2026 San Diego Real Estate: 3 Scenarios for Buyers & Sellers

We're heading into 2026 with more rate uncertainty than we've seen in years. Instead of making one shaky prediction, I'm breaking down three realistic scenarios based on where interest rates land. Whether you're buying or selling, here's how to prepare for each outcome.

The Three Scenarios

Steady Case: Steady As She Goes

Interest Rates: Hold around current levels (mid-6% range)

The market continues much like late 2024. We'll maintain 2-3 months of inventory. Still a seller's market, but not the frenzy of 2020-2021. Homes priced correctly will sell within 30-45 days. Home prices tick up 2-3% over the year.

What This Means: You won't face bidding wars on every property, but you can't drag your feet either. Good homes will still attract 2-4 offers. Sellers who overprice by even 5% will sit on market for weeks. Pricing accuracy matters more than ever.

Bull Case: Rates Drop, Competition Returns

Interest Rates: Fall below 6%

Remember 2019? That's where we're headed. Buyers who've been waiting on the sidelines flood back in. Inventory gets absorbed quickly. Bidding wars return on well-priced homes. Prices jump 4-8% as affordability improves and demand surges.

What This Means: Expect to compete against 5-8 offers on desirable properties. Homes will sell in the first 7-14 days. Waiving contingencies becomes common again (though I still don't recommend it). Appraisal gaps reappear. Sellers who price strategically will trigger bidding wars.

Bear Case: Rates Rise, Buyers Pull Back

Interest Rates: Climb above 7%

Days on market increase to 40-60 days. Price reductions become normal. Expect 20-30% of listings to drop their price at least once. Inventory builds to 4-5 months. Buyers have room to negotiate. Prices stay flat or dip 1%.

What This Means: Buyers will have time to tour multiple properties and negotiate repairs. Sellers who wait too long to adjust pricing will see their homes sit. Homes that stay on market 45+ days signal motivated sellers, that's when buyers find deals.

What I Think Will Happen

If I'm putting odds on it: 50% chance market stays steady, 30% chance rates drop, 20% chance rates increase.

The Fed has signaled they're done with aggressive rate hikes, but inflation isn't fully controlled. Most economists expect rates to drift slightly lower through 2026, which favors the base-to-bull range.

But here's what matters more than my prediction: you can prepare for all three.

The playbooks below work in any scenario—you'll just adjust your timeline and intensity based on which way rates move.

What Buyers Should Do

Before You Start House Hunting

Get fully approved by a lender—not just pre-qualified. Have them review your full financial picture. This is your offer superpower in any market.

Get a "proof of funds" letter from your bank showing your down payment money. Sellers want to know you can actually close.

Save 3+ months of living expenses beyond your down payment. You don’t want to be house poor.

Make Your Payment Work

Ask lenders about "buy-downs"—the seller pay upfront to lower your monthly payment. A 2-1 buy-down can save you $600-1,000/month in year one.

Get quotes with and without "points" (paying extra now to lower your rate). Sometimes it makes sense, most of the times it doesn't.

Know your comfortable monthly payment before you start looking at homes. This prevents falling in love with a house you can't afford.

Ask sellers to pay closing costs (2-3% of price) instead of dropping your offer price. This is especially effective in if the market stays steady or if the rates increase, sellers will have to be flexible.

House Hunting Strategy

Watch for homes that just dropped price or made improvements. These sellers are motivated and responsive.

When you see more "pending" signs in your target area, act faster. This signals the market is shifting toward the more competitive scenario.

Track the "sale to list" ratio in your target neighborhoods. If homes sell at 98-99% of asking, you're in a competitive market. If they sell at 95-97%, you have negotiating room.

Making Strong Offers

Keep your inspection and financing protection, but offer shorter deadlines (7 days instead of 14). This shows sellers you're serious without giving up safety.

Offer to let sellers stay 7-29 days after closing if they need time to move. This solves their biggest problem and costs you nothing.

Look at what nearby homes sold for in the last 30 days—that's your real price range, not Zillow estimates from 6 months ago.

If homes are selling at 99% of asking price, don't lowball. Offer full price and ask for closing cost help instead. You'll win more deals this way.

In competitive situations, increase your earnest money to 2-3% to show you're committed.

If You Keep Losing Offers

Increase your earnest money or shorten your contingency periods. Small adjustments can make a big difference.

Expand your search area or adjust your budget. If you're consistently losing in one neighborhood, look at adjacent areas.

What Sellers Should Do

Pricing Your Home

Price based on homes that just sold or went "pending" this month, not sold homes from 6+ months ago. Pendings tell you what buyers are willing to pay today.

Check your competition every Monday. If similar homes listed near you, price yours lower to stand out. Otherwise you’re just helping them sell their home.

Track the "sale to list" ratio. If homes in your area sell for 98-99% of asking, price yours right. If they sell for 95-97%, expect negotiations.

Prepare Your Home

Get a pre-inspection (costs $600-800 but finds issues before buyers do). Fix problems before listing to avoid surprises.

Fix everything that shows in photos: landscaping, paint, lighting, door handles, curb appeal. Online photos sell the first showing. Curb appeal is a real thing.

Stage to make photos look amazing. In a competitive market, invest $1,500-3,000 in professional staging. In a slower market, at least declutter and deep clean.

Deep clean or hire professionals ($200-400). Buyers notice smell and dirt immediately.

Marketing Strategy

Offer to pay a "buy-down credit" ($3,000-8,000 to lower buyer's interest rate). This helps more buyers qualify and is more effective than a straight price drop. $8K in credit is better than a $10K price drop.

Update your listing photos and description every 21 days if your home hasn't sold. Fresh listings get more attention. Strategically offer more credits.

In a bull market: Set a deadline for offers (example: "reviewing all offers Tuesday at 5pm") and review multiple offers at once.
In a base market: Respond to offers within 24-48 hours and be ready to negotiate.
In a bear market: Respond within 24 hours and expect to negotiate on price, repairs, and closing costs.

If You're Not Getting Offers

Track "days on market" (DOM) closely. Here's when to adjust:

After 14 days with no showings: Drop price 3-5%. Your price is too high.

After 14 days with showings but no offers: Something's wrong with condition or disclosure. Ask your agent for showing feedback.

After 28 days: New photos + price adjustment + offer $5k closing cost credit. Relaunch as a "new" listing.

After 45 days: Consider pulling the listing to reset or switch agents. Long DOM kills your negotiating power.

Watch Your Competition

Monitor price reductions in your area. If 30% of homes drop price, you need to price right from day one.

When you see neighboring homes sitting 60+ days, that's your warning signal to price below them.

Watch for market shifts. If pendings start accelerating, that signals a move toward the bull case. If new listings pile up, that signals a move toward the bear case.

Bottom Line

Rates will shift throughout 2026. Here's how to know which scenario is unfolding:

Rates trending DOWN toward 6% or below → Shift to bull case strategy
Rates holding steady in mid-6% range → Continue base case strategy
Rates trending UP toward 7% or above → Shift to bear case strategy