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Five key predictions for the San Diego housing market in 2026
- After over a year of declining home values, the San Diego area is predicted to reach bottom in 2026 and begin a modest recovery with a 1.2% price increase.
- Several factors support long-term price growth in San Diego, including a persistent housing shortage, a strong economy, and a desirable coastal lifestyle.
- Mortgage rates are expected to decline to around 6% in 2026 from 6.6% in 2025. Combined with stabilizing prices, this could create an opportunity for buyers.
- Market conditions vary significantly across neighborhoods and cities. Example: Carlsbad experiencing 5% price growth in the past year while other cities declined.
- Ongoing challenges for 2026 include housing affordability, rising home insurance costs (particularly in fire-prone areas), and economic uncertainties related to trade.
The Big Story: A Turning Point for the Market?
After more than a year of declining home values across the San Diego-Carlsbad metropolitan area, the real estate market appears poised for a modest recovery in 2026.
Multiple forecasts suggest that home prices in the region may be approaching bottom, with predictions pointing toward renewed upward momentum in the year ahead.
Current Real Estate Conditions in San Diego
The San Diego real estate market has softened over the past year with home values dropping in most major cities across the metro area.
According to Zillow’s November 2025 assessment, the average home value in the San Diego-Carlsbad metro area stands at $918,426, representing a 2.6% decline over the previous 12 months.
This downturn marks a significant correction from the elevated price levels that characterized the post-pandemic housing boom.
(Note: The city of Carlsbad itself is the notable exception to this trend. Carlsbad has experienced steady price growth over the past year, defying the broader metro-wide decline.)
Currently, Zillow classifies the San Diego-Carlsbad metro area as a slight seller’s market, with a market heat index of 55 out of 100. This suggests that sellers could have a slight advantage in the 2026 housing market, especially if buyer demand increases next year.
2026 Price Predictions Signal Market Bottom
Despite recent declines, the San Diego real estate market forecast for 2026 indicates a turning point may be near.
Zillow’s one-year forecast (covering the period from October 2025 to October 2026) predicts a modest 1.2% increase in median home values for the metro area.
While this projection indicates only modest growth ahead, it signals a possible turning point in market dynamics following an extended period of price deterioration.
This prediction suggests that San Diego-area home prices may be hitting bottom in 2026, potentially marking the beginning of a new appreciation cycle.
These types of forecasts can also change the psychology among buyers. For many months, potential home buyers in the San Diego area have watched prices decline and chosen to remain on the sidelines.
But the possibility of home value appreciation in 2026 could create a new sense of urgency among some, motivating them to purchase before prices start climbing again.
Factors Supporting Price Growth in San Diego
Despite occasional fluctuations (like the current post-pandemic market adjustment), the San Diego-Carlsbad metro area has a long history of steady home price growth.
Several factors put upward pressure on prices:
- Persistent housing shortage: Limited land availability, restrictive zoning laws, and a lack of new construction have created a structural supply deficit that prevents dramatic price declines and positions the market for recovery when conditions support it.
- Strong economic diversity: The San Diego metro area’s economic strength is anchored by strong employment sectors including technology, healthcare, biotechnology, and military installations. This resilience helps stabilize the real estate market, even during periods of national economic uncertainty.
- Desirable lifestyle: The region’s year-round mild climate, coastal access, and recreational amenities attract buyers who are willing to pay a premium for San Diego properties. These quality-of-life factors create persistent demand that supports home values.
Given this combination of factors, it’s not surprising to see a mostly positive forecast for the San Diego housing market in 2026.
Implications for 2026 Home Buyers
These recent predictions could create a sense of urgency for those who plan to enter the San Diego real estate market in 2026. If prices do rise next year, as suggested, it would make sense to buy sooner rather than later to avoid paying more.
A decline in mortgage rates could also improve affordability for home buyers, creating even more incentive to enter the market in early 2026. Some forecasts predict that mortgage rates will average around 6% in 2026, down from 6.6% in 2025.
Lower mortgage rates, combined with stabilizing home prices, could create a favorable window for buyers who have been priced out or reluctant to enter the market.
