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the housing market in California

California Housing Market Trends & Forecast [2026]

Every state is unique when it comes to the real estate market. That's why it's critical to understand the market you live or operate in. Whether you're renting, buying or selling, it will impact many aspects of your life.

California Housing Market Overview

California remains the most expensive large housing market in the country, and affordability is still one of the defining issues shaping the state in 2026. The state continues to attract residents with its climate, coastal access, major job centers, and cultural influence, but those advantages come with exceptionally high housing costs. The California Association of Realtors reported that just 18% of households could afford the state’s median-priced home in the fourth quarter of 2025, even after a slight improvement from earlier in the year.

At the same time, California’s market is not simply a story of high prices. It is also a story of persistent supply constraints, uneven population patterns, and affordability pressure that extends well beyond first-time buyers. CAR’s 2026 forecast projects that the statewide median home price will keep rising, while affordability improves only slightly, which suggests the market remains expensive even as conditions stabilize somewhat.

Economic conditions are also adding pressure. California’s labor market has softened compared with some other states, and state labor data showed an unemployment rate above the national level in the latest available reporting. That does not erase housing demand, but it does add another layer of strain for households already dealing with high housing costs. Overall, California’s housing market in 2026 is best understood as a market defined by high prices, limited affordability, and chronic undersupply, especially in many of its most in-demand metro areas.

California Housing Market Trends

To understand the California real estate market, it's important to keep up with trends. Let's look at some key ones in CA:

Note: These statistics are based on Redfin's monthly housing data from February 2026.

Median Home Price

California's median home price is $820,500, according to Redfin's monthly housing market data from February 2026. This is a decrease of about 1.2% since February of last year. Median prices are even higher in large metropolitan areas like Los Angeles ($1,000,000). High market values and rents have made housing unaffordable for many California residents, many of whom are frustrated with the state of housing in expensive cities like LA and San Diego.

Number of Homes Sold in February 2026

In April, there were 18,505 homes sold in California, down 1.8% from last year according to the Redfin dataset. Thus, even though California has had serious housing issues, selling and buying are still occurring at a high clip. It's important to keep in mind that this number might be lower compared to other months since nationally speaking, sales usually peak during the spring and summer months and slow considerably in the winter. In fact, the National Association of Realtors (NAR) predicts that in February and March alone, sales activity increases by as much as 34% and prices by 3%.

Median Days on Market (DOM)

Days on Market (DOM) is the average length of time a home remains listed on the market before being put under contract. A lower DOM signals an extremely competitive seller's market with more pressure on buyers to come in with higher offers and remove contingencies. A higher DOM signals a buyer's market with slower sales and less leverage for sellers.

The current median DOM in California is 50 days. This is lower compared to many other states, and it's well-known that California has been a market that typically favors sellers for years.

New Supply Statistics

Housing supply remains one of California’s biggest housing challenges. The state is still not building enough homes to fully meet demand, especially in higher-cost coastal and metro areas where affordability pressures are most severe. Even though California continues to add new housing, the pace of construction remains too slow to meaningfully close the gap between supply and need. The U.S. Census Bureau reports that California issued 101,545 residential building permits in 2024, while the state’s housing planning process continues to reflect the need for far more housing across communities.

Property Tax Rate

The average property tax rate in California is 0.75%, according to Rocket Mortgage. This places California's average property tax rate as the 19th lowest in the U.S. It's important to point out that property taxes vary widely depending on the specific county of California and the value of the home, so this average rate may or may not be indicative of your situation.

Foreclosure Rate in January 2026

In January of 2026, 1 in every 3,612 homes experienced a foreclosure filing (according to recent data from ATTOM). Based on this data, California's foreclosure rate is higher than most other states.

Hottest Local Markets in California

California has several hot markets. Here are three of the most noteworthy:

• Los Angeles

As the second largest city in America, Los Angeles has the widest range of opportunities for investors. All types of real estate are available here, making many types of leasing possible. The Los Angeles housing market is diverse just like its demographics. The city hosts tons of visitors and tourists throughout the year, increasing demand for short-term rentals close to Los Angeles' many culinary, artistic, retail, and recreation amenities. However, Phoenix is also seeing an influx of population growth from expensive cities along the west coast as well as areas like Chicago and Dallas, leading to higher demand for long-term rental housing as well.

• San Francisco

San Francisco remains one of California’s most expensive and competitive housing markets, especially for higher-income buyers, but it is not best described as a vacation-home market. Instead, San Francisco is driven more by high-end primary-home demand, limited inventory, and strong long-term appreciation potential than by seasonal ownership. In February 2026, Redfin reported a median sale price of $1.5 million, with homes selling in about 14 days, which reflects a fast-moving market with persistent demand.

It is also important to note that San Francisco has strict short-term rental rules, which limit the city’s appeal as a pure vacation-property market. The city requires hosts to be permanent residents, and official city guidance says short-term rentals are regulated rather than freely open to investor-style vacation use. That means San Francisco is generally a better fit for buyers seeking long-term value, luxury housing, or primary-residence ownership than for buyers focused mainly on seasonal rental property.

