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2026 California �Housing Market Outlook

Coffee & Collab X Further Together

February 4, 2026

Oscar Wei

Deputy Chief Economist

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Housing

Market Update

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California Housing Market Snapshot

page 3

Existing Home Sales

% change

+2.0% YTY

Median�Sales Price

$850,680

-1.2% Y2Y

Unsold Inventory Index

2.7 months

+0.0% Y2Y

Median�Days on Market

36 days

+16.1% Y2Y

December 2025

+0.9% YTD

288,200

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SERIES: Sales of Existing Detached Homes

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Sales by price bracket

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Growth in active listings smallest since February ‘24

SERIES: Active Listing of Existing Single-Family Homes

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

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Delistings is one reason for the supply growth deceleration

SOURCE: Redfin

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December 2025 Southern California Housing Snapshot

page 7

Existing Home Sales

% change

+1.7% YTY

Unsold Inventory Index

2.9 months

Median Days on Market

35 days

Sales Price to List Price Ratio

98.1%

+0.1% YTD

Existing Home Price

% change

$855,000

+0.6% YTY

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Soft pending sales suggest slow start for 2026

SERIES: Percent Change in Pending Sales

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

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U.S. economy expanded at the fastest pace in two years

SOURCE: Bureau of Economic Analysis, U.S. Department of Commerce

K-shaped economy

Consumer spending accelerated with a growth pace of 3.5% in Q3 from 2.5% in Q2.

Private domestic investment continued to drop but at a much slower pace of 0% compared to -13.8% in Q2.

Import declined again with a dip of 4.4% after a drop of 29.3% in Q2, while export increased 9.6% following a -1.8% decline in Q2.

Govt spending increased for the first time since Q424 (defense spending and buyouts for federal workers).

The Conference Board reported consumer confidence declined substantially this month, down 3.8 points from November. The December reading of 89.1 was the lowest since April.

The unemployment rate recently hitting a four-year high.

Who’s doing better in the current k-shaped economy?

stockholders, higher-income households, finance, tech workers?

Who’s doing worse?

- Furloughed workers, lower-income households, snap benefit recipients, retail, tourism, restaurants, tech workers?

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December inflation surprised on the upside

SOURCE Bureau of Labor Statistics

Encouraging consumer prices suggest that tariffs-induced inflation might have peaked.
The latest consumer price index (CPI) came in lower than expected and showed signs that the tariffs-induced inflation might have already reached its peak.
The December CPI increased 0.3% from the prior month and climbed 2.7% from the same month last year.
Core CPI, on the other hand, recorded 12 basis points (bps) below the estimated month-over-month growth pace and was held unchanged at 2.6% on a year-over-year basis.
While the overall inflation level remained relatively contained at the close of 2025, both groceries and restaurant meals had sizable price increases over the past month.
Shelter cost, a category that accounts for more than one-third of the CPI weighing, was up 3.2% on an annual basis but improved solidly from the 4.6% gain recorded in December 2024.
Despite seeing some signs of easing in core prices at the end of 2025, inflation continued to stay above the Fed’s target of 2%.
As such, the central bank will likely keep the fed funds rate unchanged in the upcoming meeting.

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Outlook

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Mortgage rates up from recent lows

Average 30-Yr. FRM

SOURCE: Mortgage News Daily, Freddie Mac

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Market believe the Fed will stay put in the next two meetings

SOURCE: CME Group (as of 2/3/2026)

Odds of a rate cut in upcoming FOMC meetings

March

(current range)

April

(current range)

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Economic growth in Q4 will be soft, due partly to the govt. shutdown

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Other policy-related risk that could affect the economy

Americans who buy their health insurance on the Affordable Care Act (ACA) no longer have access to enhanced premium tax credits to help defray the cost of their coverage.

If Congress takes no action to extend them, nearly 5 million people are estimated to become uninsured in 2026, and insurance premium will soar for millions more.

The loss of ACA credits could lead to nearly 340k jobs lost across the U.S. in 2026.

House passed a bill to extend ACA health care subsidies for three years.

A bipartisan Senate group is working toward a solution separate from the House bill, but they don’t yet have an agreement.

