The California housing market in 2026 is shaping up to be a year of modest growth and slightly improved affordability. While we won’t see the rapid surges of years past, expect a gentle uptick in home sales and a record-breaking median price that hints at a market finding its footing after more challenging times.

I’ve seen cycles come and go. It’s always tempting to focus on the dramatic swings, but sometimes the most insightful observations come from understanding the subtle shifts. The California Association of Realtors (C.A.R.) latest forecast for 2026 offers a glimpse into a market that’s stabilizing, and for many, that stability is actually good news.

California Housing Market Forecast for the Next Year: 2026 Predictions

Sales on the Upswing, But Don’t Expect a Frenzy

According to C.A.R., we’re looking at an increase of about 2 percent in existing, single-family home sales in 2026. This means an estimated 274,400 units could change hands. This might not sound like headline-grabbing news, especially when you compare it to the booming sales numbers of a few years ago. However, it’s a welcome step up from the projected 269,000 sales for 2025, which itself is a slight dip from the 269,200 homes sold in 2024.

Think of it like this: the market has been catching its breath. After a period of intense activity, it’s natural for things to calm down a bit. This projected increase in sales in 2026 signifies a gradual return to normalcy, rather than a mad dash. For buyers who have been priced out or overwhelmed by competition, this could mean more options and a slightly less frantic search.

A New Price Record, But At a Slower Pace

Here’s a fact that will likely grab attention: California’s median home price is forecast to hit a new projected record of $905,000 in 2026. This represents a 3.6 percent increase from the projected $873,900 in 2025. It’s important to remember that this follows a more modest 1 percent rise in 2025 from the $865,400 median price in 2024.

Now, I know what some of you might be thinking: “More expensive? Great!” But it’s crucial to dig a little deeper. This 3.6 percent growth is significantly slower than the double-digit increases we’ve witnessed in some prior years. This is a key indicator that the market is moving away from rapid appreciation and towards a more sustainable growth pattern. As C.A.R. President Heather Ozur mentioned, “Home prices in California are expected to rise in 2026, but the growth pace will remain mild when compared to rates we’ve seen in past years.” This is a message of moderation, not runaway inflation.

Improved Affordability: A Breath of Fresh Air

One of the most encouraging pieces of the 2026 forecast is the projected increase in housing affordability. We’re looking at the Housing Affordability Index inching up to 18 percent in 2026, from a projected 17 percent in 2025, and 16 percent in 2024.

What does this mean for the average Californian? It means a slightly larger percentage of households will be able to afford to buy a median-priced home. This improvement is largely driven by a projected decrease in mortgage interest rates. C.A.R. forecasts the average 30-year, fixed mortgage rate to dip to 6.0 percent in 2026, down from 6.6 percent in 2025. While these rates are still higher than the pre-pandemic era, they represent a significant improvement from recent years and are well below the long-term average of nearly 8 percent. Lower interest rates, combined with a slight uptick in inventory, creates a more favorable environment for buyers.

Economic Undercurrents: What’s Driving the Forecast?

It’s vital to understand the broader economic forces that are shaping this housing forecast. C.A.R. projects a slight slowdown in U.S. GDP growth to 1 percent in 2026, following a projected 1.3 percent in 2025. California’s nonfarm job growth is also expected to be modest at 0.3 percent in 2026, contributing to a projected unemployment rate of 5.8 percent.

This might sound a bit concerning, but in the context of the housing market, it can play a balancing role. A strong, rapidly growing economy can fuel rapid home price appreciation. A more measured economic pace, on the other hand, helps to temper extreme price swings and contribute to the stability we’re forecasting.

We also anticipate inflation to average around 3.0 percent in 2026, a slight increase from the projected 2.8 percent in 2025. While higher inflation can erode purchasing power, the projected drop in mortgage rates is expected to offset some of this impact on housing affordability.

Inventory: A Gradual Improvement

A key factor influencing both sales and prices is the availability of homes for sale. The 2026 forecast suggests that housing supply will continue to improve, potentially reaching near pre-pandemic levels. Active listings are expected to be up by nearly 10 percent. This is excellent news for buyers who have been frustrated by the lack of choices.

When there are more homes on the market, sellers have to be more competitive, and buyers have more leverage. This gradual increase in inventory is crucial for sustaining a healthy market. As Jordan Levine, C.A.R.’s Senior Vice President and Chief Economist, pointed out, “Housing sentiment will see some improvement in 2026” as economic uncertainty clears and mortgage rates decline.

