Riverside & San Diego Q4 Real Estate Outlook: What's Next?

Mortgage rates are expected to stay above 7% through the end of 2026 and into next year, even as home prices cool in Southern California. For buyers and sellers in Riverside and San Diego counties, that means the window for pricing your home right — and locking a rate before any further hikes — is closing fast.

The Mortgage Bankers Association forecasts the 30-year fixed mortgage rate will average 7.3% in the fourth quarter of 2026 (MBA), while Fannie Mae now projects 7.4% for this quarter and 7.5% through all of 2027 (MBA Newslink). Those are the highest levels in more than three years, and they're reshaping who can afford to buy and what sellers can realistically ask.

Where mortgage rates are headed through year-end

Both major forecasters expect rates to stay elevated, not fall. The MBA projects the 30-year fixed rate to average 7.3% in Q4 2026 and remain above 7% through 2027 (MBA). Fannie Mae took the more aggressive view, sharply raising its forecast to 7.4% for the fourth quarter and 7.5% across all of 2027 (MBA Newslink).

MBA chief economist Mike Fratantoni said mortgage rates have "recently spiked to their highest level in more than three years," with the 10-year Treasury at its highest in 24 years, as inflation keeps central banks and bond investors on edge (MBA). MBA's own forecast calls for two more Fed hikes — one in December 2026 and one in early 2027. The practical takeaway: waiting for rates to drop before year-end is a losing bet.

Riverside: prices cooling, buyers gaining leverage

In Riverside County's largest city, the median home value sits at $581,604, down 0.3% month over month and down 3.8% over the last three months (Zillow). That cooling is the product of exactly the rate spike forecasters are describing: as mortgage costs climb, demand softens and sellers who priced high are forced to adjust.

The practical effect is a market tipping in buyers' favor. Nationally, newly pending sales fell 8.5% year over year in September as sky-high rates chilled activity, with mortgage rates ending the month at 7.28%, the highest reading since November 2023 (Zillow). In an Inland Empire market like Riverside, where supply is less constrained than the coast, that translates into more negotiation room on price and more time to make a decision — a meaningful shift after several years of multiple offers and waived contingencies.

San Diego: a far more competitive picture

San Diego tells a different story. The median home value in the metro holds at $929,618, down 0.6% month over month but up 0.9% year over year, with far less inventory than Riverside — for-sale inventory is down 4.9% from a year ago (Zillow). Coastal scarcity keeps prices resilient even as mortgage rates climb.

For San Diego buyers, the challenge is selection and competition rather than price relief. For sellers, the higher-rate environment is beginning to test formerly aggressive asking prices — nationally, the median home-sale price fell 0.1% year over year to $389,601, its first decline in more than three years, even as the typical monthly mortgage payment hit a near-record $2,786 at a 7.32% rate (Redfin).

Buyers: lock before December

With rates expected to hold near 7.3%–7.4% for the quarter and forecasters projecting further Fed hikes in December, locking a rate now can protect against a higher payment later (MBA). In Riverside, the cooling market means you can negotiate on price and push for contingencies. In San Diego, expect to move quickly — the metro's for-sale inventory is down 4.9% year over year, so well-priced homes still attract competition (Zillow).

A rate lock, points to buy down the rate, or an ARM (which MBA data show now makes up about 10% of applications) can each stretch your budget. The key is to get pre-approved and lock before December, when another 25-basis-point Fed hike could push rates even higher (MBA).

Sellers: price to current comps

Sellers face a market that rewards realistic pricing. Nationally, home-sale prices just posted their first year-over-year decline in more than three years, and buyers have more options — Zillow reports for-sale inventory has risen for 34 straight months (Zillow). In Riverside, that means pricing to current comps rather than last spring's peak, while in San Diego the still-positive price trend supports a firmer ask.

With mortgage costs near record highs, buyers are far more price-sensitive. The homes moving are the ones priced right from day one — overpriced listings sit and then come down. A well-priced listing with a realistic timeline still sells before the holidays; a home listed high now may carry into 2027's uncertain rate environment.

Ready to get pre-approved before year-end?

Whether you're buying in Riverside or San Diego, pre-approval is your first and most important step — it tells you exactly what you can afford, locks in your negotiation position, and lets you move fast when the right home comes up. With rates expected to hold near 7.3%–7.4% through the quarter and another Fed hike possible in December, locking your rate now protects against a higher payment later.

I'm Bill Jawitz, Branch Manager at Franklin Loan Center, and I've spent 35 years helping Southern California buyers and sellers navigate exactly these rate cycles. Let's get you pre-approved so you're ready to act before the holidays. Reach out to me to get started on your home loan pre-approval today — click here to contact me and get started.

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