2026 San Diego Real Estate Market Forecast: Trends & Insights

The 2026 San Diego Real Estate Market is poised for continued evolution. With shifting home prices, gradually easing mortgage rates, and tightening inventory, understanding these trends is crucial for buyers, sellers, and investors. Dive into our comprehensive forecast to navigate the evolving landscape of San Diego’s housing market.

Disclaimer

Palm Tree Properties is not a Certified Public Accountant (CPA) or financial advisor. The information provided in this blog is for informational purposes only and should not be considered financial, legal, or investment advice. Before making any real estate or financial decisions, we strongly recommend consulting with a trusted professional to assess your specific situation and ensure you are making informed choices.

2025 San Diego Real Estate Market Forecast

Home Price Trends

San Diego’s housing market continues to demonstrate resilience heading into the latter half of 2026. According to the San Diego Association of Realtors (SDAR), the total county median sale price reached $925,000 in May 2026, reflecting a modest 1.3% increase year-over-year. Breaking that down further, detached single-family homes carried a median of $1,099,500 (flat year-over-year), while condos came in at $675,000, down 1.5% year-over-year.

Looking ahead through the remainder of 2026, several factors continue to shape price expectations:

• Economic Growth: San Diego’s economy remains a durable engine, anchored by technology, biotechnology, defense, and tourism. Strong employment in these sectors continues to underpin housing demand and support price stability.

• Population Influx: San Diego continues to attract new residents drawn by its climate, job market, and quality of life, sustaining demand even as affordability remains stretched.

• Mortgage Rate Trajectory: With Fannie Mae projecting mortgage rates to reach approximately 5.9% by year-end 2026, improved affordability conditions could provide a modest lift to buyer activity and support further price appreciation in the months ahead.

Zillow’s one-year forecast (October 2025 through October 2026) projects a 1.2% increase in San Diego median home values - a signal of continued, if measured, appreciation rather than the sharp swings seen in prior years. Overall, the 2026 outlook points toward gradual stabilization with mild upward price pressure.

What About Interest Rates’ Impact on Real Estate?

Interest rates remain one of the most consequential factors shaping San Diego’s housing market in 2026. Fannie Mae projects the 30-year fixed mortgage rate will land near 5.9% by the end of 2026 - a meaningful improvement from the elevated rates buyers faced in 2023 and 2024.

Even incremental rate decreases carry outsized weight in a high-cost market like San Diego. A drop from 6.5% to 5.9%, for example, can translate into hundreds of dollars in monthly savings on a $900,000+ loan, meaningfully expanding the pool of qualified buyers. As rates ease further, expect renewed activity from buyers who have been sitting on the sidelines waiting for more favorable conditions.

Prospective buyers in 2026 should monitor Federal Reserve guidance and lender rate sheets closely, as even small shifts in the rate environment can significantly impact both affordability and competitive dynamics in San Diego neighborhoods.

Housing Inventory and Demand

The supply-demand balance in San Diego has shifted notably compared to the inventory surge seen in mid-2024. As of May 2026, total active inventory stood at 5,798 units - down 12.4% year-over-year - with new listings running 15.9% below the prior May’s pace. This tightening supply is putting upward pressure back on the market after the brief window of relative buyer leverage in late 2024.

The results are visible in the pace of sales. Single-family homes are carrying approximately 2.4 months of supply, while condos sit at around 4.0 months - both well below the 6-month threshold traditionally associated with a balanced market. Homes are averaging just 25 days on market with roughly 3 offers per listing, indicating that well-priced properties are still generating meaningful competition.

Sales volume has also strengthened considerably. SDAR reported a 22.2% jump in sales from January to February 2026, and year-over-year sales are up 4.6% - outperforming both statewide California sales (−0.3%) and the broader Southern California region (−0.6%). San Diego is clearly bucking regional trends and holding up as one of the stronger performing markets in the state.

For buyers, this means the brief window of elevated inventory and softer competition has largely closed. Acting strategically and being well-prepared financially remains essential heading into the second half of 2026.

Disclaimer: The information provided in this forecast is for general informational purposes only and does not constitute financial, legal, or real estate advice. Market conditions are subject to change. Always consult a licensed real estate professional and conduct your own due diligence before making any real estate decisions. Data sourced from SDAR, Zillow, and Fannie Mae as of mid-2026.

San Diego Real Estate Trends for 2025

• New Developments: Ongoing and planned residential projects continue to work toward expanding housing inventory, though new listings as of mid-2026 are running approximately 15.9% below year-prior levels, according to the San Diego Association of Realtors (SDAR), keeping supply constrained despite development efforts.

• Buyer Demand: Demand remains resilient, with San Diego sales volume rising 4.6% year-over-year as of early 2026 - outperforming both statewide sales (−0.3%) and the broader Southern California market (−0.6%), per SDAR. Millennials, remote workers, and investors continue to target San Diego for its quality of life and long-term appreciation potential.

The 2026 San Diego market is best described as a seller-leaning but stabilizing environment. The county-wide median sale price stood at $925,000 as of May 2026, up 1.3% year-over-year (SDAR). Detached single-family homes commanded a median of $1,099,500, while condos came in at $675,000, down slightly (−1.5% YoY) - offering a potential entry point for budget-conscious buyers or investors.

