N※N

California Housing Market Faces Significant Downturn

  //house-home.news-articles.net/content/2026/01/2 .. a-housing-market-faces-significant-downturn.html
  Published in House and Home on Saturday, January 24th 2026 at 11:34 GMT by Los Angeles Daily News
      Locale: UNITED STATES

SACRAMENTO - California's residential real estate market continues to grapple with a significant downturn, with December sales figures revealing a stark slowdown and persistent affordability issues. New data released this week indicates sales have fallen to the second-lowest level in over two decades, reinforcing the sense that the Golden State's housing boom is firmly in the rearview mirror.

The California Association of Realtors (CAR) reported a dramatic 16.6% drop in home sales compared to December 2023, and a further 17.6% decrease when compared to November. The total number of homes sold reached 204,820, a figure second only to October 2005 in the last 21 years - a stark illustration of the current market conditions. These figures paint a picture of cautious consumers and a shrinking pool of active buyers.

The Rate Factor and Economic Hesitancy

The primary driver behind this decline appears to be the persistent grip of high mortgage rates. Currently hovering above 7%, these rates are substantially higher than the historically low rates enjoyed during the pandemic boom. This significant increase has dramatically eroded affordability, pushing homeownership out of reach for many prospective buyers. "The housing market is clearly impacted by high mortgage rates and economic uncertainty, deterring potential buyers," stated Jennifer Nahar, President of the California Association of Realtors, succinctly summarizing the situation.

Buyers, hesitant to commit to large mortgages at elevated rates, are increasingly adopting a "wait-and-see" approach. Nahar noted, "We're seeing a slowdown in buyer activity as they remain on the sidelines, waiting for rates to come down." This behavior contributes to the ongoing downward pressure on sales volumes.

Price Dynamics: A Shifting Landscape

While sales are plummeting, the median home price in California has demonstrated surprising resilience. The median price edged up 0.7% year-over-year to $853,500. However, it's crucial to understand the context of this seemingly positive number. While representing a slight increase, this figure remains considerably higher than pre-pandemic levels. This combination of high prices and elevated mortgage rates creates a double whammy for potential homebuyers, severely limiting accessibility.

Potential for Inventory Increase - A Glimmer of Hope?

The slowdown in sales is generating a ripple effect within the market. As frustrated sellers find themselves unable to achieve their desired prices, or simply tiring of listing their properties without attracting buyers, an increase in inventory is becoming increasingly likely. "This would give buyers more options and potentially ease the competition," Nahar observed, offering a cautiously optimistic perspective. A rise in inventory would be a welcome development for buyers, giving them more choices and potentially moderating price pressures. However, the pace of any inventory increase remains uncertain and hinges on how much longer mortgage rates remain elevated.

Looking Ahead: A Complex and Uncertain Future

The California housing market faces a complex and uncertain future. While a modest price increase might seem positive, it's overshadowed by the significant affordability challenges. The market's recovery will largely depend on the trajectory of mortgage rates. A decrease in rates would almost certainly stimulate buyer activity, but predictions for rate movements remain varied and influenced by broader economic factors.

Experts anticipate continued volatility in the near term. First-time homebuyers, in particular, are facing an exceptionally difficult environment. Until mortgage rates soften significantly and inventory expands substantially, the California housing market is likely to remain in a state of prolonged adjustment, characterized by lower sales volumes and subdued buyer enthusiasm.