Challenges on the Horizon

While the forecast paints a picture of cautious optimism, it’s not without its potential hurdles. Levine also highlighted ongoing challenges such as “mounting headwinds such as the ongoing trade tensions between the U.S. and its trading partners, the home insurance crisis, and a potential stock market bubble.”

These are important considerations. The home insurance crisis, in particular, continues to be a significant concern for many homeowners and can impact buying decisions. Trade tensions and stock market volatility can create broader economic uncertainties that could influence consumer confidence and, consequently, the housing market.

My Take: A Market for Savvy Buyers and Patient Sellers

From my perspective, the 2026 California housing market forecast points to a period of balanced conditions. For buyers, this means opportunities. The slight increase in affordability, coupled with a more stable price appreciation and improving inventory, makes it a more approachable market than in recent years. It’s a time to be strategic, do your research, and potentially negotiate from a stronger position.

For sellers, it’s important to have realistic expectations. While prices are projected to rise and sales are expected to increase, the days of wildly inflated offers might be behind us for now. A well-priced, well-presented home will still attract strong interest, but patience and a clear understanding of current market values will be essential.

The key takeaway for me is that the California housing market is evolving. It’s moving away from the extreme volatility of the past and towards a more sustainable, predictable future. It’s less about getting lucky and more about making smart, informed decisions.

2026 California Housing Forecast Summary

*Note: Housing Affordability Index is the percentage of households that can afford to purchase a median-priced home.

Mortgage Bankers Association

Kitchen and bath updates, fresh paint, decluttering and curb appeal boost home value as buyers face steady interest rates

People considering buying or selling a home are facing a unique market. Real estate has been in flux for several years, and high interest rates have made borrowing more expensive.

The Mortgage Bankers Association projects 30-year mortgage rates will level off at 6.5 percent for the foreseeable future. That could disappoint buyers who were waiting for lower rates, but it may also push hesitant shoppers to act in 2025. Sellers, meanwhile, would be wise to make improvements that help their properties stand out and secure the best possible price.

Make kitchen and bath updates

The kitchen remains the heart of the home, and moderate upgrades such as resurfacing cabinets, changing fixtures or replacing countertops can give the space a refreshed look. Bathrooms are equally important. Katie Severance, author of The Brilliant Home Buyer, calls kitchens and baths “money rooms” because they add the most value.

Declutter living spaces

Removing unnecessary belongings can make rooms feel larger, which appeals to buyers, especially as open floor plans remain popular. A tidy, streamlined home also makes it easier for potential buyers to imagine themselves living there.

Add fresh paint

Painting is one of the most cost-effective renovations. According to HGTV, freshly painted rooms appear cleaner and more modern, making them attractive to buyers. Experts recommend neutral colors to appeal to the broadest audience.

Enhance curb appeal

A property’s exterior is the first thing buyers see in person or online. Homeowners should keep lawns maintained and consider adding colorful, low-maintenance plants to boost curb appeal.

Expand usable space

Finishing basements or attics, converting garages into living areas or adding a three-season room can increase livable square footage—another strong selling point.

With rates steady and competition expected to remain, homeowners can maximize resale value by making targeted improvements before listing their properties.

CubeSmart (NYSE:CUBE) is back in the spotlight after Evercore ISI upgraded the stock to ‘Outperform,’ pointing to what they see as an attractive valuation and optimism around the housing market. Evercore’s decision comes with the view that improving market conditions could give a welcome boost to CubeSmart’s revenue in the coming year, a sentiment many investors may find reassuring after a year that has prompted tough questions about where growth will come from. For those tracking REITs or real estate stocks, this is the sort of event that could nudge portfolios in a new direction.

In the bigger picture, CubeSmart’s stock has seen plenty of movement, with short-term gains giving way to a longer-term downswing. Over the last year, the shares have declined around 20%, despite pockets of positive momentum in recent weeks. Rising interest rates and competitive dynamics shaped the larger narrative, but annual revenue growth has held up, even if net income didn’t budge much. While CubeSmart’s three-year and five-year returns still look healthy, the past year suggests momentum has cooled for now.

So after this analyst-driven bump, is CubeSmart undervalued, set for a turnaround, or is the market already factoring in its growth story ahead of next year?

Most Popular Narrative: 10.5% Undervalued

According to the most widely followed narrative, CubeSmart is trading below its estimated fair value, with analysts pointing to a sizeable upside potential if their assumptions hold true. The current share price is seen as not fully reflecting the company’s long-term growth prospects, even as short-term headwinds persist.

