning so you have adequate time for repairs, staging, and curb-appeal improvements that can materially impact your final outcome.
You can book a strategy session using the button below if you’d like professional guidance on preparing your home for sale and positioning it to attract the strongest possible offers.
In 2026, buyers should be cautious about waiting for dramatic price drops that the data does not support, or overpaying for properties with structural issues, financially unhealthy HOAs, or elevated fire insurance costs.
For sellers, it’s important to recognize that the market is still emerging from a prolonged slowdown. Pricing strategically and investing in preparing your home for the market, guided by professional advice, will be critical to achieving the best outcome.
The market will reward well-located properties, discerning buyers who perform thorough due diligence, and sellers who position their homes to stand out in the market.
Taken together, the data from 2025 and the outlook for 2026 point to a market that is no longer frozen, but not overheated either. This balance is a welcome reprieve from the rollercoaster highs and lows of the past 5 years.
This article concludes my four-part series, San Diego Real Estate: State of the Market, which examined how values performed in 2025, where opportunities emerged, why a market crash is unlikely, and what lies ahead in 2026.
Explore the Full Series
This article is Part 4 of a four-part series: San Diego Real Estate: State of the Market.
- Part 1 examines how San Diego home values performed overall in 2025 and which zip codes saw the biggest gains and losses.
- Part 2 explores why 2-4 unit properties outperformed and where investors found opportunity.
- Part 3 tackles the question many buyers and sellers are asking: Is a San Diego real estate market crash coming in 2026?
If you’d like a custom report showing how your specific neighborhood performed in 2025, comment with your zip code and whether you want data for detached homes, condos/townhomes, or 2–4 unit properties, and I’ll prepare it for you.
Wishing everyone a prosperous 2026. Live well and invest smart!
*All data in these articles are from quantitative real estate economist Steven Thomas and the San Diego MLS, unless otherwise noted.
