California Real Estate Market Analysis - July 2026
Last month's inflation scare has largely unwound. Headline CPI fell to 3.5% year over year in June from 4.2% in May, and the index actually declined 0.4% on the month, with energy the largest single contributor to the drop (BLS, released July 14, 2026). Core CPI eased to 2.6%. That combination supports the reading we offered last month: the May spike was an energy event, not a broadening of price pressure.
Mortgage rates have not cooperated. The Freddie Mac 30-year fixed averaged 6.49% in June, up from 6.44% in May, and the weekly survey has since climbed from 6.43% on July 2 to 6.49% on July 9, 6.55% on July 16, and 6.58% on July 23. The Mortgage Bankers Association's separate survey put its 30-year contract rate at 6.65% for the week ending July 10, the highest since August 2025, and reported mortgage applications down 2.7% on the week. The gap between the two surveys is a matter of loan mix and methodology, not a contradiction, but both point the same direction.
The Federal Reserve held its target range at 3.50% to 3.75% on June 17 in Chair Kevin Warsh's first meeting, in a unanimous vote. More consequential than the hold was the Summary of Economic Projections: officials removed the rate cut they had previously penciled in for 2026 and left the door open to a hike. For borrowers, this means the long-anticipated relief from Fed easing is off the table for this year.
National activity is drifting sideways with a softer edge. Existing-home sales fell 2.4% in June to a 4.09 million SAAR, though they remained up 2.8% from a year earlier, and the national median reached a record $440,600, a 36th consecutive year-over-year increase (NAR, released July 9, 2026). Seasonally adjusted annual rate, or SAAR, annualizes a single month's pace so months compare cleanly. Inventory stood at 4.6 months, still below the 5-to-6-month range generally considered balanced. The forward-looking signal is weaker: NAR's Pending Home Sales Index dropped 5.4% to 72.5, the lowest reading since January and down 0.3% year over year, with month-over-month declines in all four regions.
California closed the first half of 2026 with the healthiest sales figure in six months. Closed escrow sales of existing single-family homes reached a 279,880 SAAR in June, up 4.1% from May's revised 268,810 and up 6.0% from June 2025, the third consecutive year-over-year gain and the strongest since September 2025 (C.A.R., released July 16). Year-to-date sales are up 1.9% through the first half. Statewide sales have now run below the 300,000 benchmark for 45 consecutive months, so this is a recovery within a depressed range rather than a return to normal volume.
What makes the June sales figure more encouraging than April's or May's is where the growth came from. C.A.R. reports that gains were driven primarily by entry-level and mid-tier homes, while higher-priced sales retreated for a second straight month. For the past two quarters this report has flagged that California's record medians were substantially a composition effect, meaning the median rose because the mix of homes sold tilted upmarket rather than because typical homes were appreciating. June is the mirror image: the share of million-dollar-and-above sales fell from a record 38.5% in May to 36.9%, and the statewide median fell 2.8% to $904,640 even though it remains 0.4% above a year ago. A median that falls because ordinary buyers came back is a healthier signal than a median that rises because they left.
Supply moved the other way. The C.A.R. Unsold Inventory Index (UII, the months it would take to clear all listed homes at the current sales pace) fell to 3.1 months in June from 3.8 a year earlier, and active listings were down 10.4% year over year, the fifth consecutive annual decline and the steepest since December 2023. Median time on market was 23 days, down from 24, and the sales-price-to-list-price ratio was 100.0% against 99.3% a year ago. Faster sales at full asking price, with fewer listings, is the classic setup for renewed price pressure in the second half if demand holds.
| County | Median Price (Jun '26) | Price YoY | Price MoM | Sales YoY | Affordability (Q1 '26) |
|---|---|---|---|---|---|
| San Francisco | $2,128,000 | +24.8% | −3.3% | +18.1% | 20% |
| Santa Clara | $1,950,000 | −7.6% | −7.1% | −1.8% | 22% |
| Orange | $1,490,000 | +1.4% | −0.2% | +12.2% | 16% |
| Alameda | $1,325,000 | +0.3% | −5.4% | +1.5% | 23% |
| San Diego | $1,085,000 | +5.9% | +2.5% | +16.1% | 17% |
| Los Angeles | $910,370 | +0.7% | +8.6% | +6.8% | 18% |
| Riverside | $635,000 | 0.0% | −0.8% | +7.1% | 29% |
| Sacramento | $575,000 | +4.7% | +2.6% | +18.3% | 34% |
| San Bernardino | $508,080 | +5.3% | +4.5% | +13.1% | 35% |
| Fresno | $429,820 | −2.0% | −1.2% | +14.7% | 37% |
On the columns: This table follows individual counties rather than C.A.R.'s multi-county regions, so the same market is never counted twice. Median price, year-over-year and month-over-month change, and sales growth all come from the C.A.R. June 2026 release. The final column is C.A.R.'s Traditional Housing Affordability Index for the first quarter of 2026, the share of local households that can afford the county median-priced home (higher is more affordable). A one-year price forecast column is deliberately omitted: the only Zillow regional forecast vintage available at publication was dated December 2025, too stale to present as current, and no county-level forecast from a primary source was available. Zillow's current national outlook is a 0.2% decline in U.S. values over the twelve months to May 2027.