• San Diego

San Diego remains one of California’s most desirable and expensive housing markets, driven by its coastal location, strong employment base, and broad appeal to students, young professionals, and higher-income households. It is the second-most-populous city in California, and housing demand remains strong because of the city’s mix of lifestyle appeal and economic opportunity. At the same time, affordability remains a major challenge for both buyers and renters.

For investors, San Diego’s appeal comes less from easy affordability and more from its persistent demand and high rental costs. Redfin reported a median sale price of $932,000 in February 2026, showing how expensive both ownership and renting have become. Even though home prices were down year over year and homes were taking a bit longer to sell, the market still reflects strong long-term demand and limited affordability.

Factors Impacting the California Housing Market

A holistic view of California's housing market requires a basic understanding of the main economic drivers affecting the market. Let's take a look at a few critical ones below:

Mortgage Rates

Mortgage rates remain a major affordability challenge in California, even though they have eased from the highs seen in recent years. Bankrate reported California’s 30-year fixed mortgage rate at 6.44% in March 2026, slightly above the national benchmark. Freddie Mac’s weekly survey showed the average 30-year fixed-rate mortgage at 6.11% for the week ending March 12, 2026. Together, those figures suggest that borrowing costs have improved, but they are still high enough to weigh heavily on affordability in one of the country’s most expensive housing markets.

Higher mortgage rates continue to discourage some homeowners from listing, since many are reluctant to give up older loans with lower rates. For buyers, that means financing costs still have a major effect on purchasing power and monthly payments. In a market as expensive as California, even modest changes in mortgage rates can meaningfully shape demand, inventory, and overall housing activity.

Inflation and Cost of Living

Mortgage rates relate directly to inflation, another massive contributing factor to the affordability of housing and the state of housing markets in general. Inflation has increased the cost of living for many across the U.S., including in California. This means fewer people can truly afford to limit housing costs to less than the recommended 30% of their monthly income.

Population Changes and Demographics

California still faces a major housing supply challenge, and the state continues to fall short of the level of homebuilding needed to meaningfully improve affordability. The California Department of Housing and Community Development says the state has long projected a need for about 180,000 additional homes per year, while also noting that actual production has remained well below that pace. At the same time, California’s population pressures have become more mixed: the U.S. Census Bureau estimates the state’s population at 39.36 million in 2025, slightly below its 2024 estimate of 39.43 million, suggesting that growth remains slow even as housing affordability stays strained.

Economic conditions are also part of the picture. California’s unemployment rate has remained above the national level in recent state labor reporting, at 5.6% as of the end of 2025, which adds pressure for households already dealing with high housing costs. Altogether, California’s housing challenges are not just about demand alone, but about the combination of chronic undersupply, slow population change, and persistent affordability stress.

High Tax Rates and Regulations

California’s business climate remains a point of debate, but the bigger economic story in 2026 is less about a “business exodus” and more about the combined pressure of high housing costs, high living costs, and a complex regulatory environment. Recent PPIC research found that California did experience a net loss of company headquarters over the 2011-2021 period, and that firms leaving the state often moved to places with lower taxes, less regulation, and lower housing costs. At the same time, PPIC also notes that this pattern reflects broader national relocation trends, not just a uniquely California problem.

For housing, the practical takeaway is that affordability remains central to California’s long-term competitiveness. The Legislative Analyst’s Office says housing costs in California remain dramatically higher than they were just a few years ago, even without major recent price growth, which continues to strain households and employers alike. In other words, California’s tax and regulatory environment matters, but housing affordability and cost of living remain two of the biggest forces shaping whether residents and businesses stay, leave, or expand elsewhere.

California Housing Market Forecast 2026

The California housing market is sensitive to a myriad of factors, which are being closely monitored by real estate analysts and homeowners across the country.

In general, housing market predictions for California are lukewarm in 2026, but many analysts believe the market will be better for buyers and sellers due to declining mortgage interest rates. Major cities and metropolitan areas like Los Angeles will likely see modest growth while the market continues to be tight as demand outpaces supply. The unemployment rate will still place a burden on the state and the housing market generally. Residents and prospective homeowners will continue to monitor high interest rates throughout the rest of the coming year.

Likelihood of California Housing Market Crash

Given the factors illustrated above, many investors and analysts are concerned about California's housing market. Per a report released by data curator ATTOM, California is one of three states with a very high risk of housing market decline.

Many experts are somewhat pessimistic about California's housing market's future. There are 14 counties in California that experts believe face the greatest risk: Butte County, Sacramento County, El Dorado County, Solano County, Fresno County, Kern County, Kings County, Madera County, Merced County, San Joaquin County, Stanislas County, Tulare County, Riverside County, and San Bernadino County.

So, while a crash isn't imminent, the market outlook isn't pristine. California is still a seller's market and is facing some serious issues.

Forecast for The U.S. Housing Market

Now that we've looked at California's housing market, let's zoom out a little bit. What about the U.S. housing market? What do you need to keep an eye on in the coming years?

