A More Balanced Market Ahead
As 2026 begins, the San Diego housing market is showing signs of greater balance after years of extreme volatility. While home prices surged in the early 2020s, the pace of appreciation has slowed. Experts forecast modest price increases in the coming year, driven by continued demand and limited housing supply. Unlike the rapid spikes of past years, the market is settling into a more stable rhythm.
San Diego continues to be one of the most desirable places to live in California. Its strong job market, coastal lifestyle, and mild climate make it highly attractive. However, limited buildable land and slow housing construction contribute to persistent inventory shortages. This imbalance between supply and demand is expected to support moderate price growth in 2026, especially in popular neighborhoods.
Mortgage Rates: Stabilizing After Recent Highs
In recent years, mortgage rates climbed to their highest levels in over two decades. By the end of 2025, however, rates began to ease. In early 2026, 30-year fixed mortgage rates are averaging between 6.15% and 6.3%, offering some relief for buyers who faced steeper borrowing costs just a year ago.
Looking ahead, industry analysts predict that rates will remain relatively stable or gradually decline throughout 2026. Some forecasts even suggest rates could fall below 6% by year-end if inflation continues to moderate. For homebuyers, this creates a window of opportunity to lock in more favorable mortgage terms.
Lower rates directly improve affordability. A one percent drop in mortgage rates can save borrowers hundreds of dollars each month. For those planning to buy in San Diego, monitoring interest rate trends and working with a knowledgeable mortgage broker can make a significant financial difference.
Inventory Levels and Market Competition
One of the defining features of the San Diego housing market is limited inventory. Although there has been a slight uptick in new listings compared to previous years, the overall supply remains well below demand. This keeps competition high, especially for move-in ready homes in desirable neighborhoods.
Homes in coastal areas, top school districts, and walkable communities continue to attract strong interest. Many properties receive multiple offers, often above asking price. However, buyers are becoming more selective, and overpriced listings are sitting on the market longer.
In 2026, we expect this trend to continue. While buyers may have slightly more options than during the peak of the pandemic-era frenzy, the market still favors sellers. Buyers who are prepared, pre-approved, and decisive will have the best chance of success.
Home Prices in 2026: Modest Growth Expected
San Diego home values remain among the highest in the country. Median prices in many neighborhoods still exceed $900,000, with some coastal and luxury markets well over $1 million. Despite this, price appreciation is expected to remain moderate in 2026.
Forecasters anticipate price growth between 2% and 5%, depending on the neighborhood and property type. More affordable areas inland may see stronger appreciation, while pricier coastal communities may experience slower gains. Nonetheless, San Diego’s long-term housing shortage continues to support upward pressure on prices.
Buyers should be prepared for high price tags but can take comfort in the fact that runaway bidding wars are less common than in past years. A more measured market allows for better negotiation and the opportunity to conduct thorough due diligence before committing to a purchase.
Affordability Challenges Remain
Despite improving mortgage rates, affordability continues to be a challenge for many San Diego buyers. Home prices remain high relative to local incomes, and competition is fierce. This makes it essential for buyers to plan carefully before applying for a mortgage.
A key factor is the debt-to-income (DTI) ratio, which lenders use to assess how much house you can afford. Buyers should aim to keep their DTI below 43%, including all housing expenses. A higher credit score and a larger down payment can also lead to better loan terms.
First-time buyers may benefit from government-backed programs like FHA loans, which allow lower down payments and more flexible credit requirements. Additionally, state and local assistance programs can help with closing costs and down payment support. Working with a broker like Lending Bee ensures that you explore every available option to maximize affordability.
Smart Mortgage Strategies for 2026
In a market like San Diego, timing and preparation are key. Applying for a mortgage isn’t just about finding a home—it’s about having a financial strategy. Buyers should begin the mortgage process before they start house hunting.
Getting pre-approved is one of the most effective ways to strengthen your position. A pre-approval letter signals to sellers that you are serious and financially qualified. It also helps you define your budget and avoid falling in love with homes outside your price range.
Another smart move is to keep a close eye on interest rate trends. If rates drop significantly, consider locking in a rate to protect against future increases. At Lending Bee, we help buyers evaluate rate lock options and explore different loan programs to find the best fit.
Buyers should also consider their long-term plans. If you expect to stay in your home for a decade or more, a fixed-rate mortgage provides stability and predictability. If you plan to sell within a few years, an adjustable-rate mortgage (ARM) may offer lower initial payments.
San Diego’s Local Market Factors
Beyond national trends, local conditions shape the San Diego housing market. The region’s long-standing housing shortage, driven by restrictive zoning, high land costs, and environmental regulations, limits new construction. This keeps supply low and supports home values, even during slower economic periods.
Demographics also play a role. While population growth has slowed, demand remains strong among professionals, remote workers, and retirees. San Diego’s lifestyle, amenities, and climate continue to attract new residents.
Additionally, job growth in biotech, defense, and tech sectors adds to housing demand, especially near employment hubs like Sorrento Valley and downtown. Buyers should evaluate not just property values but proximity to work, schools, and transit when choosing a location.
Why Work With Lending Bee in 2026
Navigating the San Diego market requires expert guidance. Lending Bee offers personalized mortgage solutions tailored to each client’s needs. Whether you’re a first-time buyer or a seasoned investor, we help you understand your options, improve your financial profile, and secure competitive rates.
Lending Bee provides access to a wide range of loan products, including conventional, FHA, VA, and jumbo loans. We also help clients explore down payment assistance and state programs designed to make homeownership more accessible. Our team ensures a smooth, transparent process from application to closing.
Unlike large banks or impersonal online lenders, Lending Bee offers a hands-on approach. We know the San Diego market inside and out. Our advisors take the time to understand your goals, answer your questions, and provide ongoing support throughout your homebuying journey.