Greater San Diego Association of Realtors (SDAR) says real estate market is ready for a comeback in 2026

The Greater San Diego Association of Realtors (SDAR), San Diego’s largest trade association for San Diego-area real estate professionals, reports the housing market is set for a comeback in 2026.

As part of her comments for SDAR’s 2026 Housing Market Forecast, Chris Anderson, 2025 and 2026 SDAR president, said, “I believe our local real estate professionals may finally see a long-awaited comeback surge in activity in the New Year, with home sales poised for a possible double-digit jump.”

Indeed, the National Association of Realtors (NAR) is forecasting a 14% nationwide increase for existing, single-family home sales in 2026, following 2025’s stagnating levels. New-home sales are also projected to rise 5% in 2026.

The California Association of Realtors (CAR) is less bullish, but still optimistic with a projected increase in statewide home sales of 2%. Based on lower family formation, reduced undocumented immigration and a declining birth rate, demand for new housing will be muted. Overall, CAR is expecting a subdued market with a slight improvement in affordability.

“Speaking of affordability,” said Anderson, “it will be a key word heard countless times in 2026.”

She said some economists are expecting the affordability crisis will unite policymakers across political party lines. The YIMBY (Yes In My Backyard) is expected to pick up more supporters, opening the door for initiatives that increase housing supply.

“Yes, it’s true that affordability will still remain a challenge for many aspiring homeowners, especially first-time buyers who don’t have equity from an existing home to put toward a new home purchase,” Anderson said.

Steady job growth and lower interest rates could fuel a home sales surge, said Anderson. In 2026, Redfin projects a year-long period of gradual increases in home sales and a normalization of prices that will improve affordability. Incomes will rise faster than home prices for the first time since the Great Recession era, according to Redfin.

For San Diego County’s real estate consumers, both buyers or sellers, Anderson said, “I’m expecting 2026 will be the year when it will be a good time to make your move. Affordability will improve just enough to lure some on-the-fence buyers to return to the marketplace. Prospective homebuyers who are financially ready to move forward with a purchase will be able to do so with relative confidence on several fronts.”

For example, Anderson said that home prices will neither crash nor soar in 2026. Most economists expect home prices to climb in 2026, between 2% and 4%, supported by job growth and persistent supply shortages. Also, housing appreciation should eck-out a gain of about 2%.

CAR expects the California median home price to rise 3.6%, following a 1% increase in 2025, compared to 2024. Zillow is expecting a fairly dull year with a 1% gain in the median price in the six Southern California counties.

For would-be buyers who sat out during the past couple of years, Anderson said, “I’m expecting there will be more opportunities as inventory will increase moderately and lending conditions will become more favorable. Buyers who are financially ready and know their budget numbers will find success in the 2026 housing market, especially because a record-high amount of cash will not be needed as a down payment.”

According to Anderson, seller confidence will also improve in 2026, as home prices stabilize and demand begins to rise again after an essentially flat housing market in 2025. Sellers will be in a position to walk away with good money if they choose to sell.

She also said the mortgage rate lock-in effect caused by market rates that are well above the rates for existing mortgages has left many homeowners with a strong reason to stay put.

“However, sellers who definitely want to sell should pay attention to the competition when setting a price, and they may need to be prepared to adjust expectations based on market feedback,” she said. Some turnover will be likely spurred by life necessities, such as job or family changes.

Anderson said, “Home shoppers who can afford to pay cash or finance at current mortgage rates will be in a more favorable position in 2026 than they were in 2025.”

Indeed, the groundwork for a rebound in 2026 has already been forming, according to Anderson. Mortgage applications have been trending higher, job gains have remained steady, homebuilders continue to add supply and home listings are up. Many sellers have resorted to lowering their initial asking price as homes take longer to sell.

“Housing supply in 2026 will continue to expand with active listings expected to increase by 10% as market conditions and the lending environment improves,” said Anderson. “Also, mortgage interest rates will continue to inch down in 2026.”

Anderson notes that CAR expects the average, 30-year fixed mortgage interest rate will moderate from 6.6% in 2025 to 6.0% in 2026, which is lower than the long-run average of nearly 8% over the past 50 years. NAR predicts the average rate on a 30-year mortgage will drop to around 6% in 2026.

Redfin said the average fixed rate will average 6.3% for the year. Realtor.com also expects rates to hover around 6.3% for the year. Zillow expects rates to stay at or slightly above 6% for much of 2026, citing housing-related inflation as a key factor.

Other economists are projecting a rate of 5.6% in 2026, which would greatly increase housing affordability.

Mortgage rates began easing in July 2025 in anticipation of a series of Federal Reserve rate cuts, which began in September and continued in December.

According to Anderson, decreasing mortgage rates in 2026 may be disappointing to some buyers who were hoping for even lower rates.

Still, Anderson said, rates are expected to remain low enough to offset price gains, causing monthly payments to drop for the first time since 2020, even as home prices slightly rise. Coupled with rising incomes, affordability will improve, said Realtor.com. The share of monthly pay that buyers have to fork over to buy a typically priced home is projected to fall below 30% in 2026.

Anderson said a major concern in 2026 is a proposal from the County Board of Supervisors to impose a “transfer tax,” meaning a tax on the transfer of documents when a property is sold. The tax would effectively be a sales tax on real estate.

One proposal calls for increasing the current tax from 55 cents per $500 of sale price to a whopping $30.55 per $500 of sale price. This would mean the transfer tax on a $750,000 home, currently at roughly $825, would increase to $45,825.

“If approved, this tax would significantly alter the ability for buyers to buy and sellers to sell,” she said. “It would worsen the affordability crisis, raise rents, discourage home sales, drive away investment and make the dream of home ownership even less attainable for San Diegans.”