The U.S. housing market in 2026 is expected to remain relatively stable, but it is unlikely to become easy for buyers anytime soon. Mortgage rates have come down from the peaks seen in recent years, which has helped improve affordability somewhat. Freddie Mac reports the average 30-year fixed-rate mortgage at 6.11% for March 2026, down from 6.65% a year earlier. That decline should help support buyer activity, especially during the spring selling season, even though borrowing costs are still well above the ultra-low levels many buyers became used to earlier in the decade.

Recent sales data suggest the market is improving gradually rather than rebounding sharply. The National Association of Realtors reported that existing-home sales rose 1.7% in February 2026, while pending home sales increased 1.8% month over month. At the same time, pending sales were still down 0.8% year over year, which shows that demand is recovering, but not surging. In other words, the most likely national trend for 2026 is modest improvement in activity rather than a dramatic comeback.

Home prices are also expected to keep rising, but at a slower pace than in the overheated years of the pandemic market. According to Fannie Mae’s Home Price Expectations Survey, experts forecast national home price growth of 2.1% in 2026, following 2.4% in 2025 and 5.3% in 2024. That points to a market where prices are still appreciating, but in a more moderate and sustainable way.

Overall, 2026 looks more like a year of adjustment than a year of major correction. Lower mortgage rates and gradually improving affordability should help bring more buyers and sellers back into the market, but tight inventory and still-high monthly housing costs will likely keep conditions competitive in many areas. Rather than a nationwide crash, the more likely outcome is a slower, uneven market where price growth cools, sales improve modestly, and affordability remains one of the biggest challenges shaping the housing market.

California Rental Market

The rental and buying market are obviously closely linked. When home prices fall, landlords are more likely to buy properties to rent out. Home prices and rental prices are correlated as well because a hot market means prices rise.

California’s rental market remains one of the most expensive in the country, and affordability is still a major challenge in 2026. Zillow reports the average rent in California was $2,695 in March 2026, well above the U.S. average of $2,000, which reflects just how costly the state remains for renters even outside its most expensive metro areas.

The affordability pressure is not just about asking rents. Using U.S. Census Bureau data, USAFacts reports that California’s median monthly rent was about $2,104 in 2024, and renters spent an average of 35% of their income on rent. It also found that 55.8% of renter households in California were cost-burdened in 2024, meaning they spent at least 30% of their income on housing.

Rental costs also vary sharply by location. In higher-demand cities, the pressure is even more severe. Zillow reports the average rent in San Francisco was $3,743 in March 2026. Overall, California’s rental market in 2026 is best described as expensive, highly uneven, and still difficult for many renters to navigate, especially in coastal and job-rich metro areas.

California's current rental market is influenced by these trends. Unaffordability extends from high home prices to high rental rates, including in major CA rental markets like Los Angeles and San Diego. Below are just a few of the current trends for California's rental market based on data pulled from Zillow:

California Rental Market Key Trends

• Median rent: $2,695
• Month-over-month rent change: -$5
• Year-over-year rent change: -$55
• Available rentals: 86,188

The California rental market, like the housing market, isn't known for affordability. The fact that the state is subject to rent controls in certain areas also adds another layer. Investors need to be savvy about how they enter and react to the market. That said, the never-ending demand for rentals still makes California a great option for landlords if you approach things carefully.

As with trends we've discussed previously, young renters are leaving CA for states like Texas and Arizona at a high rate. However, 2026 may be a year where things change as mortgage rates lower, and the economy recalibrates a bit.

Conclusion

California’s housing market in 2026 remains expensive, supply-constrained, and difficult for many households to afford. While conditions have become somewhat more stable than during the most volatile years of the market, high home prices, elevated mortgage rates, and limited housing production continue to put pressure on both buyers and renters. For investors, homeowners, and prospective residents, California remains a market defined by strong demand and long-term appeal, but also persistent affordability challenges.

FAQs

Is California a buyer’s or seller’s market in 2026?

California still leans toward a seller’s market, especially in high-demand metro areas where inventory remains limited. However, conditions are less frenzied than they were a few years ago, and some buyers may have a bit more negotiating room than during the market’s peak.

Are home prices still rising in California?

In many parts of the state, yes, but growth has become slower and more uneven. California is no longer seeing the same kind of rapid appreciation that defined the pandemic-era market, though prices remain very high by national standards.

Why is housing so expensive in California?

California’s housing costs are driven by a combination of chronic undersupply, strong long-term demand, high construction barriers, and expensive coastal job centers. Even when demand cools, the state often does not add enough housing to meaningfully improve affordability.

Will the California housing market crash?

A major statewide crash appears unlikely in the near term, but that does not mean every local market will perform the same way. California looks more likely to experience localized slowdowns, uneven price movement, or softer demand in some regions than a broad collapse across the entire state.

Is California a good place for real estate investors?

California can still be attractive for investors because of its large population, strong rental demand, and long-term appreciation potential, but it is also a high-cost, highly regulated market. Investors usually need to be more selective, more capitalized, and more aware of local laws than they would in lower-cost states.