The coastal Bay Area is pulling in two directions. San Francisco's median jumped 24.8% year over year to $2,128,000, which C.A.R. attributes to AI-driven demand, an acute inventory shortage, and tech-equity gains lifting buyer net worth; San Mateo rose 7.9% and Marin 7.6%. At the same time Santa Clara fell 7.6% to $1,950,000 with sales down 1.8%, the only major coastal county losing ground on both price and volume, and Napa fell 17.3%. Alameda was essentially flat at $1,325,000.
San Diego, Orange, and the inland counties turned in the broadest gains. San Diego led the large coastal counties on price at $1,085,000, up 5.9% with sales up 16.1%, and Orange reached $1,490,000, up 1.4% with sales up 12.2%. Inland, San Bernardino rose 5.3% to $508,080 on 13.1% more sales, while Riverside was flat at $635,000 even as sales rose 7.1%, consistent with more entry-level product clearing. Los Angeles County sat at $910,370, up just 0.7% year over year.
The Central Valley and Sacramento remain the volume and affordability leaders. Sacramento County sales rose 18.3% with the median up 4.7% to $575,000, and Fresno sales rose 14.7% even as its median slipped 2.0% to $429,820. These are the counties where the largest share of households can still afford the local median, from 34% in Sacramento to 37% in Fresno, against 16% to 23% across the coastal counties. Statewide, the median time on market was 23 days and the sales-to-list ratio was 100.0%; C.A.R. does not publish those two measures at the county level.
Single index: California LAO tier-qualification share, 2019 vs 2026
For the first time in several editions this report can publish California distress figures rather than describe the trend qualitatively. ATTOM's Mid-Year 2026 report counted 21,543 California properties with a foreclosure filing in the first half of 2026, up 12.8% from a year earlier, covering 0.15% of housing units, or one in every 680. That ranked California 18th nationally by rate, well behind Florida at 0.27% and South Carolina at 0.26%, so California's problem is one of absolute volume rather than intensity. Within that volume, California recorded 16,040 foreclosure starts, third nationally behind Texas and Florida, and 2,644 bank repossessions (REO, property a lender takes back after foreclosure), second nationally. Bakersfield posted the fourth-worst metro foreclosure rate in the second quarter at one in every 616 housing units.
Nationally the picture is one of gradual normalization rather than distress. Filings totaled 227,548 in the first half, up 21% year over year, but second-quarter filings of 115,714 were down 3% from the first quarter even while up 15% from a year earlier. The average time to complete a foreclosure fell to 563 days in Q2, the shortest since 2013 and a seventh consecutive quarterly decline. Shorter timelines mechanically raise completion counts without implying more borrowers are failing, which is the main reason REO volume is growing faster than filings. California is a non-judicial foreclosure state, so its process moves from a Notice of Default (NOD, the first formal step) to REO faster than judicial states, and first-half starts should surface as completions later in the year.
Rents continue to diverge sharply by market. Zillow's statewide average asking rent was $2,700 as of mid-July, up $5 on the month but down $100 year over year, while San Francisco averaged $4,295 and Sacramento $1,995. The rent-versus-own gap documented by the LAO, with ownership running about 66% above rent on a comparable two-bedroom home, keeps rental demand structurally firm regardless of what for-sale prices do.
California's statewide rent cap under AB 1482 follows a standing formula: 5% plus the regional change in CPI, capped at 10%. For the adjustment window beginning August 1, 2026, the cap in the Los Angeles-Long Beach-Anaheim CPI region is 8.7% (Apartment Association of Greater Los Angeles), and Marin County's is 8.8% on an April 2026 regional CPI of 3.8% (County of Marin). These are near the top of the range seen in recent years, a direct consequence of the spring energy-driven CPI run-up. Owners and tenants in covered units should confirm the figure for their own CPI region, since it varies materially across the state.