Improving fundamentals in key urban markets, especially along dense corridors like New York City, where demand is driven by a growing base of urban dwellers and small businesses coupled with limited new supply, are creating a stable, resilient occupancy base and sticky customer relationships. This environment may steadily lift revenue and net rental income as positive trends flow through the portfolio.

What is the financial engine fueling this bullish rating? Analysts are betting on a delicate balance of growth factors, from urban demand trends to future profitability assumptions. However, the real surprise lies in just how ambitious this narrative is about CubeSmart’s future margin trajectory and valuation multiple. Want to uncover the forecasts and financial math powering this undervaluation call? The numbers behind this outlook may just defy expectations.

Result: Fair Value of $45.28 (UNDERVALUED)

Have a read of the narrative in full and understand what’s behind the forecasts.

However, persistent new supply in Sunbelt regions or a slower recovery in move-in rates could dampen CubeSmart’s revenue growth and delay a margin rebound.

Find out about the key risks to this CubeSmart narrative.

Another View: Discounted Cash Flow Model

Taking a different approach, the SWS DCF model suggests CubeSmart’s value story could be even more compelling. This analysis frames the stock as undervalued by a wide margin. How might this change your perspective?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out CubeSmart for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match – so you never miss a potential opportunity.

Build Your Own CubeSmart Narrative

If you see things differently or want to dive deeper into the numbers yourself, you can put together your own perspective in just a few minutes. Do it your way

A great starting point for your CubeSmart research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data
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Recent analysis from Moody’s Analytics, led by Chief Economist Mark Zandi and Deputy Chief Economist Cristian deRitis, points directly to outdated capital gains tax caps as the culprit that is keeping millions of homes off the market and out of reach for families who need them most.

According to the report, the problem starts with too many empty-nest seniors “locked in” to homes that no longer fit their needs. But instead of selling and downsizing to a smaller home, the prospect of steep capital gains taxes keeps them in their bigger homes.

The problem is especially acute in high-cost metro areas, where decades of property appreciation means selling even a modest home can trigger a six-figure tax bill. This “misallocation” in the housing market results in a “logjam” where nearly 6 million older Americans reside in houses far larger than necessary, while growing families are crammed into spaces that are too small and millions of young households stay stuck in rental limbo.

This lock-in effect, which is separate from the one caused by high mortgage rates, stems from the Taxpayer Relief Act of 1997, which introduced a capital gains exclusion of $250,000 for single filers and $500,000 for married couples. But these thresholds haven’t budged in almost 30 years. If indexed to home price growth, today’s exclusions would be $885,000 for individuals and $1.77 million for couples. Instead, the thresholds remain static, and more homeowners face massive taxes for moving, especially in states like California and Florida.

In an America full of what UBS calls “everyday millionaires” — a phrase that applies to lots of Americans whose inflated assets make them wealthy on paper, but quite average in lifestyle — lots of people can’t afford to pay the taxes on their real-estate nest eggs.

The case of the widow who wouldn’t sell

Zandi and deRitis argue the most direct remedy is to index the exclusion caps to reflect either inflation or actual home price growth. Raising or even eliminating these caps would immediately release pent-up inventory, helping empty nesters downsize and making more family homes available.

Take the hypothetical example of a widow with a 2,800-square-foot home, the authors write: she faces capital gains of $750,000, and after her $250,000 exclusion, she would pay taxes of more than $100,000 at combined federal and state rates. That represents over 20% of her downsizing proceeds.

“The disincentive to sell is strong,” they write, and she would naturally favor the alternative of living in the house until she dies. “Her heirs would inherit the home on a stepped-up cost basis, avoiding the capital gains tax altogether.”

The Congressional Research Service has estimated that capital gains taxes on the sales of homes exceeding the caps generate $6 billion-$10 billion a year in federal revenue. But changing the tax code doesn’t have to blow a hole in government budgets. Zandi’s analysis suggests much of this could be offset by other tax streams if turnover rises.

Moody’s found that greater housing turnover would also boost labor mobility, one of the keys to regional economic growth. When people can move for jobs, metro areas with more housing transactions see significantly higher employment and gross product growth. Increased sales generate new revenue for local governments through transfer and property taxes, while additional commissions and remodeling purchases pump billions into the economy.

Not just a fix for the wealthy

Right now, much of the tax burden falls on middle-income owners in pricey regions—often after a life crisis like divorce or the death of a spouse—and not on the wealthy, according to the report. That’s because savvy high earners have resources to sidestep taxes entirely. Indexing or eliminating caps would shift the burden from those least able to pay and smooth market frictions hurting families of all ages.

