California Real Estate Market Analysis - December 2026

The 30-year fixed averaged 7.33% in October, up from 6.86% in September and the eighth consecutive monthly increase from February's 6.05% low, a climb of 128 basis points (1.28 percentage points). The weekly peak was 7.40% on October 8 and 15. Since then rates have eased four weeks running, to 7.24% on October 29, 7.18% on November 5 and 7.11% on November 12, still well above the 6.24% of a year earlier (Freddie Mac). Buyers noticed: mortgage applications to buy a home rose 8% in the week ending November 6, though they remain 18% below a year ago, and the Mortgage Bankers Association's contract rate fell to 7.21% (MBA, via HousingWire, Nov 12, 2026).

Inflation is still the obstacle. Consumer prices rose 0.4% in October after 0.6% in September, above the roughly 0.3% forecasters expected, and core prices, which strip out food and energy, rose 0.3% for a third straight month (BLS, Nov 10, 2026). BLS did not publish twelve-month rates for most October series, because October 2025 prices were never collected during last year's federal funding lapse, so September's 3.7% headline and 2.6% core readings remain the latest annual figures. The Federal Reserve held its target range at 3.75% to 4.00% on October 28, but two voters, Lisa Cook and Beth Hammack, dissented in favor of a hike, and the statement said inflation "remains elevated." After the October CPI report, futures priced the odds of a quarter-point hike at the December 8-9 meeting near 89% (CME FedWatch via Investing.com, Nov 10, 2026), and Governor Christopher Waller said he would support one (Federal Reserve, Nov 10, 2026).

NAR reported existing-home sales fell 5.5% in October to a 3.75 million SAAR, 8.8% below a year earlier and the slowest pace since August 2010. SAAR, or seasonally adjusted annual rate, annualizes one month's pace so months compare cleanly. September was revised down to 3.97 million. The West fell hardest, down 9.7% on the month and 14.5% on the year to 650,000, with a median price of $624,300, flat on the year. Nationally the median was $416,700, up only 0.4%, the 40th straight annual gain, and 1.59 million homes for sale equal a 5.1-month supply, against 4.7 in September and 4.4 a year ago. Homes took a median 35 days to sell, and all-cash buyers rose to 29% of sales (NAR, Nov 12, 2026). The forward signal is no better: Zillow counted newly pending sales down 16.8% from a year earlier, the biggest drop since 2023 (Zillow, Nov 5, 2026). NAR's October pending home sales index is due November 18, after September's record low of 66.0.

What October data already shows comes from Zillow, which covers all home types in each metro. The typical home value rose 0.8% on the year in Los Angeles to $950,752, 3.5% in San Francisco to $1,133,992, 0.7% in San Diego to $929,026 and 0.3% in Riverside to $580,531, was flat in Sacramento at $572,390, and fell 1.0% in San Jose to $1,537,924 (Zillow October Market Report, Nov 5, 2026). Zillow's estimate of closed sales in the same six metros ran 6% to 18% below a year earlier, the steepest in Los Angeles (down 18%) and San Diego (down 17.2%). With the West's sales down 14.5% on the year in NAR's count, a weak C.A.R. sales figure for October is the likely outcome; prices are the open question.

The county figures available now are C.A.R.'s third-quarter affordability readings, and they split the state. Affordability slipped in Southern California and the Central Valley: Los Angeles to 15% from 17% in the second quarter, San Diego to 16% from 17%, Riverside to 27% from 28%, San Bernardino to 33% from 34%, and Fresno to 34% from 36%. It improved in the Bay Area and Sacramento, where quarterly medians eased: Contra Costa to 29% from 27%, Santa Clara and Alameda to 23% from 22%, and Sacramento to 33% from 32%. Orange County held at 15%, tied with Los Angeles for the lowest of the ten. Across all 53 counties C.A.R. tracks, 24 improved, 21 declined and 8 were unchanged; Lassen was the most affordable at 61% and Mono the least at 8% (C.A.R., Oct 30, 2026).

C.A.R.'s third-quarter Housing Affordability Index held at 19% of California households able to afford the median-priced existing single-family home, unchanged from the second quarter and from a year earlier. Two forces cancelled out: the quarterly median fell 2.3% to $894,630 while the effective mortgage rate rose to 6.80% from 6.54%. On that basis the monthly PITI payment is $5,700, where PITI means principal, interest, taxes, and insurance, and the minimum qualifying income is $228,000, up $4,400 from a year ago (C.A.R., Oct 30, 2026).

Rates have moved since the quarter ended. Holding C.A.R.'s third-quarter price, 20% down payment, and tax and insurance assumptions, October's 7.33% average lifts that payment to roughly $5,955 a month and the qualifying income to about $238,200, and the November 12 rate of 7.11% gives about $5,850 and $233,900, by this report's estimate. Put the other way, at 7.11% the $5,700 payment buys a home of about $872,000, roughly 2.5% less than at the third-quarter rate. Condominiums remain the realistic entry point: 31% of households could afford the third-quarter condo median of $640,000, on a qualifying income of $163,200, up from 30% in the second quarter (C.A.R.).

The latest quarterly reading still points the same way. Auction.com reports that completed foreclosure auctions in California rose 80% year over year in the third quarter, 9% above early-2020 levels, making the state third in the nation by volume (Auction.com Q3 2026 Auction Market Dispatch, as reported by The MortgagePoint, Oct 22, 2026). California is a non-judicial foreclosure state: the process runs from a Notice of Default (NOD, the first formal filing when a borrower falls behind) to a trustee sale and, if the home does not sell, to REO (real estate owned, a home the lender took back), without court. Today's auctions are early 2027's REO supply. Starting in 2027, foreclosures in two Bay Area cities also carry a new cost; see the Policy section.

The rental market keeps absorbing would-be buyers. Zillow put the typical U.S. asking rent at $1,913 in October, up 2.9% year over year, the strongest annual gain in 19 months and well ahead of the 0.7% growth in home values, while 40.4% of rental listings offered a concession, up from 38.7% a year earlier (Zillow, Nov 5, 2026). California's technology metros ran hottest again: San Francisco rents rose 12.2% to $3,438 and San Jose 8.9% to $3,811. Riverside rose 3.1% to $2,522, San Diego 2.3% to $2,936, Sacramento 2.2% to $2,282 and Los Angeles 2.1% to $2,913. Zillow's rental report finds demand from renters up 22.1% on the year, and estimates that a typical single-family renter in San Jose would need a $214,364 raise to afford buying a comparable home, the largest gap in the country (Zillow, Nov 12, 2026).

For covered units, the AB 1482 rent cap resets every August 1 using April regional CPI: 5% plus the regional change in the cost of living, capped at 10%. For August 1, 2026 through July 31, 2027, the Los Angeles-Long Beach-Anaheim CPI of 3.7% allows 8.7%; other regions use their own CPI.

SB 79, which allows ministerial (by-right) approval of transit-oriented housing near qualifying stops, has been in effect since July 1, 2026, and the CEQA reforms in AB 130 and SB 131 took effect on signature June 30, 2025. California permitting ran about 14% ahead of 2025 through September, and these laws may be part of the reason, though the evidence is far from conclusive. Rates above 7% in October are the test of whether that pace holds.