Total active inventory sits at approximately 5,798 units, down 12.4% year-over-year, which continues to put upward pressure on prices despite modest affordability improvements. Single-family homes carry roughly 2.4 months of supply, and condos approximately 4.0 months - both well below the 6-month threshold that signals a balanced market. Homes are averaging just 25 days on market with around 3 offers per listing, indicating continued competition among buyers.

On the financing side, Fannie Mae projects mortgage rates to ease to approximately 5.9% by year-end 2026, which could unlock additional buyer purchasing power in the second half of the year. Zillow’s one-year forecast (October 2025-October 2026) anticipates a modest 1.2% increase in San Diego home values, suggesting steady but tempered appreciation ahead.

For buyers and investors watching the market, 2026 presents a window of relative stability compared to the frenzied conditions of prior years - with slower price growth, improving (if still tight) inventory, and the prospect of gradually declining rates making planning more predictable.

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Disclaimer: Market data referenced above is sourced from SDAR (May 2026), Fannie Mae, and Zillow forecasts current as of late 2025-2026. Real estate conditions change frequently; consult a licensed real estate professional before making any investment or purchasing decisions.

Investment Opportunities in the Real Estate Market for 2025

San Diego continues to be a promising market for real estate investors. Factors contributing to this include:

• Economic Diversification: The city’s diverse economy, with strong sectors in technology, healthcare, and tourism, supports a stable rental market.

• Population Growth: An increasing population drives demand for both rental and owned properties, providing opportunities for investment returns.

• Short-Term Rentals: San Diego’s appeal as a tourist destination makes short-term rental properties a potentially lucrative investment, though investors should stay informed about local regulations governing such rentals.

• Strong Sales Momentum: San Diego sales volume rose 4.6% year-over-year as of early 2026, outpacing both statewide (−0.3%) and broader Southern California (−0.6%) sales trends - a signal of resilient local demand even as other markets cool. (Source: SDAR)

• Tight Inventory Favoring Sellers and Landlords: With total active inventory down 12.4% year-over-year to approximately 5,798 units, and new listings running nearly 16% below prior-year levels, supply constraints continue to support property values and rental pricing power. Single-family homes are averaging just 25 days on market with roughly 3 offers per listing, reflecting competitive conditions. (Source: SDAR, May 2026)

• Modest but Steady Appreciation: Zillow’s one-year forecast projects a 1.2% increase in San Diego median home values through October 2026, suggesting a more stable, normalized appreciation environment - favorable for investors seeking lower-volatility, long-term holds rather than speculative flips.

• Improving Rate Environment: Fannie Mae projects mortgage rates to reach approximately 5.9% by year-end 2026, down from recent highs. If rates continue to ease, buyer demand - and therefore rental competition - may shift, giving investors additional strategic flexibility on timing acquisitions or refinancing existing holdings.

Investors should conduct thorough market research and consider long-term trends to capitalize on opportunities in 2026. With the county’s overall median sale price at $925,000 (as of May 2026, per SDAR), entry costs remain significant, making careful due diligence on cash flow projections, local rental ordinances, and financing terms essential before committing capital.

Potential Challenges in Real Estate for 2025

Despite the positive outlook, several challenges could impact the San Diego real estate market:

• Economic Uncertainty: Factors such as stock market volatility can influence buyer confidence and spending power. Cities with significant luxury home listings, including San Diego, may be particularly affected by stock market downturns.
• Affordability Concerns: High home prices continue to be a barrier for many potential buyers. With the county-wide median sale price sitting at $925,000 as of May 2026 (per SDAR) and detached single-family homes at a median of $1,099,500, affordability remains one of the most pressing issues facing San Diego buyers - particularly first-time purchasers and middle-income households. Creative financing solutions and workforce housing initiatives will be increasingly necessary.

• Regulatory Changes: Potential changes in housing policies or regulations could impact development and investment strategies.

• Natural Disasters & Environmental Risks: Climate-related events are an increasing concern for real estate investors and homeowners alike. San Diego’s own vulnerability to wildfires, drought, and coastal flooding continues to weigh on buyer decisions in certain neighborhoods. Insurance costs across Southern California have risen sharply in recent years, with some carriers reducing coverage availability in high-risk fire zones entirely. These factors can meaningfully affect home values, buyer interest, and long-term investment viability in specific regions of San Diego County.

• Tight Inventory Pressures: While reduced inventory benefits sellers in the short term, it poses a structural challenge for the broader market. As of May 2026, total active inventory stood at just 5,798 units - down 12.4% year-over-year - with new listings running 15.9% below the prior year’s levels (SDAR). Single-family homes carried only about 2.4 months of supply, keeping competition elevated and limiting options for buyers.

Staying informed about these challenges will be essential for all market participants.

The San Diego real estate market in 2026 is poised for a period of stabilization and modest growth. With the county median sale price at $925,000 (May 2026, SDAR), mortgage rates projected near 5.9% by year-end (Fannie Mae), and sales volume outpacing both statewide and Southern California trends, opportunities remain for buyers, sellers, and investors. Homes are moving quickly - averaging just 25 days on market with roughly 3 offers per listing - signaling continued demand despite affordability headwinds. However, it’s crucial to remain aware of potential challenges and stay informed to navigate the market effectively.