San Diego Real Estate 2027 Predictions

What the January through August 2026 housing data suggests about the year ahead

A local market analysis from Dawn Lewis and The Lewis Team at Real Broker | September 2026

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My base-case prediction is that San Diego County home prices will rise modestly in 2027, while transaction volume improves from the restrained pace of 2026. I expect countywide prices to increase approximately 2% to 5% for the year, with detached homes generally outperforming attached properties. I also expect closed sales to increase about 5% to 12% if mortgage rates ease or become less volatile. This is a forecast, not a promise. Interest rates, inflation, the conflict involving Iran and the Strait of Hormuz, employment, financial markets and post-election policy decisions could move the result outside those ranges.

The first eight months of 2026 did not produce the broad decline some buyers expected. Through August, the countywide median sales price was $925,000, up 2.2% from the same period in 2025. Closed sales were up 1.7% and pending sales were up 2.1%, even though new listings were down 4.2%. August itself was weaker: pending sales fell 12.0% from a year earlier and closed sales fell 17.1%, while the monthly median price rose 7.1% to $965,000. The market therefore entered the final months of 2026 with higher prices, limited supply and uncertain momentum.

After more than 35 years in San Diego real estate, I do not base a forecast on one dramatic month. I look for the relationship among prices, inventory, accepted offers, closings, market time and affordability. The most important 2026 signal is that demand slowed without creating a large supply surplus. That is why my 2027 outlook calls for moderate appreciation rather than either another rapid boom or a countywide crash.

The 2026 Market Trend Through August

The monthly sequence shows the normal spring buildup in activity and inventory, followed by a summer slowdown. The median moved from $905,000 in January to $965,000 in August, although it did not rise in a straight line. Pending sales peaked at 2,199 in April and fell to 1,830 in August. Active inventory climbed from 4,071 homes in January to 5,981 in July, then declined to 5,650 in August. Months of supply rose from 2.1 to 3.1 before slipping to 2.9.

Those movements do not show sellers flooding the market. Inventory increased seasonally, but August inventory was still 10.0% below August 2025. The year-to-date decline in new listings also shows that many owners remained reluctant to give up older low-rate mortgages. This rate-lock effect restricted selection and supported prices even when buyer demand weakened.

Detached and Attached Homes Followed Different Paths

The countywide average conceals a major division. In August, detached homes had a $1,120,000 median price, up 4.7% year over year, and only 2.3 months of inventory. Detached inventory was 20.7% below August 2025. Their year-to-date median was $1,100,000, up 2.6%. This segment remained supply-constrained.

Attached homes, including condominiums and townhomes, had a $670,000 August median, almost unchanged from the prior year. Their year-to-date median was $665,000, down 0.7%. Attached inventory increased 4.6% year over year and supply measured 4.0 months. Attached properties also took an average of 44 days to sell, compared with 35 days for detached homes.

This split is likely to continue into 2027. Scarce detached inventory should support values in established neighborhoods, especially for homes that are updated and correctly priced. Condos and townhomes will remain highly important to affordability, but buyers will compare HOA dues, reserves, insurance, assessments and financing eligibility carefully. Buildings with high monthly costs or unresolved association issues may underperform well-managed communities.

My Base Case Forecast for 2027

My base case assumes that the national economy avoids a severe recession, San Diego employment remains broadly stable, inflation moves lower during 2027, and the Middle East energy shock gradually eases. It also assumes mortgage rates spend much of 2027 below their early September 2026 level, although not necessarily below 6%.

The forecast does not depend on a return to the unusually low mortgage rates of 2020 and 2021. A move from the high-6% range into the low-6% range could still improve purchasing power and confidence. The effect would not be entirely favorable to buyers because lower rates could bring more competition back into a market where detached inventory is already limited.

Interest Rates Will Be the Largest Swing Factor

Freddie Mac reported that the average 30-year fixed mortgage rate was 6.71% on September 3, 2026, compared with 6.50% one year earlier. At that rate level, even well-qualified buyers feel the monthly-payment burden of San Diego prices. A reduction of half a percentage point can improve purchasing power, but the impact varies by loan amount, down payment, credit profile, points and fees.

