C.A.R. projects a slight uptick in home sales and prices as lending conditions improve
California’s housing market was set for a modest recovery in 2026, according to the California Association of Realtors (C.A.R.), which forecast a 2% rise in single-family home sales and a 3.6% increase in the median home price. While affordability would still be tough, C.A.R. said better lending conditions and more available homes could help more buyers enter the market.
Sales and prices inch upward as market steadies
C.A.R. expected 274,400 single-family homes to be sold in 2026, up from 269,000 in 2025. The median price was forecast to reach a record $905,000, after rising to $873,900 in 2025. Although these increases were smaller than the big jumps seen earlier in the decade, they pointed to a more stable market.
"Home prices in California are expected to rise in 2026, but the growth pace will remain mild when compared to rates we've seen in past years," said C.A.R. President Heather Ozur, a Palm Springs REALTOR®.
"For would-be buyers who sat out the competitive market during the past couple of years, that means more opportunities as inventory increases moderately and lending conditions become more favorable. Seller confidence will also improve as home prices stabilize and demand begins to rise again next year after a slow 2025."
California’s housing market remained under pressure in July, with both sales and prices falling for the fourth straight month compared to last year. In July, 261,820 existing single-family homes were sold on a seasonally adjusted annualized basis. This was a 1% drop from June’s 264,400 sales and 4.1% lower than the 272,990 homes sold in July 2024.
Affordability remains tight, but relief in sight
The C.A.R. forecast anticipated a slight improvement in housing affordability, with the index expected to tick up to 18% in 2026 from a projected 17% in 2025. This would still leave affordability near historic lows, with only about one in six California households able to purchase a median-priced home. The average 30-year fixed mortgage rate was expected to decline to 6.0% in 2026, down from 6.6% in 2025, potentially easing monthly payment burdens for new buyers.
A study from HomeAbroad and Ziffy.ai found that if mortgage rates fell to 6%, buyers would need about $2,448 less in annual income to qualify for a loan. The savings would be even greater in high-cost areas, making it easier for middle-income earners, such as teachers and first responders, to buy homes in places they couldn’t afford before.
C.A.R. Senior Vice President and Chief Economist Jordan Levine said, “As economic uncertainty begins to clear up in the next 12 months and mortgage rates start declining more consistently in the upcoming quarters, housing sentiment will see some improvement in 2026.” Levine flagged ongoing trade tensions, the home insurance crisis, and a potential stock market bubble as persistent risks for the market.
GDP, inflation shape housing market outlook
The forecast also pointed to broader economic trends shaping the market. US GDP growth was expected to slow to 1% in 2026, while California’s job growth was projected at 0.3%. The state’s unemployment rate was forecast to rise to 5.8%. Inflation was expected to average 3.0% in 2026, up from 2.8% in 2025. Active listings were projected to rise nearly 10%, bringing supply closer to pre-pandemic levels.
