If you've been watching the California housing market 2026 closely, you already know: things are complicated. Prices are still high. Rates are still painful. And yet — something is different this year. Inventory is creeping up, seller psychology is shifting, and buyers who've been waiting on the sidelines are starting to move. Not fast, but moving.
The California Association of Realtors (C.A.R.) projects 274,400 home sales in 2026 — up 2% from last year — and a median price of $905,000, a new record. That might sound like more of the same, but dig into the data and you'll see a market that's genuinely rebalancing for the first time since the pandemic disrupted everything.
This report covers everything driving that shift: California home prices 2026, the latest California housing market forecast 2026 from major sources, a frank look at California housing affordability 2026, and the regional differences that make the California real estate market 2026 so hard to summarize in a single headline. Whether you're buying, selling, renting, or investing — there's something here for you.
California Housing Market Forecast 2026: What the Data Actually Says
Let's start with the California housing market forecast 2026 — because that's what most people searching right now actually want to know. And the honest answer is: it depends on who you ask, but the direction is the same.
C.A.R. expects existing home sales to reach 274,400 units — a modest 2% gain — and projects the statewide median to hit $905,000 by year's end. Mortgage rates, which averaged around 6.6% for much of 2025, are expected to ease to roughly 6.0% this year. Active listings are forecast to rise nearly 10%. None of this is dramatic. But after two years of near-frozen market conditions, even modest movement matters.
For a broader perspective, Redfin has labeled 2026 'The Great Housing Reset' — a phrase that captures something real. It's not a crash. It's not a boom either. It's a slow, multi-year process of the market finding its new normal after the chaos of 2020–2023. Redfin sees the 30-year rate averaging 6.3% this year, and crucially, predicts wages will grow faster than home prices for the first time in years. That's a bigger deal than it sounds.
Zillow and Realtor.com land in similar territory — modest sales growth, prices holding firm but not spiking. What's notably consistent across all three is the idea of pent-up demand. Years of buyers who couldn't or wouldn't buy are still out there. As conditions soften even slightly, some of that demand releases. That's what keeps this from being a buyer's market in any traditional sense.
California Home Prices 2026: Record Highs With a Catch
Talk to people about California home prices 2026 and you'll get different answers depending on which data they're looking at. Here's why that happens — and what the numbers actually mean.
Redfin's January 2026 data puts the statewide median at $780,200, down about 0.72% from a year ago. That sounds like prices are falling. But C.A.R., which focuses specifically on existing single-family home resales, projects the full-year 2026 median at $905,000 — a new record high. Both numbers are right. The difference is methodology. Redfin includes condos, townhomes, and all property types; C.A.R. focuses on the single-family segment, which skews higher.
Either way, the core truth holds: California homes still cost roughly twice the national median, which Redfin tracks at around $423,000 nationally. That gap isn't closing anytime soon.
What's interesting is the luxury end. While the broader market has softened, Redfin luxury data compiled by CalHomeNews shows high-end California prices — top 5% of sales — up 7.2% year over year. The Bay Area led with +9.9%. San Jose hit +12.8%. Bidding wars haven't disappeared; they've just migrated upmarket. For buyers in the $800K–$1.2M range, conditions are more negotiable. Above $2M, it's still competitive.
On the regional front, Newsweek's February 2026 housing analysis flagged that California's median price fell 2.2% in Q4 2025 — two straight quarters of small declines. Los Angeles was down 1.2% year over year. San Diego -2.6%. Inland Empire -2.5%. It sounds worrying, but these are corrections after years of overheating, not the start of a collapse. Most analysts expect a spring rebound as inventory tightens again seasonally.
California Housing Affordability 2026: Technically Better, Still Brutal
Here's the thing about California housing affordability 2026: it's improving. C.A.R.'s Housing Affordability Index hit 18% at the end of 2025, up from 16% the year before. That's the first genuine improvement in years. But let's be clear about what that number means — 82% of California households still can't afford to buy the median-priced home. Better isn't the same as good.
The California Legislative Analyst's Office (LAO) Housing Affordability Tracker breaks this down in stark terms. Only about 45% of California households would qualify for a bottom-tier home mortgage based on their income — down from 60% back in 2019. For a mid-tier home, that drops to 23%, compared to 35% six years ago. And to buy the C.A.R. median home outright, you need a household income of roughly $222,000 per year. The statewide median income is around $80,000. Do that math and you understand why so many Californians are renting indefinitely.
The rent-versus-buy gap is what really stings. The LAO estimates a monthly mortgage payment for a two-bedroom California home runs around $4,350. Renting a comparable unit? About $2,680. That's a 62% premium just for the privilege of ownership — before you factor in property taxes, HOA fees, or maintenance. No wonder so many people are staying renters.
The improvement driver is clear: mortgage rates declined for three straight quarters in 2025, reaching their lowest point since Q3 2022, according to Newsweek. As rates drop further in 2026, affordability should tick up again. Most economists cited by NewsNation expect wage growth to outpace home price growth this year — which, if it holds, would be genuinely good news for buyers. Whether that optimism translates to real purchasing power is still an open question.
