12/02/2025
Q1 2026 San Diego Real Estate Forecast: Low Inventory, Rate Pressure, and What Smart Buyers & Sellers Should Do Now
As we enter Q1, San Diego’s housing market continues to operate in a supply-constrained environment. Inventory remains significantly below historical norms, driven largely by homeowners who are holding tight to low mortgage rates secured over the last several years. This “rate lock-in” continues to restrict new listings, while population inflow and strong job sectors maintain demand. Even with seasonal upticks in January and February, buyers should expect limited options and faster-moving properties—especially in well-priced entry and mid-tier ranges.
Interest rates remain a defining force as we open the quarter. While many hoped for significant drops, rate movement has been modest, leaving mortgage costs elevated compared to pre-2022 levels. This has reshaped affordability but hasn’t meaningfully eased prices due to persistent low inventory. Inflation, although cooling, still impacts construction costs, rental rates, and consumer confidence, creating a cautious but active marketplace. Buyers entering Q1 should prepare for continued rate volatility, and sellers should understand how borrowing costs influence buyer behavior.
Despite these economic challenges, San Diego real estate remains fundamentally resilient. Demand continues to be supported by limited land availability, a high-earning workforce, and ongoing migration from other states. These factors help stabilize property values even when national trends fluctuate. As a result, well-positioned buyers can still secure good opportunities, particularly with motivated sellers who want to capitalize on early-year buyer activity. For sellers, low competition and steady demand can translate into strong results, provided pricing aligns with today’s rate-sensitive environment.
The outlook for Q1 suggests steady activity, tight supply, and a market where both buyers and sellers can win with the right strategy. Those preparing to make a move should focus on smart timing, strong pre-approval, and a realistic understanding of the economic landscape. In a housing market shaped by scarce inventory and rate uncertainty, informed decisions—paired with expert guidance—are the key to succeeding in San Diego real estate as 2026 gets underway.
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