Southern California Housing Market Forecast for 2026

After a year marked by declining home prices, Southern California real estate markets could soon reach a turning point. Recent forecasts predict that home prices across the San Diego, Los Angeles, and Inland Empire regions could rise slightly in 2026.

For home buyers, sellers, real estate professionals, and investors, this could be a meaningful market shift with a ripple effect that extends throughout 2026.

5 Key Takeaways You Should Know

Southern California home prices declined 1-3% across major metros in 2025 but are forecast to rise 1-2% in 2026.
Late 2025 and early 2026 could be the lowest price point of the current cycle. Buyers who wait until late 2026 might pay more.
Mortgage rates are expected to drop from 6.6% to 6.0% in 2026. This should improve affordability and bring buyers back to the market.
Even small price increases matter in expensive markets. A 1.5% increase on a $900,000 home means paying $13,500 more.
Buyer psychology could shift from “wait and see” to “act now” as positive housing forecasts become more widely known.

The Current Landscape: A Year of Decline

Southern California’s housing market has experienced a measurable downturn over the past year, with home values declining across the region’s three largest metropolitan areas.

San Diego-Carlsbad Metro: The average home value was $918,426 at the end of 2025, marking a decline of 2.6% over the past year.
Los Angeles-Long Beach-Anaheim Metro: Average home values have dropped to $942,799, down 1.2% year-over-year.
Riverside-San Bernardino-Ontario Metro: This Inland Empire region has seen average home values fall to $578,678, a 2.5% decrease.

These declines reflect broader market dynamics that have characterized much of 2025, including elevated mortgage rates, affordability constraints, and a cautious buyer sentiment that kept many potential purchasers on the sidelines.

A Positive but Modest Forecast for 2026

According to at least one forecast, the Southern California real estate market could hit a turning point in 2026 with home prices turning north again.

In December 2025, Zillow offered the following home-price predictions for the three major metro areas listed above:

San Diego-Carlsbad: +1.2% year over year
Los Angeles-Long Beach-Anaheim: +1.1%
Riverside-San Bernardino-Ontario: +1.6%

(This forecast covers the 12 months from November 2025 to November 2026.)

An annual price increase of 1.1% to 1.6% might not seem like much. But it would mark an important turning point for the southern California real estate market.

If these predictions prove accurate, we could be coming into the bottom of the current price cycle with the possibility of steady appreciation going forward.

Statewide Trends Mirror Regional Patterns

The California Association of Realtors (C.A.R.) has released projections that reinforce the narrative of a housing market that’s poised for recovery.

According to their 2026 forecast, California’s median home price is expected to rise 3.6% to $905,000 in 2026, following a modest 1.0% increase in 2025.

As C.A.R. president Heather Ozur explained:

“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 statewide trend is particularly relevant for Southern California, which represents a significant portion of the state’s housing market activity.

7 Factors That Could Boost SoCal Home Prices

Home price trends are influenced by a range of factors, on both the supply and demand side of the equation. Here are seven factors that could cause SoCal home prices to rise in 2026:

Declining Mortgage Rates: Rates are predicted to drop from 6.6% in 2025 to 6.0% in 2026. This could bring more buyers into the market, increasing demand and prices.
Housing Supply Shortage: California’s roughly 3-million-unit shortage keeps supply tight and continues to boost prices in many cities.
Prop 13 Lock-In Effect: Low tax assessments tied to original purchase prices discourage homeowners from moving and keep inventory limited.
Regulatory and Zoning Barriers: Strict rules, long permitting timelines, and widespread single-family zoning limit new construction and keep supply tight.
Regional Desirability: Strong job markets, climate, and culture continue to draw people into SoCal, supporting demand within the housing market.
Limited Construction: Despite reforms, homebuilding remains flat, widening the gap between housing needs and actual production.
Regional Rent Growth: Forecasted rent gains, including 3.2% annual growth in the Inland Empire, make buying more appealing than renting.

What This Means for Southern California Home Buyers

For those planning to buy a home in SoCal, the price forecast for 2026 could justify a renewed sense of urgency. Timing could become crucial in the coming months.

The Bottom May Be Now

The data suggests that the lowest price point of the current cycle is occurring right now and will likely extend over the next few months. For buyers who have been waiting on the sidelines hoping for better deals, this may represent the optimal entry point.

Markets like San Diego, Los Angeles, and the Inland Empire have already experienced their price corrections.

While no one can predict the future with certainty, historical patterns and current forecasts suggest that waiting until the latter half of 2026 could mean paying more for the same property.

Even Small Increases Matter in SoCal

In a high-cost real estate market like Southern California, even a small percentage increase in home values can add up to a lot of money.

A 1.5% to 2% increase on a $900,000 home represents $13,500 to $18,000 in additional cost. For buyers near the edge of affordability, this difference could be the deciding factor in whether or not they can buy a home.

Be Aware of Regional Variations

While housing forecasts can give us a general sense of what the future might bring, we have to remember that the Southern California real estate market is incredibly diverse.

Coastal vs. Inland: Coastal communities often maintain more price stability due to limited supply and high desirability, while inland areas can be more volatile.
Price Segments: Luxury properties may behave differently than entry-level homes, with first-time buyer segments potentially seeing stronger demand in 2026.
Local Economic Factors: Employment trends, new development, and migration can create “micro-market” conditions that diverge from regional patterns.

The bottom line: Data and forecasts suggest that Southern California’s housing market is approaching a significant transition from falling to rising prices.

Forecasts for the Major Metro Areas

Elsewhere on this site, you’ll find housing market forecasts for the major metropolitan areas in Southern California:

Long Beach | Orange County | San Diego-Carlsbad

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