California Housing Market Cools in September as Higher Mortgage Rates Weigh on Buyers

Published: November 2, 2026

California’s housing market lost momentum in September as higher mortgage rates and persistent affordability challenges weighed on homebuyer demand. Existing single-family home sales declined both month over month and year over year, while the statewide median home price remained relatively stable.

The latest figures from the California Association of REALTORS® (C.A.R.) point to a market where buyers may have more time to evaluate properties, but high home prices and borrowing costs continue to limit affordability. For sellers, the slowdown underscores the importance of competitive pricing and understanding local market conditions.

Home Sales Decline Across Much of California

California recorded a seasonally adjusted annualized rate of 260,410 existing single-family home sales in September 2026. This represented a 3.4% decline from August and a 6.5% decrease compared with September 2025.

The annualized figure estimates how many homes would sell over a full year if September’s seasonally adjusted sales pace continued. It does not represent the actual number of homes sold during the month.

Sales activity weakened across most major regions of the state. Southern California experienced the steepest annual decline, with sales falling 9.1%. The Far North followed with a 9.0% decrease, while the San Francisco Bay Area recorded a 3.1% decline and the Central Valley saw sales drop 2.5%.

The Central Coast was the exception, recording a 4.4% annual increase in sales.

The figures highlight how California’s housing market continues to move at different speeds depending on location, available inventory, and local buyer demand.

Home Prices Remain Relatively Stable

Despite slower sales, California’s statewide median price for an existing single-family home remained close to its recent level.

The median price reached $899,720 in September, down slightly from $901,420 in August but up 1.7% from $884,390 a year earlier. This marked the fifth consecutive month of annual price increases.

Regional results varied. The Southern California median price reached $895,000, up 3.0% year over year. The San Francisco Bay Area recorded a median of $1.325 million, an annual increase of 1.9%.

The Inland Empire’s median price rose 1.7% to $601,030, while the Central Valley remained virtually unchanged at $500,000. The Far North was the only major region to record an annual decline, with its median price falling 3.4% to $377,150.

These differences show why statewide figures do not necessarily reflect the conditions of a particular neighborhood or property. Local supply, the types of homes sold, and the mix of transactions can all influence median prices.

Southern California Sees Slower Sales Despite Higher Prices

Southern California experienced the largest regional decline in sales activity during September, although its median home price remained above the previous year’s level.

Los Angeles County recorded a median price of $994,670, up 1.2% year over year, even as sales declined 10.9%. Orange County’s median reached $1.48 million, an annual increase of 5.6%, while sales fell 2.0%.

San Diego County recorded a median price of $1.05 million, up 6.1% from September 2025. However, sales dropped 12.2% year over year.

The combination of higher median prices and lower sales volumes suggests that reduced transaction activity has not translated into widespread annual price declines across these counties.

For buyers, these conditions reinforce the importance of researching recent comparable sales and evaluating individual properties rather than assuming that slower market activity automatically means substantial discounts.

Mortgage Rates Add to Affordability Challenges

Rising borrowing costs remain a major obstacle for prospective homebuyers.

According to Freddie Mac, the average 30-year fixed mortgage rate was 6.86% in September, compared with 6.67% in August and 6.35% a year earlier, based on the weekly survey figures used in C.A.R.’s report.

Mortgage rates climbed further in October, reaching 7.40% in Freddie Mac’s weekly survey on October 8 and again on October 15 before easing to 7.24% on October 29.

Higher interest rates increase the cost of financing a home and can reduce the amount buyers qualify to borrow. Even when prices remain stable, a higher monthly mortgage payment may put homeownership beyond the reach of some households.

Buyers should therefore consider the full cost of ownership, including principal, interest, property taxes, insurance, and any applicable homeowners association fees, when determining an affordable purchase price.

Housing Supply Improves Modestly

California’s housing supply showed some improvement in September, although the increase was limited.

Active listings rose 2.7% from August and 0.5% compared with September 2025. It was the first annual increase in active listings in eight months.

The statewide unsold inventory index remained at 3.7 months, unchanged from August and slightly above the 3.6 months recorded a year earlier. The index estimates how long it would take to sell the available supply at the current sales pace.

Homes also took a median of 29 days to sell in September, compared with 32 days in September 2025. The statewide sales-price-to-list-price ratio reached 98.8%, meaning the typical sale price was close to the original asking price.

Although these indicators suggest some changes in market conditions, supply remains constrained in many areas. The mortgage rate lock-in effect may discourage homeowners with lower existing mortgage rates from listing their properties, limiting the number of homes entering the market.

For buyers, a modest increase in listings may provide additional choices, but competition and negotiating opportunities will continue to vary by location and price range.

Affordability Remains a Major Concern

California continues to face substantial housing affordability challenges.

In the second quarter of 2026, only 19% of California households could afford the statewide median-priced existing single-family home of $916,750, according to C.A.R.’s housing affordability index.

The association estimated that a household needed an annual income of approximately $228,400 to qualify for the purchase under its standard assumptions, including a 20% down payment and a 30-year fixed mortgage at a 6.54% interest rate.

Affordability had declined from 22% in the first quarter of 2026, although it remained above the 17% recorded in the second quarter of 2025.

These figures help explain why higher mortgage rates can affect demand even when home prices change relatively little. Many households must balance housing costs against other expenses, savings goals, and income requirements.

What the Market Means for Buyers and Sellers

For buyers, slower sales and slightly higher inventory may create more time to compare properties, assess financing options, and negotiate terms where sellers are willing. However, opportunities will depend on the local market, property condition, and competition from other buyers.

For sellers, realistic pricing and careful preparation remain important. Properties priced in line with recent comparable sales may be better positioned to attract qualified buyers in a market where affordability is a concern.

Investors should also consider local rental demand, financing costs, maintenance expenses, and potential returns rather than relying on statewide price trends alone.

Looking Ahead

California’s September housing figures reveal a market facing weaker sales activity, elevated borrowing costs, and continuing affordability pressures. Yet the statewide median price remained higher than a year earlier, demonstrating that slower transactions do not necessarily translate into immediate or widespread price declines.

As the market moves through the final months of 2026, buyers and sellers should monitor mortgage rates, new listings, pending sales, and local pricing trends to make informed decisions.

The central takeaway is that California’s housing market is cooling in terms of sales activity, but conditions remain highly dependent on location. Understanding the differences between local markets will be essential for anyone planning to buy, sell, or invest in residential property.