California housing market freezes: Sales hit historic lows despite slight price dip

The California housing market is showing signs of strain in early 2026 as homebuyer affordability remains out of reach across the state. Despite slight price declines, sales volume has plunged to near-record lows.

Data from Attom reveals that even the most affordable regions of California are now unattainable for many. During the fourth quarter of 2025, residents in both the 12 most and 12 least expensive counties spent an average of 83% of their income on housing costs.

By the end of 2025, home prices dropped in 14 of California's 16 major metropolitan areas. While the largest decline was a modest 4% in Stockton, the shift marks a significant turn from March 2025, when no regions in the state reported a decrease in value.

Statewide home sales reached just 23,317 units in November, the second-lowest total in 21 years. This figure represents an 8% decrease from the previous year and sits 30% below the historical average.

The statewide median home price remained high at $735,000. That figure is only 2% below the peak reached in June 2025.

Data from early 2026 reveals a deepening paradox in California’s real estate market: a total stalemate. While property values have avoided a post-boom collapse, transaction volume has effectively frozen. This paralysis is the result of stubbornly high mortgage rates, which continue to exert a dual-pronged pressure on the housing sector.

On the demand side, prospective buyers are being systematically priced out by prohibitive borrowing costs. Even in historically affordable inland regions, the financial burden of homeownership has reached an unsustainable threshold. In the state’s most cost-effective counties, debt service requirements have quadrupled since the post-Great Recession nadir, rendering the traditional "drive 'til you qualify" strategy—moving further from urban centers to find value—obsolete.

Simultaneously, the supply side remains constrained by a pervasive "golden handcuffs" effect. Current homeowners are reluctant to list their properties and relinquish legacy low-interest mortgages for today’s significantly higher market rates. This has resulted in a severe inventory shortage, which provides a floor for home prices despite a visible softening in actual demand.

The result is a stagnant market characterized by a lack of transactional incentives for either party. Marginal price corrections have proven insufficient to attract sidelined buyers, while artificially low inventory levels keep valuations elevated. This structural tension indicates a protracted deadlock that is unlikely to break until California sees a significant pivot in interest rate policy or a fundamental shift in broader macroeconomic conditions.

For California’s expansive Vietnamese-American community, these rising costs are directly threatening the "American Dream." Homeownership, a cornerstone of stability for first- and second-generation families alike, is becoming increasingly out of reach—even in cultural hubs like Little Saigon in Orange County and the South Bay. Many young families are now faced with the choice of renting indefinitely or leaving California for more affordable states. The ripple effects extend to the local economy; small business owners in the nail salon industry and phở restaurants are feeling the squeeze as high housing costs drive up wage demands and sap the disposable income of their regular customers. Perhaps most significantly, the housing crisis is widening the geographic gap between generations, making it harder for adult children to live near their parents and straining the traditional multigenerational family structure.