And while some worry that changing the exclusion could flood the market, Moody’s analysis finds that even a 25% spike in listings would only restore sales to normal, pre-crisis levels. Zandi and deRitis suggest a time-limited adjustment could “jump-start” the market without destabilizing prices. They also note significant compliance savings for taxpayers and the IRS, as millions would no longer need to track decades’ worth of paperwork.

America is aging in place

Meanwhile, the number of first-time home buyers has shrunk to a historic low, and they are growing older than ever, hitting a median age of 38. As of July, more senior citizens were actively buying homes than Gen Z and millennials. In April, Jessica Lautz of the National Association of Realtors told Fortune that boomers were “dominating” the housing market, “often purchasing their next homes with cash.”

Zandi isn’t alone in decrying how stuck the housing market has become. Meredith Whitney, the so-called “Oracle of Wall Street,” calculates that baby boomers now own over 54% of U.S. homes (up from 44% in 2008), and 79% are mortgage-free.

“This has made it easier for seniors to hold on to their homes by tapping into some of this built-up equity,” she warned this month. “And growth in such funding will be a major theme for the US economy in the next three to four years.”

Ted and Jamie Garber have a counterintuitive strategy for shedding cash flow from their rental properties.

“We always rent at or below market rates,” the Florida-based couple who own 28 units across 15 commercial and residential properties told Business Insider.

They’ve found that it drives a lot of tenant applications and helps prevent tenant turnover.

Plus, “our tenants value the fact that they’re renting slightly below market rate, so they’re going to want to take care of the place,” said Ted, calling it a win-win. “They’re getting a deal, and we’re still making money from it all.”

Despite renting at or below the average in their area, the Garbers earn six figures in “mostly passive” rental income, said Ted. They started buying rentals in 2020 to accelerate their progress toward financial independence and estimate that they spend about 10 hours a month on real estate-related activities.

Their philosophy on increasing rent is property and market-dependent. With insurance premiums surging in Florida due to increased costs from natural disasters, sometimes increasing rent is inevitable. But it’s capped, said Ted: “We have it built into the leases that it’s a maximum of 5% a year.”

In other areas where they own rentals, it doesn’t make sense to increase rent.

“For example, our new single-family homes are oversaturated by institutional investors that came in — like Invitation Homes by Blackstone — bought a ton of properties in that growing area, and flooded the market with rentals,” he explained. “I was able to get ours rented within days of closing because of my marketing and listing, but you still have to factor all that in. So in those areas, I’m not going to increase because the supply is way outpacing the demand.”

Washington-based investor Dion McNeeley, who retired early thanks to his portfolio of rentals, also believes in providing below-market rent.

He uses what he calls the “binder strategy” to include his tenants in the pricing conversation. He’ll set up a meeting with his tenant and bring a three-ring binder. The first page features a picture of the property they’re renting and its cost.

“Most tenants aren’t looking at home prices unless they’re looking to buy,” he said. “My last property was $400,000 for a duplex. Before that, I paid $525,000 for a triplex. Those are big numbers to a renter, so you point out the current price and say: ‘That’s what my taxes are going to be based on. That’s what my insurance is going to be based on.'”

The second page includes a map showing his property and all the rentals in the surrounding area with the same number of bedrooms and bathrooms. McNeeley walks his tenants through the binder to educate them on market prices and explain how much they’re paying below the average.

He gives the example of one of his duplexes. When he bought it, both tenants he inherited were paying about $1,100 in rent, but the market rent was closer to $1,600.

“If I just went to those tenants, and I said, ‘I’m going to raise you to $1,600,’ I would be a jerk and they’d probably move out,” he said. When he sat them both down with the binder and asked what they thought a fair price would be, “the tenants asked for more than a $300 increase because it’s still below the area average and they’re still getting a deal.”

His tenants rarely ask to pay market rent, he noted: “I’ve never had a tenant say, ‘If the average is $1,600, we should raise it to $1,600.’ I’ve also never had a tenant say, ‘I think it would be fair for it to stay the same or for it to go down.'”

In the long run, he’s saving money by maintaining good relationships with his tenants and avoiding turnover.

“Happy tenants don’t trash the place, and they don’t move, and tenant turnover is one of the most expensive things a landlord has to deal with,” he said. “I’m making tens of thousands of dollars more in the last few years than I would have if I raised the rent to the area average and then dealt with a bunch of turnover.”