Why San Diego Home Prices Didn't Crash — And What That Means for Buyers in 2026
Most people operate on a simple assumption: when mortgage rates go up, home prices come down. It's logical. It's intuitive. And in San Diego, it was wrong.
In January 2021, the 30-year fixed rate sat at 2.74% and the median sales price for a detached home in San Diego County was $750,000. Over the next two and a half years, rates climbed relentlessly — peaking at 7.79% in October 2023, the fastest sustained increase in four decades. Economists predicted a correction. Buyers stepped back. And for about six months in late 2022, prices did soften — dropping to a low of around $865,000 before resuming their climb.
That dip was the correction. It lasted less than a year.
Why prices held — and kept rising
The mechanism is straightforward once you see it: homeowners locked into 2% and 3% mortgages had no financial incentive to sell. Move up, move down, or move sideways — any new mortgage meant a rate more than double what they already had. So they stayed put. Inventory cratered. And with demand in San Diego's coastal market consistently outpacing available supply, prices had nowhere to go but up.
By April 2026, the median sales price for a detached home in San Diego County hit $1,100,000 — a 47% increase from January 2021, accomplished almost entirely during a period of historically elevated borrowing costs.
Where things stand today
As of May 20, 2026, the 30-year fixed rate sits at 6.75% per Mortgage News Daily. Rates have pulled back meaningfully from their 2023 peak, and early signs suggest buyer demand is responding. But inventory remains structurally constrained in North County coastal markets like Encinitas, Carlsbad, and Solana Beach — the same supply dynamic that kept prices elevated through the rate shock is still in place.
If rates continue to ease, more buyers come off the sidelines. More competition for the same limited homes. The data isn't pointing toward a correction — it's pointing toward more of the same.
The window that briefly opened in 2022 has closed. Understanding that is the starting point for making a smart decision in this market.
Loren Sanders | Beach Life Group @ Compass | beachlifegroup.com | 760-583-7100
