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Southern California Housing Prices Fall Sharply

  //house-home.news-articles.net/content/2026/01/0 .. hern-california-housing-prices-fall-sharply.html
  Published in House and Home on Friday, January 9th 2026 at 11:55 GMT by KTTV
      Locales: California, UNITED STATES

Significant Price Drops in Southern California

The hardest-hit regions appear to be concentrated in Southern California. Los Angeles, Riverside, and San Bernardino counties led the downward trend in December. Los Angeles County's median price settled at $820,290, down 2.6% month-over-month and a significant 6.7% year-over-year. Riverside County saw an even sharper decrease, with the median price falling to $525,880 - a 3.2% monthly drop and a substantial 12.9% decline from the previous year. San Bernardino County mirrored this trend with a median price of $506,460, down 3.4% from November and 11.8% from December 2022.

Orange County, while still boasting a high median price of $985,780, also felt the cooling effect, experiencing a 0.7% monthly decrease and an 8.1% annual drop. San Diego County, another traditionally expensive market, saw a 0.7% monthly decline and a 4.3% decrease year-over-year, bringing the median price to $833,480.

Factors Driving the Correction

Several interconnected factors are contributing to this market correction. The most prominent is the rapid increase in mortgage interest rates over the past year and a half. The Federal Reserve's efforts to combat inflation have significantly raised borrowing costs, making homeownership less affordable for many potential buyers. This decreased affordability has naturally dampened demand.

Economic uncertainty also plays a role. Fears of a potential recession, coupled with ongoing concerns about inflation, have led some prospective buyers to delay their purchases, hoping for further price reductions or a more stable economic outlook. The combination of higher rates and economic anxiety is creating a 'wait-and-see' attitude amongst many.

Limited Inventory Provides a Buffer

Despite the falling prices, the market isn't experiencing a dramatic collapse, and this is largely due to the persistently low inventory of homes for sale. While inventory has increased slightly in recent months, it remains well below historical averages. This limited supply continues to provide a floor for prices, preventing a more significant downturn. Sellers are still hesitant to list their homes, fearing they won't achieve the prices seen during the peak of the market.

Looking Ahead: A Period of Transition

Jordan Levine, CAR vice president and chief economist, describes the current situation as a "period of transition." He emphasizes that while prices have retreated from their peaks, they remain elevated compared to pre-pandemic levels. The future trajectory of the market hinges on several key factors, most notably the path of interest rates and the overall health of the economy.

"The key will be to see how interest rates and the economy perform in the coming months," Levine stated. If the Federal Reserve begins to ease monetary policy and interest rates stabilize or even decline, it could provide a boost to the housing market. However, if inflation remains stubbornly high and the economy slips into a recession, further price declines are likely. For now, California's housing market is navigating a delicate balance between cooling demand and constrained supply.