June's headline was dramatic and largely hollow for the for-sale market. Total housing starts rebounded 19.0% to a 1,427,000 SAAR after a weak May, but the entire gain came from multifamily, which jumped 76.3% to a 513,000 rate, the highest in more than three years. Single-family starts were 895,000, essentially flat against May's revised 897,000 and below the 1,022,000 reached in March. Single-family construction has been range-bound near 900,000 for a year, which is the number that matters most for entry-level for-sale supply.
Multifamily strength is not irrelevant to California. More apartment completions in 2027 and 2028 would ease the rent pressure that the AB 1482 caps above are responding to, and rental supply is the faster lever in a state where the lock-in effect keeps resale listings scarce. On the California permit picture specifically, state-level authorization counts for June were not available from Census or the Construction Industry Research Board at publication, so no figure is presented here rather than an estimate. The structural reforms remain the bigger California story: the AB 130 and SB 131 CEQA exemptions took effect January 1, 2026, and their measurable effect on permits and completions will take several more quarters to appear.
Signed October 2025; took effect July 1, 2026. Applies immediately in Alameda, Los Angeles, Sacramento, San Diego, San Francisco, San Mateo, and Santa Clara counties, raising height and density standards near major transit stops and overriding local zoning. Cities have split: Los Angeles adopted the most restrictive option available, delaying full implementation to 2030; Los Angeles, San Francisco, and San Jose are pursuing industrial employment hub exclusions; Menlo Park adopted the law after rejecting a staff recommendation to seek an exemption.
AB 130 and SB 131 were signed and took effect January 1, 2026: expanded CEQA exemptions for qualifying infill and housing projects, shortened agency review timelines, caps on public hearings, and limits on the administrative record in litigation. The first major CEQA reform in a decade.
AB 1482 caps reset August 1, 2026 at 5% plus regional CPI to a 10% ceiling, producing 8.7% in the Los Angeles CPI region and 8.8% in Marin. On ADUs (accessory dwelling units), AB 976 permanently ended owner-occupancy requirements, AB 434 mandates pre-approved plans, SB 1211 allows additional ADUs on multifamily lots, and AB 1033 lets cities permit separate condo sale. All signed and in effect.
- July FOMC decision (July 28-29) and any shift in the dot plot
- C.A.R. July 2026 closed sales, median, and UII (mid-August)
- NAR July existing home sales and pending sales index
- July CPI: whether core holds near 2.6%
- Census July housing starts and permits, single-family in particular
- CA NOD filings: Los Angeles and Bay Area county recorders
- Freddie Mac weekly PMMS: whether the climb past 6.58% continues
- AB 1482 caps taking effect August 1 and local ordinance overlays
- SB 79 application volume in the seven covered counties
- SAAR
- Seasonally Adjusted Annual Rate: a month's sales pace annualized and adjusted for seasonal patterns, so months compare cleanly.
- PITI
- Principal, Interest, Taxes, and Insurance: the full monthly cost of owning, not just the loan payment.
- NOD
- Notice of Default: the first formal step in the foreclosure process, recorded when a borrower falls behind.
- REO
- Real Estate Owned: property a lender takes back after a foreclosure that did not sell at auction.
- DOM
- Days on Market: the median time from listing to pending sale.
- UII
- Unsold Inventory Index: the months it would take to sell all listed homes at the current sales pace. Lower means tighter supply.
- HAI
- Housing Affordability Index: C.A.R.'s measure of the share of households that can afford a median-priced home.
- Basis point
- One-hundredth of a percentage point. 46 basis points equals 0.46%.
- Composition effect
- A shift in the median caused by a change in which homes sold (for example, more or fewer high-end sales), rather than by individual homes changing value.
About North Coast Financial, Inc.
North Coast Financial has experience funding hard money loans across California since 1981. With over $1 billion in loans funded, we have a ground-level view of how California real estate markets shift across cycles, rate environments, and regional conditions.
This monthly analysis is written for borrowers, investors, brokers, and fiduciaries who need a clear picture of where the California market stands today. We focus on the data that matters most to real estate transactions: price trends, inventory, days on market, and lending conditions.
North Coast Financial is a direct hard money lender based in Oceanside, CA. We lend on residential and commercial real estate statewide, with loan approvals available the same day and funding within 7 days for business purpose scenarios. Questions about a specific deal? Call (760) 722-2991 or email contact@northcoastfinancialinc.com.
