San Diego Housing Market Update: Prices Drop in May 2026

Key Takeaways

San Diego's housing market is in a normalization phase after years of rapid growth. Modest price softening, rising inventory, and higher rates are creating more opportunities for buyers while requiring sellers to adapt. No crash is expected.

• Median home prices fell 1.5% year-over-year to $950,000 (Redfin, March 2026 data), with price per square foot at $687 (-1.2% YoY).
• Mortgage rates rose to around 6.5% in early May 2026, pressuring affordability.
• Only 17% of San Diego households can afford a median-priced home, one of the lowest rates nationally.
• Buyers now have leverage: more homes selling below asking price, with inventory expanding.
• Outlook: Modest 2-4% appreciation expected through late 2026, supported by strong local economy and limited supply.

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May 2026 Update: San Diego Housing Market Trends

The market shows clear signs of rebalancing. Homes are still selling relatively quickly (around 25 days on market), but competition has cooled and negotiation room has increased.

Recent Data Highlights

• January 2026 recorded the lowest monthly sales in at least 35 years (1,615 countywide), per Attom Data Solutions.
• Detached homes held up better (median ~$1.07M, +2% YoY), while attached homes (condos/townhomes) saw sharper declines (median ~$632K, -4.4% YoY).
• Countywide median in February was around $872K–$918K depending on the source, showing variation between city and broader county figures.

Why Are San Diego Home Prices Softening?

Several factors converged in 2025–2026:

• Mortgage rates climbed to ~6.5% after dipping earlier in the year.
• Severe affordability challenges persist (median households would need to spend ~87% of income on housing).
• Economic uncertainty, construction cost pressures, and slower buyer demand amid higher rates.

Chronic undersupply and San Diego's strong biotech/defense economy continue to provide long-term support.

What This Means for Market Trends

Inventory has expanded to roughly 3–4+ months of supply (up from tighter levels earlier), though it remains below the 6-month balanced threshold in many segments. Homes sell faster than the California average but with less frenzy.

About 55% of sales close under asking, giving buyers real negotiation power. Analysts forecast modest appreciation (2–4%) for 2026, potentially pushing the median toward ~$1.05M by year-end. This points to stabilization rather than decline.

Implications for Buyers, Sellers, and Investors

• Buyers: Greater selection and leverage, especially in condos and suburban areas. First-time buyers can explore down payment assistance programs (e.g., San Diego Housing Commission).
• Sellers: Price realistically and prepare for longer negotiations. Well-conditioned, well-located homes still perform well.
• Investors: Strong long-term fundamentals due to limited land and diverse economy.

Conclusion

San Diego's housing market is adjusting toward balance in 2026 after an extended boom. Modest price softening and increased inventory create opportunities without signaling a collapse. Buyers gain leverage, sellers must adapt, and the market's underlying strengths point to stability ahead.

FAQs

Q1. Is now a good time to buy in San Diego? Yes for prepared buyers. Negotiation power is higher than in recent years, with more inventory and homes selling below asking. Affordability remains tough (only 17% of households qualify), but patient buyers — especially in condos or suburbs — have better odds.

Q2. Are San Diego home prices dropping? Yes, modestly. The median fell 1.5% YoY to $950K as of March 2026 data. Some consecutive monthly softening occurred in late 2025, but the market is stabilizing rather than crashing.

Q3. What's causing the current trends? Primarily higher mortgage rates (~6.5%), affordability barriers, and reduced buyer urgency. Secondary factors include construction costs and economic caution. Supply constraints prevent a deeper downturn.

Q4. How is the condo market performing vs. single-family homes? Condos/townhomes have seen sharper declines in sales volume and prices, making them relatively more affordable and negotiable than detached homes.

Q5. What's the 2026 forecast? Most experts project 2–4% appreciation with the median potentially reaching ~$1.05M by late 2026. Expect continued normalization, with inventory growth supporting balanced conditions.