# of jobs lost if ACA tax credits are not extended

Urban Institute researchers have estimated that the end of enhanced tax credits will lead to 7.3 million people losing their ACA coverage in 2026, of whom 4.8 million would become uninsured.
The loss of the additional subsidies are projected to increase how much marketplace enrollees must pay by an average of 114 percent, from an average of $888 to $1,904 per year.
The higher costs will exceed the budget of many Americans, forcing about 2.5 million to shift into other coverage, while nearly 5 million become uninsured.
The resulting reductions in funding for health care, together with related downstream economic effects for businesses that serve health providers and their staff, will cause state economies (gross domestic products, or GDPs) to fall by about $40.7 billion.

Source: https://www.commonwealthfund.org/publications/issue-briefs/2025/oct/expiring-premium-tax-credits-lead-340000-jobs-lost-2026?check_logged_in=1

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Americans have gotten more worried about their job outlook

SOURCE: New York Fed’s Survey of Consumer Expectations

Job outlook – perceptions and expectations

Probability (in %)

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Upside risk: What about the $2K dividend rebate?

Paying a dividend of $2k per person could cost $600b/yr

The federal government raised about $195b in custom duties in fiscal year 2025.

Using income from tariffs to pay dividends would mean that income could not be used to reduce deficits or offset borrowing from the OBBBA.

Using all the tariff revenue for rebates would push debt to 127% of Gross Domestic Product by 2035 under current law

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Could a $200bln purchase in MBS lead to lower rates?

MBS prices soared after the announcement

SOURCE: Mortgage News Daily

The surge in bond price and the sharp decline in rates were likely an overreaction.

Actual impact depends on how the purchase is conducted: one-time deal or ongoing commitment?

The President has the authority to it and the GSEs have the money to carry out the transaction.

Rates could go down by 0.25% to 0.50% but don’t expect an overnight miracle. It could, however, create more volatility.

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Institutional investors have a small market share

SERIES: 2025 Housing Market Survey

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Investor-owned share of SFH Stock in Jun 2025

SOURCE: AEI Housing Center: Institutional Investors in the US Housing Market: Myths and Realities; Parcl Labs

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Insurance premiums will continue to climb in 2026

SOURCE: Insurify, Quadrant Information Services

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U.S. economic outlook

	2016	2017	2018	2019	2020	2021	2022	2023	2024	2025p	2026f
US GDP	1.8%	2.5%	3.0%	2.5%	-2.2%	5.8%	1.9%	2.9%	2.8%	2.0%	1.7%
Nonfarm Job Growth	1.8%	1.6%	1.6%	1.3%	-5.8%	2.9%	4.3%	2.2%	1.2%	0.8%	0.4%
Unemployment	4.9%	4.4%	3.9%	3.7%	8.1%	5.4%	3.6%	3.6%	4.0%	4.3%	4.6%
CPI	1.3%	2.1%	2.4%	1.8%	1.2%	4.7%	8.0%	4.1%	3.0%	2.8%	2.6%
Real Disposable Income, % Change	1.9%	3.1%	3.6%	3.1%	6.4%	3.1%	-5.9%	5.1%	2.9%	1.7%	2.0%

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California housing market outlook

	2016	2017	2018	2019	2020	2021	2022	2023	2024	2025	2026f
SFH Resales (000s)	417.7	424.9	402.6	398.0	411.9	444.6	339.8	257.7	269.2	271.6	277.0
% Change	2.0%	1.7%	-5.2%	-1.2%	3.5%	7.9%	-23.6%	-24.2%	4.4%	0.9%	2.0%
Median Price ($000s)	$502.3	$537.9	$569.5	$592.4	$659.4	$784.8	$819.4	$814.3	$865.6	$875.6	$905.8
% Change	5.4%	7.1%	5.9%	4.0%	11.3%	19.0%	4.4%	-0.6%	6.3%	1.2%	3.5%
Housing Affordability Index	31%	29%	28%	31%	32%	26%	19%	17%	16%	17%	18%
30-Yr FRM	3.6%	4.0%	4.5%	3.9%	3.1%	3.0%	5.3%	6.8%	6.7%	6.6%	5.9%

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Final thoughts

Economy will post a gain in 2026 but will be soft in first half.

Fed will cut rates twice: March and July?

Rates will continue to trend down but don’t expect a sharp decline.

Homeowner insurance premiums are expected to rise by 7% - 10%.

Housing affordability will improve slightly as prices continue to climb.

Lock-in effect eases further with supply projected to climb near 10%.

More first-time buyers entering the market in the next 12 months.

May see a pullback in international buyers in CA as policy uncertainty remains.

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Thank you!!

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