Differences in San Diego Area Micro-Markets
While broad forecasts provide useful guidance for the overall San Diego-Carlsbad metropolitan area, market conditions can vary significantly by city and neighborhood.
These micro-markets within the larger metro area feature distinct supply and demand dynamics that produce divergent price trends.
The city of Carlsbad offers a good example.
Over the past year, Carlsbad significantly outperformed the broader San Diego metro area with price growth of nearly 5% over the past year. In other cities in the metro area, prices declined slightly during that same timeframe.
This shows how location-specific factors like school quality, community amenities, and neighborhood characteristics can insulate certain markets from broader regional trends.
Key point: Buyers and sellers should carefully research conditions in their specific target areas rather than relying solely on metro-wide statistics.
Coastal communities, neighborhoods with highly-rated schools, and areas with limited inventory often demonstrate greater price resilience and faster appreciation than the regional average.
Statewide California Housing Forecast for 2026
Let’s now zoom out to the broader California real estate market for some additional context.
The California Association of Realtors (C.A.R.) released its 2026 California Housing Market Forecast in September 2025, projecting modest gains for the state as a whole.
Key statewide predictions include:
- Home sales: Existing single-family home sales will total 274,400 units in 2026, representing a 2% increase from the projected 269,000 sales in 2025.
- Median home price: The statewide median is forecast to rise 3.6% to $905,000 in 2026, following a projected 1.0% increase to $873,900 in 2025 from $865,400 in 2024.
- Mortgage rates: The average 30-year fixed mortgage rate is expected to decline to 6.0% in 2026 from 6.6% in 2025.
- Housing affordability: Unaffordability will continue to be a problem for many San Diego home buyers in 2026, with an expected 18% able to afford a purchase.
While the San Diego market’s predicted 1.2% appreciation lags behind the statewide forecast, both projections suggest a return to positive price growth after a long downturn.
Housing Supply Outlook
Housing inventory conditions will play a crucial role in determining actual price movements in 2026.
C.A.R.’s forecast indicates that active real estate listings statewide will increase by nearly 10% as market conditions and mortgage rates continue to improve.
This inventory growth could help moderate price increases and provide buyers with more selection compared to the severe shortage conditions that characterized earlier years.
Persistent Market Challenges
Despite the generally optimistic outlook, several challenges will continue to confront the San Diego real estate market in 2026.
C.A.R. Chief Economist Jordan Levine identified ongoing trade tensions, the home insurance crisis, and potential stock market volatility as headwinds that could constrain housing market performance.
Insurance costs have emerged as a significant concern for California homeowners, with premium increases affecting housing affordability beyond just mortgage payments.
This issue has particular relevance for fire-prone areas within San Diego County, where some homeowners have a hard time finding coverage at reasonable rates.
Economic uncertainty related to trade policy and potential impacts on California’s export-oriented industries could affect job growth and consumer confidence, potentially dampening housing demand.
While the San Diego economy’s military and defense components provide some insulation from trade-related disruptions, the broader regional economy remains exposed to national and global economic conditions.
Conclusion: Stabilizing Home Prices in San Diego
The San Diego real estate market forecast for 2026 indicates a market transitioning from correction to stabilization and modest recovery.
After more than a year of declining home values, predictions suggest that prices may reach bottom in 2026 before resuming upward momentum.
The projected 1.2% price increase—while modest compared to the dramatic gains witnessed during the pandemic era—signals an important shift in market trajectory.
- For buyers who have waited through the downturn, 2026 may bring an opportunity to enter the market before price appreciation accelerates.
- For sellers who have delayed listing their properties, improved market conditions and declining mortgage rates should support increased buyer activity and more favorable transaction outcomes.
As with any forecast, actual market performance will depend on evolving economic conditions, interest rate movements, and local supply-demand dynamics.
Buyers and sellers should monitor local conditions closely and consider working with an experienced agent who understands both macro trends and micro-market variations.
Disclaimer: This report contains predictions for the San Diego-area real estate market extending into 2026. Such views are the equivalent of an educated guess and therefore not certain. The publisher makes no claims about future housing or economic conditions.