‘Headwinds’ foreseen for California housing market as local sales rise slightly

Home sales and prices in the four-county Sacramento area showed slight increases in May, a warning sign of potential problems ahead in 2026.

Statewide, closed escrow sales of existing, single-family detached homes in California fell 3.1% from April and increased 5.1% on a year-over-year basis, the California Association of Realtors said in a news release.

Median prices rose 2.3% to $930,260 in May from $909,410 in April, a 3.1% increase over May 2025, the association said.

The 5.1% year-over-year boost is the strongest in eight months, said Oscar Wei, deputy chief economist of the association. Even so, he forecast difficulties ahead.

“With rates remaining volatile and the US/Iran agreement yet to be finalized, there will likely be headwinds in the market at the start of the second half of 2026,” Wei said.

But Wei said he expects housing market conditions to improve in the next six months as political uncertainty and the economy begin to stabilize.

“California’s home sales softened in May as broader economic uncertainty continued to weigh on consumer confidence and homebuying sentiment,” saidTamara Suminski,president of the association. “Even so, the recent easing in mortgage rates is an encouraging development, and if that trend continues, it could help bring more buyers and sellers back into the market and support a gradual improvement in housing conditions beginning in the third quarter.”

Here’s what to know:

What do the numbers show?

Home sales in Sacramento County in May fell 6.3% from April but were 1.5% higher than in May 2025.

In Placer County, sales rose 13.1% over April and increased 5.9% compared to May 2025.

Home sales in El Dorado County rose 1.3% in May compared to April but were 1.7% lower than in May 2025.

Sales in Yolo County were unchanged from April and were 15.7% higher than in May 2025.

Median home sale prices in Sacramento County rose 1.9% to $560,500 from $550,000 in May compared to May 2025.

In Placer County, median home sale prices increased 3.0% to $685,000 from $665,000 in the same period.

Median home sale prices in El Dorado County rose 5.9% to $740,000 from $699,000 in May 2025.

In Yolo County, median home sale prices slipped 0.3% to $685,000 from $687,400 in May 2025.

What do the numbers mean?

Home sales figures for May remain soft, but the rise in median sale prices is encouraging, Wei said.

“With the statewide median price reaching a new high, housing affordability challenges remain but should improve once prices moderate in September or October and the mortgage rate outlook becomes clear,” he said.

What do buyers need to know?

Tight housing inventory in May in California means market competition will boost prices, Wei said.

“Softer-than-expected housing demand, however, could provide leverage to homebuyers in the negotiation process,” he said. “Despite rates remaining elevated, the homebuying season is still a good time to buy for many homebuyers.”

What do sellers need to know?

Sellers seeking to trade up or down to another property should “seize the opportunity” to put their house on the market, Wei said.

“This year’s homebuying season could be stretched longer than a normal season if the economy stays healthy and mortgage rates begin to stabilize or even decline,” he said.

What do figures mean for 2026?

“Housing market conditions for the first five months of the year were affected by the US/Iran war, but home sales were still able to exceed last year’s level by a slight margin for the same time frame,” Wei said. “Assuming that the Middle East conflict will be resolved in the short term, the market should see some steady growth for the rest of the year.”