Cash Buyers Dominate San Diego 2026: 68% Pay Cash in Luxury Market as ADU Investment Opportunities Rise

Cash Dominance Reshapes San Diego's Luxury Real Estate Landscape

San Diego's luxury real estate market has entered a new era where cash buyers command dominant market share. According to recent market analysis, 68% of luxury buyers (homes $2M+) pay cash in 2026, with international purchasers representing 35% of transactions above $3M and paying cash 85% of the time. This shift fundamentally changes the competitive landscape for sellers considering their options.

The average international transaction reaches $4.2M, significantly higher than the domestic buyer average of $2.8M. Leading international buyers come from Canada (28%), China (22%), Mexico (18%), UK/Europe (15%), and Middle East (10%), with strong preferences for La Jolla, Coronado, and Rancho Santa Fe properties.

With 30% of all U.S. homes purchased entirely with cash in 2025—concentrated heavily in California's high-cost markets—San Diego sellers face a market reality where cash offers represent the norm rather than the exception, particularly in luxury segments.

Why Cash Buyers Hold the Advantage in 2026's Tight Inventory Market

San Diego's housing inventory remains constrained at approximately 2.0-2.3 months of supply countywide as of January 2026, well below the 3-month threshold that signals a balanced market. Single-family homes show even tighter conditions at just 0.8 months of supply. This scarcity gives cash buyers significant competitive advantages.

Mortgage rates averaging 6.15% for 30-year fixed loans as of January 2026 limit financed buyer purchasing power. A $990K median home requires approximately $6,000+ monthly PITI payments, demanding household incomes exceeding $215K—restricting the financed buyer pool to the top 20-25% of San Diego households.

Cash buyers close in 7-14 days versus 30-45 days for financed purchases, eliminate appraisal contingencies, and carry zero financing fall-through risk. In neighborhoods like Pacific Beach, Mission Beach, and North Park, where ADU-eligible properties attract investor attention, cash offers routinely outcompete traditional financing.

ADU Investment Opportunities Drive Investor Cash Purchases

San Diego's progressive ADU regulations have created compelling investment opportunities, with nearly 20% of all new homes in 2024 built as accessory dwelling units. Recent regulatory changes allowing ADU condominium sales under AB1033 and expanded multifamily ADU development rights under SB1211 have intensified investor interest.

Median ADU rental income reaches $2,000 monthly, with North Park one-bedroom units commanding approximately $2,400. The San Diego Housing Commission offers construction-to-permanent loans up to $250,000 for eligible homeowners, making ADU development financially accessible.

Cash investors target single-family properties with ADU potential in Pacific Beach, Mission Beach, North Park, City Heights, and College Area. The typical value-add strategy involves purchasing an $800K single-family home and investing $100K-150K in ADU construction, creating a property valued near $1.1M while generating $2,400-3,000 monthly rental income from the ADU alone. Cash buyers dominate this segment due to their ability to close quickly before financed competitors secure approval and acquire properties requiring construction that traditional financing won't readily approve.