"If you need a $222,000 income to buy the median California home, and most households earn less than $80,000, you don't have an affordability problem. You have an affordability crisis." — California LAO, Housing Tracker
The Lock-In Effect: Why Sellers Aren't Selling
There's a reason the California housing market 2026 has such thin inventory — and it's not that nobody wants to move. It's that moving is financially painful for millions of homeowners right now.
As of late 2025, the LAO's affordability report found that roughly 80% of California homeowners are sitting on mortgage rates below 5%. The average rate for a new buyer today? Around 6.25%. Selling means giving up your 3% rate and taking on a 6%+ rate on your next purchase. On a $900,000 home, that's a monthly payment difference of several hundred dollars — compounding to over $180,000 across a 30-year loan. Most people aren't willing to do that voluntarily.
The result: would-be sellers stay put. That keeps supply tight. Tight supply keeps prices elevated. And prices staying elevated keeps affordability low. It's a self-reinforcing loop, and it won't fully unwind until rates come down enough to make trading up feel financially reasonable again.
That said, inventory is slowly improving. C.A.R. forecasts active listings up 10% in 2026. Redfin's 2025 year-in-review showed national listings up 18.3% from 2024. In California specifically, Redfin counted 85,159 homes for sale in January 2026 — but new listings were still down about 10% year over year, as sellers continue to hesitate. Improvement is real. It's just slow.
California Real Estate Market 2026: How Each Region Looks
One of the most important things to understand about the California real estate market 2026 is that it isn't one market. It's dozens of overlapping ones, each with its own supply dynamics, buyer pool, and price trajectory. Here's how the major regions look right now.
Bay Area
The Bay Area is still extraordinarily expensive — median prices hover around $1.25 million — but there are real signs of stabilization. Affordability here sits around 23%, which is slightly better than San Diego (15%) or Orange County (9%). San Mateo County is the outlier: buying the median home there requires an annual income of over $500,000, making it arguably the least affordable county in the country.
Tech sector recovery and rising stock valuations are beginning to revive luxury demand, particularly in Marin and Santa Clara. But for mid-range buyers, conditions remain brutally competitive. For county-level data, C.A.R.'s regional market tracker is the most granular publicly available source.
Southern California
SoCal is where the most visible softening is happening — and where the spring rebound will likely be most noticeable. The region's three major metros all posted year-over-year price declines at the end of 2025: LA (-1.2%), San Diego (-2.6%), Inland Empire (-2.5%). But according to HomeBuyingInstitute's SoCal market forecast, Zillow projects 1.1–1.6% price gains for all three by year-end 2026.
The Inland Empire remains the most accessible entry point in Southern California — average home value around $578,000, and historically some of the strongest price growth in the state (7–8% annually over the past decade). As rates drop toward 6%, this region is likely to see some of the strongest demand recovery.
Central Valley & Inland Markets
California's most affordable housing exists inland. The Central Valley starts around $480,000 for a median home, and affordability rates in Sacramento and Fresno hover near 30%. That's still low by national standards, but it's the best the state offers. These markets attract buyers priced out of coastal cities, and they're expected to see steady, if unspectacular, activity in 2026.
For anyone looking at the numbers across all regions, Norada Real Estate's 2026 California analysis is probably the most comprehensive publicly available regional breakdown worth bookmarking.
California Housing Market Predictions 2026: What to Watch
Forecasting the California market is always risky — conditions can shift fast. But here are the California housing market predictions 2026 that most analysts agree on, along with the wild cards that could change everything.
Mortgage rates are the biggest lever. C.A.R. says 6.0%. Redfin says 6.3%. Either way, that's meaningfully better than the 7%+ we saw in late 2023. Norada's analysis argues that even a half-point drop in rates can shift buyer sentiment dramatically — from 'waiting until rates fall more' to 'close enough, let's go.' Watch the Fed. Watch inflation. Those two variables drive everything else.
The home insurance crisis is the wild card most people aren't tracking closely enough. Major carriers have pulled out of fire-prone California counties, and replacement coverage through the state's FAIR Plan often runs $200–$500 more per month than a traditional policy. That's a real affordability drag that doesn't show up in median price data but absolutely shows up in buyers' monthly budgets.
Supply will stay constrained. California's housing shortfall is estimated at around 3 million units, and that's not a 2026 problem — that's a decade-long structural issue. Crezzio's January 2026 forecast documents the regulatory and permitting obstacles that continue to slow new construction. More listings will hit the market in 2026, but they won't come close to filling that gap.
Migration trends are working against the state, but not catastrophically. California still ranks among the top states for outbound moves — Redfin shows continued net outflows to Florida, Arizona, Texas, and the Carolinas. However, international migration has partially filled that gap: California's population actually grew by ~232,000 in 2024, which supports underlying housing demand.
Frequently Asked Questions
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