The Federal Reserve kept the federal funds target range at 3.5% to 3.75% at its July meeting. The Fed also said inflation remained above its 2% goal, partly because of supply shocks and energy prices. Its June projections showed a median federal funds rate of 3.6% for the end of 2027, only modestly below the 3.8% projection for the end of 2026. Mortgage rates do not move in lockstep with the federal funds rate; they respond more directly to longer-term Treasury yields, inflation expectations and mortgage-market risk.

For that reason, I would not build a 2027 buying or selling plan around a dramatic rate collapse. My working range is roughly 5.75% to 6.75% for much of the year, with periods outside that range possible. If inflation cools and bond yields decline, rates could spend more time near the lower end. If energy prices rise again or fiscal and trade policies increase inflation expectations, rates could remain near or above the upper end.

Inflation Could Delay Housing Relief

The Consumer Price Index increased 3.4% over the 12 months ending in July 2026. Core inflation, excluding food and energy, was 2.5%. Energy prices were 14.7% higher than a year earlier. Those figures show improvement in some underlying inflation measures, but they also explain why the Federal Reserve had limited room to reduce rates aggressively.

Housing benefits from falling inflation because lower inflation can reduce long-term yields and mortgage rates. The process is rarely smooth. Insurance, utilities, construction labor and materials also affect the cost of owning and producing housing in California. Even if mortgage rates decline, higher recurring costs can absorb part of the payment relief.

The Iran Conflict and Energy Markets

The conflict involving Iran matters to San Diego housing through energy prices, inflation, consumer confidence, defense activity and financial markets. The Strait of Hormuz is especially important because disruptions can reduce global oil flows. Higher oil prices raise transportation and production costs and can keep inflation and interest rates elevated. That is the main housing risk from the conflict.

The U.S. Energy Information Administration reported in August that severe constraints on Strait of Hormuz transit were continuing. Its forecast expected most regional production to return near pre-conflict levels in early 2027, with Brent crude averaging about $69 per barrel in 2027. That forecast would be constructive for inflation and mortgage rates if it proves correct. The agency also expected some disruption to continue through the end of 2027, so the risk will not disappear immediately.

San Diego also has a large military and defense presence. Defense spending and military employment can support parts of the local economy, but deployments, uncertainty and federal budget decisions can affect individual households. I would treat the conflict as a source of volatility, not as a simple reason to predict that local home prices will rise or fall.

Politics and Policy Will Add Uncertainty

The 2026 federal election cycle and the policies adopted afterward could influence the 2027 housing market through taxes, government spending, tariffs, immigration, financial regulation and housing programs. Tariffs or labor constraints could raise construction and renovation costs. Changes to tax treatment, lending rules or housing incentives could affect demand. Large fiscal deficits can also place upward pressure on long-term interest rates, even when the Federal Reserve lowers short-term rates.

Political headlines can move financial markets quickly, but real estate decisions should not be based on one speech or campaign proposal. A policy matters to housing when it changes household income, mortgage availability, construction costs, taxes, insurance or confidence. Until a proposal becomes specific and has a realistic path to implementation, it belongs in the risk analysis rather than in the base forecast.

Three Possible Outcomes for San Diego in 2027

A severe recession or a major escalation in the Middle East could produce a result worse than the weaker scenario. Conversely, a sharp and durable rate decline could generate stronger price growth than my upper range because San Diego has limited detached inventory. Forecast ranges should be updated as new information arrives.

Why I Do Not Expect a San Diego Housing Crash

A crash normally requires some combination of excessive supply, forced selling, weak credit and collapsing demand. The 2026 reports show weak affordability and uneven demand, but they do not show excessive inventory. August had 2.9 months of overall supply, including only 2.3 months for detached homes. Total inventory was 10.0% below a year earlier, and detached inventory was down 20.7%.

That does not make prices immune to correction. Individual neighborhoods, price ranges and buildings can decline, especially if unemployment rises or ownership costs become unmanageable. It does mean that a prediction of a broad crash needs evidence of materially higher supply or forced sales that was not present through August 2026.

