After several years of elevated borrowing costs, mortgage rates have recently eased to their lowest levels in years. While we are not back to the ultra low rates of the early 2020s, the shift is meaningful. Even a modest drop in rates can significantly impact affordability, buyer confidence, and overall market activity.
So what does this mean for the 2026 housing market, especially here in San Diego?
Lower Rates, Higher Purchasing Power
When mortgage rates decline, buying power increases.
For example, a one percent shift in interest rate can translate into hundreds of dollars per month in payment difference, depending on price point. For many buyers, that change can mean:
• Qualifying for a higher purchase price
• Lower monthly payments
• Or simply feeling more comfortable moving forward
Over the past couple of years, many buyers stepped to the sidelines due to rate volatility. As rates stabilize and trend lower, some of that pent up demand is beginning to re enter the market.
Buyer Activity Is Starting to Build
February is typically when momentum begins to build toward the spring market. With rates easing, we are already seeing more conversations around pre approvals and home searches.
Buyers who paused their plans in 2024 or 2025 may now be recalculating. The math simply looks better than it did before. And when buyers feel more confident, activity follows.
That said, lower rates do not automatically mean buyers should rush. Inventory levels, personal finances, and long term goals still matter more than headlines.
What This Means for Sellers
Lower rates often expand the buyer pool. When more buyers can qualify, competition increases, especially in desirable markets like San Diego.
For homeowners considering selling, this creates an interesting window:
• Buyer demand may increase before peak spring inventory hits
• Listing earlier can mean less competition
• Well priced homes may see stronger interest
Markets tend to shift quietly before the broader public fully reacts. Sellers who prepare early often position themselves more strategically than those who wait for peak season.
A Market Reset, Not a Frenzy
It is important to stay grounded. Rates easing does not mean we are returning to the rapid appreciation and bidding wars of past years. Instead, we are seeing a gradual normalization.
That can be healthy.
A more balanced environment allows:
• Buyers to make thoughtful decisions
• Sellers to price realistically
• Investors to underwrite deals more conservatively
Stability builds confidence, and confidence drives movement.
The Bigger Picture for 2026
Mortgage rates are only one piece of the puzzle. Employment trends, inflation, inventory levels, and consumer sentiment all play a role in shaping the year ahead.
What is clear is this, when borrowing becomes more affordable, opportunity expands. Whether that means buying your first home, moving up, downsizing, or selling strategically, it is worth revisiting your numbers.
If you have been sitting on the sidelines because of rates, this may be a good time to take a fresh look at your options.
Property Fling continues to monitor the San Diego market closely. If you are thinking about buying, selling, or simply want clarity on your position in today’s market, we are here to help you think through it carefully and strategically.
