San Diego’s housing market has always been one of the priciest in California. With a median home price hovering near $1 million, high mortgage rates, and a lot of speculation about a potential market slowdown, many buyers are asking the same questions:
Are San Diego home prices dropping?
Should I buy a house now or wait until 2026?
Will prices fall further in 2025?
What’s happening with mortgage rates?
Why are homes so expensive here?
How much do I need to earn to afford one?
Is renting smarter than buying in San Diego?
This guide will break down the latest numbers, expert forecasts, and practical advice for both buyers and renters.
Are San Diego Home Prices Dropping?
The short answer: yes, but modestly and unevenly.
According to Zillow, the average home value in San Diego is around $998,000, down roughly 3–4% over the past year. That’s noticeable but far from a market crash.
Entry- and mid-tier homes are still appreciating by 5–7% year-over-year.
High-end properties are seeing small declines, closer to 3%.
Inventory remains tight, keeping competition alive despite higher borrowing costs.
In short, the market is softening at the top end but holding steady in the mid-tier segment.
Should You Buy a House Now or Wait Until 2026?
When to buy this decision depends on your financial situation, risk tolerance, and long-term plans.
Reasons to Buy Now:
By 2026, the mortgage rates may fall slightly. Waiting might not save you much.
Lower- and mid-priced homes remain competitive. Deals don’t last long.
Buying now protects you from rising rents, which continue to climb.
Reasons to Wait:
Forecasts predict mortgage rates could ease slightly in late 2025 or 2026 (Norada Real Estate).
Inventory may increase as sellers adjust to higher borrowing costs.
Luxury homes could soften further in price.
Takeaway: Strong finances + long-term plans? Buying now in the lower/mid-tier market could be wise. Stretching your budget or targeting luxury properties? Waiting may pay off.
Will Home Prices Drop in 2025?
Expect modest corrections rather than steep declines.
High-end homes may dip slightly due to weaker demand.
Affordable and mid-tier homes should hold their value due to strong demand and low inventory.
Many homeowners are “locked in” with low mortgage rates, which reduces the number of homes on the market (CalMatters).
If you’re hoping for a dramatic drop, the wait may be longer than expected.
Mortgage Rate Predictions
Mortgage rates in San Diego follow national trends, but here’s the local picture:
2025 forecast: ~6.4% for a 30-year fixed mortgage
2026 forecast: Slight drop toward ~6.1% (Norada Real Estate)
While slightly better, rates remain higher than the historic lows of 2020–2021. Buyers should not expect ultra-low rates to return soon.
Why Are Homes So Expensive in San Diego?
San Diego’s high prices result from a mix of supply, demand, and economic factors:
Limited supply: Strict zoning, high land costs, and complex permitting slow new construction (Wikipedia).
High demand: Great climate, beaches, and strong job sectors (tech, biotech, military) attract buyers.
Rising construction costs: Labor, materials, and regulations increase development expenses.
Low turnover: Homeowners with low-rate mortgages are reluctant to sell, limiting inventory.
High-income buyers: Prices reflect the incomes of households who can afford them.
How Much Money Do You Need to Buy a House in San Diego?
Here’s a simple breakdown for a median-priced home (~$998,000):
20% down payment: ~$200,000
Loan amount: ~$800,000
30-year mortgage at 6.4%: ~$5,200/month principal & interest
Add taxes, insurance, maintenance: ~$6,000–$6,500/month
To stay within recommended limits (30–35% of income), you’d need a household income of $200,000–$250,000+.
For many residents, this is well above the median household income (~$100K), which explains why affordability is such a challenge.
Renting vs Buying in San Diego
Here’s a quick comparison:
Factor | Renting | Buying |
Upfront Costs | Low (deposit + first month) | High (down payment + closing) |
Monthly Payments | Often cheaper short-term | Higher but builds equity |
Stability | Flexible but rent can increase | Long-term control |
Wealth Building | None | Potential long-term appreciation |
Maintenance | Landlord responsibility | Your responsibility |
When to rent:
You plan to move soon
You can’t afford a down payment
Flexibility is a priority
When to buy:
Planning to stay 5–10+ years
You have stable finances and a down payment
You want to build equity instead of paying rent
Frequently Asked Questions (FAQ)
1. Are San Diego home prices going down in 2025?
Yes, but mostly for luxury homes. Entry- and mid-tier homes continue to hold value.
2. Will prices drop in 2026?
Predicted to stabilize or see modest declines, with no major crash expected.
3. What mortgage rates are expected in 2026?
Forecasts suggest low-6% range for 30-year fixed mortgages.
4. Why is San Diego so expensive?
Limited supply, high demand, construction costs, and low homeowner turnover all drive up prices.
5. How much income is required to buy a house?
For an average home, $200k - $250K annual domestic income is recommended.
6. Is it better to rent or buy now?
It depends on your plans and budget. It is better to stay for long-term financial stability; It is better to rent for short-term or lack of budget.
7. Should I wait till 2026 to buy?
If you are focusing on luxury homes or increasing your budget, then it can be helpful to wait. Otherwise, it may be better to shop in the lower/medium-level markets right now.
Conclusion
San Diego's housing market remains competitive and expensive, but it is not declining.
Low and medium -priced houses are flexible, while luxury houses have seen mild softening.
In 2026, the mortgage rates may decrease slightly, but the expression will remain a challenge.
Buyers with strong financial conditions can consider shopping right now to create equity and avoid increasing fare.
Sellers can avail limited supply and strong buyers demand.
San Diego remains a market where knowledge, time and preparation decide everything. Understanding the existing trends, rates and your financial situation will help you take the right steps - whether it is now to shop or wait for a better situation in 2026.