What Sellers Should Expect in 2027

Sellers should expect a market that rewards precision. A limited number of strong detached listings may receive fast attention, while buyers remain cautious about monthly payments and condition. The August data showed sellers receiving an average of 97.8% of original list price, but that average does not include seller concessions and does not mean every home can begin above market value.

The best results will come from pricing against current competition, preparing the property before photography, making the first weeks count and responding quickly to buyer feedback. Attached-home sellers should obtain HOA documents early and be ready to explain dues, reserves, insurance, assessments and recent improvements. Sellers who also need to buy should build both transactions into one plan before listing.

What Buyers Should Expect in 2027

Buyers may gain more options if inventory improves, but a mortgage-rate decline could bring sidelined demand back quickly. Buyers seeking detached homes should be fully approved and ready to act when a well-priced property appears. Buyers considering attached homes may have more negotiating room, but they must evaluate the association as carefully as the unit itself.

A purchase should work at the payment available today. Refinancing later can be a benefit if rates decline, but it should not be required for the original purchase to remain affordable. Buyers should compare the total monthly obligation, including principal, interest, taxes, insurance, HOA dues and any special assessments.

The Indicators I Will Watch

I will update this outlook as five indicators change: the 30-year mortgage rate, detached and attached months of supply, pending sales, price reductions and local employment. I will also watch energy prices and inflation because they influence bond yields and consumer confidence. One month can be noisy; a three-month trend usually provides a better signal.

A sustained rise in pending sales combined with stable inventory would point to stronger 2027 pricing. Rising inventory combined with falling pendings would shift leverage toward buyers. If attached supply remains near 4.0 months while detached supply stays near 2.0 to 2.5 months, the two property types will continue to produce different negotiating conditions.

My Final 2027 Prediction

San Diego real estate should remain resilient in 2027, but affordability will keep price growth below the pace seen in many earlier expansion years. My most likely outcome is 2% to 5% countywide appreciation, stronger performance for detached homes, modest improvement in sales and a gradual increase in listings. I expect negotiation to remain property-specific, with the widest buyer opportunities in attached housing, homes needing work and listings that miss the market on price.

The biggest upside catalyst is a sustained decline in mortgage rates without a recession. The biggest downside risks are renewed energy inflation from the Iran conflict, higher long-term interest rates, weaker employment and policy shocks that damage confidence or increase housing costs. The data supports cautious optimism, not certainty.

Plan Your 2027 San Diego Real Estate Move

A countywide forecast cannot determine the value of one home or the strength of one neighborhood. If you are considering selling in 2027, I can prepare a property-specific analysis using recent sales, current competition and the features that affect your home. If you plan to buy, The Lewis Team can help you evaluate value, monthly cost, offer strategy and the risks that apply to the property.

Dawn Lewis has more than 35 years of San Diego real estate experience and has helped clients through strong markets, slow markets, changing interest rates and economic uncertainty. For a strategy based on your goals, call Dawn Lewis and The Lewis Team at Real Broker at 619-656-0655.

Dawn Lewis | DRE #01042809 | The Lewis Team at Real Broker

Frequently Asked Questions

Will San Diego home prices go up in 2027

My base-case forecast is a countywide increase of approximately 2% to 5%. Detached homes may perform better than attached homes because detached inventory remained much tighter through August 2026. Economic or geopolitical shocks could produce a weaker result.

Will mortgage rates fall in 2027

Rates may ease if inflation and long-term bond yields decline, but a large drop is not guaranteed. My planning range is roughly 5.75% to 6.75% for much of 2027, with volatility around that range. Buyers should qualify using current rates rather than assuming a future refinance.

Is 2027 a good year to sell a San Diego home

It may be, particularly for a desirable detached home with limited competition. The result will depend on location, condition, pricing and the seller’s replacement-housing plan. Attached sellers should expect more comparison shopping and closer review of HOA costs.

Is 2027 a good year to buy in San Diego

Buyers may benefit from gradually improving inventory and more leverage in selected attached-home and longer-market-time listings. Lower rates could also increase competition. The decision should be based on a sustainable payment, the property’s value and the buyer’s expected ownership period.