Should You Buy San Diego Real Estate in 2026?

Should You Invest in San Diego Real Estate in 2026?
The housing market in San Diego will likely stop declining and stabilize. Stabilizing is good news, but it may also help you financially.

Since you have been looking at the cost of buying homes in San Diego, you probably have questions about investing in the San Diego housing market in 2026. In fact, you are not the only person asking this question. As a result of a very competitive market for several years, and a huge increase in home prices, the San Diego housing market is starting to become more balanced. We are going to review some of the information available about what happened in the San Diego housing market during 2025, and how it is projected to perform in 2026.
Numbers Tell the Story
As of today, the median value for a house in San Diego is approximately $1,050,000, and the median value for a condo is approximately $660,000. Those are high prices; however, the prices for both houses and condos increased only 3% in 2025 compared to 2024. Prices were increasing at a rapid pace prior to 2025, and it appears that the San Diego housing market has started to stabilize.
In addition to the stabilization of prices, other important metrics are also changing. Time on the market, which was extremely low in 2020 and 2021 (homes were selling in as little as 10-14 days), has improved dramatically. Today, houses are taking between 43-49 days to be placed under contract. The extra time allows buyers to think about their decision and avoid being forced into a bid war. Prior to the COVID-19 Pandemic, the typical time on the market for houses in San Diego was in excess of 60-90 days.
Redfin reports that houses are receiving an average of two bids and are selling in 41 days, as of the fourth quarter of 2025. Although the San Diego housing market was extremely hot in 2020 and 2021, it is no longer a frenzy.
Lower Interest Rates Help
Although interest rates were rising at one point, reaching greater than 7% for 30-year fixed mortgage rates, they have dropped to approximately 6.2% for 30-year fixed mortgage rates. Even better is that the Federal Reserve stopped its Quantitative Tightening Program in December 2025. Since then, experts believe interest rates could begin to decline.
Experts believe that interest rates will drop to approximately 6.1% by mid-2026, and some expect them to drop even further to 6% or less by the end of 2026. To give you a sense of how much money you will save, if you drop from a 6.5% interest rate to a 6.1% interest rate on an $800,000 loan, you will save thousands of dollars each month. Over a period of 30 years, those savings add up to tens of thousands of dollars.
Still Not Enough Inventory
One factor that has not changed is the geographic constraints of San Diego. As a result of San Diego's geography, there is a limited amount of land to develop.
Currently, the inventory of homes for sale in San Diego is low enough that it represents only a 2.9-month supply of single family homes and a 2.5-month supply of condominiums. A normal market would have a 6-month supply of homes. Because of the low level of inventory, it is difficult to imagine the housing market experiencing a large decline in prices.
Economic Factors Make the Market More Stable
Another important factor that has helped keep the San Diego housing market stable is the economy. San Diego has a growing biotechnology industry that experienced a 15% growth rate. Additionally, the military contributes approximately $28 billion to the local economy each year. These two economic factors provide a high degree of stability to the San Diego housing market.
Assistance Programs for First-Time Homebuyers
Many people believe that San Diego is an unaffordable place to live, and it is true that home prices in San Diego are among the highest in the country. However, there are numerous down-payment assistance programs that first-time homebuyers can take advantage of. California has over 2,600 different down-payment assistance programs. Here are a few of the most popular:
CalHFA Dream For All: Provides up to $150,000 (or 20% of the purchase price) in shared-appreciation funding for first-time homebuyers.
CalHFA MyHome: Offers a deferred, junior loan that covers 3-5% of the down payment.
San Diego Housing Commission: Offers up to $40,000 in deferred assistance to first-time homebuyers who meet certain requirements.
All of these programs can assist individuals who previously believed that owning a home in San Diego was an unrealistic goal.
Neighborhood Location Strategy Matters
Not every neighborhood in San Diego is developing at the same rate. According to Zillow, homes in neighborhoods with top rated schools (9+ rating) have price premiums ranging from 25-57%, and homes located within .5 miles of elementary schools that are highly rated, experience annual appreciation of 2.3%.
If you cannot afford a home in the coastal areas of San Diego, consider looking inland. Cities such as City Heights, El Cajon and Santee offer affordable entry points, with a 5+% cap rate for investors.
Recent data indicates that the 92103 ZIP Code (the north side of downtown/Hillcrest) had the largest six-month price increase in California, indicating strong demand in various micro-markets.
When Should I Buy?
Should you wait for prices to come down? Most likely not.
According to the National Association of Realtors, national home sales are expected to increase by 6% in 2025 and another 11% in 2026. Median home prices are predicted to increase by 3% in 2025 and 4% in 2026. The majority of the time, waiting for the perfect opportunity to buy usually results in higher home prices while you watch the market from the sidelines.
Presently, the homeownership rate in San Diego is 51.7%, which is slightly less than the 55.3% peak achieved in 2006. There is still a significant number of potential homebuyers who have been unable to afford a home due to rapidly increasing prices, resulting in a substantial amount of pent-up demand.
Why is 2026 Different?
There are a combination of events occurring simultaneously that are creating a unique situation in the San Diego housing market in 2026:

Prices are decreasing as a result of lower interest rates.
Inventory levels are increasing slowly as more homeowners are listing their properties.
Availability of down-payment assistance programs is at its peak.
Market conditions are shifting from the extreme advantage of sellers to a relatively balanced market.

While 2026 does not represent the best time to catch the bottom of the market, it does represent a great opportunity to position yourself before the competition becomes fierce once again.
The Greatest Danger: Delaying too long
Most buyers fail to recognize that should interest rates fall to 6%, and more buyers enter the housing market in Spring 2026, you will encounter renewed competition for the homes you are interested in. The best course of action is to get pre-approved, identify the down-payment assistance programs you are eligible for, and be prepared to act quickly when the right home comes along. Consider purchasing homes that are aligned with your five-to-ten-year vision, rather than attempting to predict short-term market fluctuations.
Summary
Should you invest in San Diego real estate in 2026? If you have a steady income, can afford the monthly payments associated with a home in San Diego, and plan to stay in your home for at least five years, the available data supports the idea that this will be one of the best times to invest in San Diego real estate in a while.
While the housing market in San Diego is not providing a fire-sale type environment, it is providing something potentially even better – time for you to make an educated decision, without the pressure that characterized recent years. For generations that felt that owning a home was becoming increasingly difficult, 2026 may be the beginning of a realistic opportunity to own a home in San Diego.
Complete your research, calculate the costs involved, and make a decision that is consistent with your financial goals. The housing market is not waiting forever.