What the Rate Forecast Means for You

—and for San Diego Real Estate—

A message from the Gloria Shepard Team at Compass

Where Rates Are Right Now

If you’ve been watching interest rates the way a lot of our clients have — cautiously, hopefully, with one eye on the news — here’s the honest picture of where things stand and what the second half of 2026 is likely to bring.

As of mid-May 2026, the 30-year fixed mortgage rate averaged 6.36% — down meaningfully from 6.81% a year earlier. It hasn’t been a straight line. Rates dipped briefly below 6% in February, then moved back up as inflation showed signs of re-acceleration. That kind of volatility is frustrating, but it’s also revealing — when rates do move lower, even briefly, buyers respond immediately.

Where Rates Are Headed

The Federal Reserve has been deliberate and measured in its approach. At its March 2026 meeting, the Fed held rates steady, with the dot plot projecting the target range to gradually fall from 3.50–3.75% to 3.00–3.25% by year-end 2027. That’s a slow, controlled descent — not the dramatic cuts some had hoped for, but a clear direction of travel.

For mortgage rates specifically, Fannie Mae projects approximately 5.9% by year-end 2026. Most major forecasters expect rates to drift slightly lower through the remainder of the year, settling in the 5.9% to 6.5% range. The National Association of Home Builders similarly expects the 30-year rate to fall just below 6% by year-end, though they note the path may be bumpy.

What It Means for San Diego

San Diego has always been a market that rewards patience — and 2026 is proving that out. The San Diego housing market is projected to remain balanced, with moderate appreciation of 2% to 4% forecast for the year and no significant crash on the horizon.

The rate story is directly shaping buyer behavior. We saw a preview of this earlier in the year: when rates dipped briefly below 6% in February 2026, San Diego sales volume jumped 22% in a single month. That’s not a coincidence — that’s a buyer pool that has been waiting for exactly the right moment.

In April 2026, San Diego County experienced a 14.8% increase in sales compared to the prior year — a surge that significantly outpaced Southern California as a whole, which saw only a 0.1% increase. That kind of outperformance speaks to something our clients already know: San Diego is in a category of its own.

What This Means for the Santaluz Buyer

Here is where it gets interesting for our community specifically. The buyers who are drawn to Santaluz — and to comparable luxury enclaves like Rancho Santa Fe and Fairbanks Ranch — are not primarily rate-driven. They are equity-driven, often cash-capable, and motivated by lifestyle, scarcity, and long-term value. A move from 6.4% to 5.9% doesn’t change their decision. But it does expand the buyer pool around them, which tightens inventory and supports pricing at every price point.

As rates ease toward the high 5% range later this year, the “lock-in effect” — which has kept many homeowners frozen in place — is expected to soften. More sellers will be willing to make a move, and more buyers will feel confident enough to step off the sidelines. That means more activity, more competition, and a more dynamic market heading into 2027.

Our Read on All of This

The second half of 2026 looks more favorable than the first — for buyers and sellers alike. Rates are trending lower, inventory is gradually improving, and San Diego’s fundamentals remain as strong as they’ve ever been. If you’ve been waiting for clarity, this is about as much as the market typically offers.

If you’re curious about what your home is worth in this environment, or what a move might look like for you right now, we’d welcome the conversation. We’re always here to help and know this market well.

Market data sourced from Freddie Mac, Fannie Mae, Federal Reserve, California Association of Realtors, and San Diego MLS. For informational purposes only and does not constitute a guarantee of value or outcome.