Are Higher Interest Rates Hurting Our Housing Market?

The answer seems like it should be obvious. How could higher interest rates NOT hurt our market? Well, the answer is more complicated than you might think.

To begin, Coronado and other coastal markets aren't driven by interest rates alone. Stock-market gains can play a big role too, increasing the purchasing power of wealthy buyers who may not need a mortgage. Industry leaders have pointed to this wealth effect as helping offset higher rates at the upper end of the market. Locally, detached homes have seen a dramatic increase in sale prices, while attached condos and townhomes have seen a modest dip. One caveat to this is that changes in the mix of properties actually selling can affect the reported gains or losses in a market; especially when the number of total sales is generally lower, such as in Coronado.

Higher rates affect would-be sellers too. Homeowners with low-rate mortgages may hesitate to trade them for more expensive loans, keeping homes off the market. That limits inventory and helps support prices, even as higher borrowing costs discourage buyers.

So higher rates are hurting activity, but not necessarily prices to the same degree. Sales are down roughly 22% year over year in Coronado and 8.5% across San Diego County. Those figures represent fewer transactions but not equivalent declines in home values.

Fewer sales can lead to price reductions when someone needs to sell and can't wait out a slower market. If enough owners are forced to sell, as happened during the housing crisis of 2008, prices can come under greater pressure.

However, over 39% of owner-occupied homes nationwide currently have no mortgage. Additionally, U.S. homeowners held $35.8 trillion in equity as of Q2 2026. That is roughly 60% more than at the housing market's 2006 peak and represents an all-time high. This staggering equity position provides a meaningful financial cushion against widespread distressed selling, although it doesn't make prices immune to declines. Many would-be sellers may choose to rent their homes or simply postpone moving if they can't get their price.

What Can Sellers Do?

Be proactive about getting your home ready for its big reveal. Taking care of minor (or major) cosmetic issues can make a huge difference. Buyers are already facing substantial purchase prices and mortgage rates well above what they became accustomed to a few years ago. If they also have to shoulder immediate repairs, it can kill their excitement when touring a home for the first time.

Pricing needs careful consideration too. Don't just look at the last comparable sale; look at what buyers can choose from today. Multiple offers and overbidding shouldn't be assumed. Sometimes pricing below the last comparable sale can generate more excitement than starting high and making reductions later.

What About Buyers?

If you need to move and can't wait out higher rates, there is some good news. A slower market can give you more negotiating room, including opportunities for repair credits, closing-cost assistance, or flexible terms. Just make sure the payment works for you today, rather than relying on a future refinance. There is no consensus on when (or if) rates will see meaningful decline.

Higher rates are making buying harder and slowing sales. But a slower market isn't automatically a falling market. Every neighborhood, and every property, is different. And for every rule, there is always at least one exception!

Jim Nelson has been selling real estate in Coronado for 16 years and is consistently ranked within the top 100 agents across San Diego County. Have a question about real estate? Submit them to jim@nelsonriddleteam.com and your question could be the subject of a future article.