California Housing Market Outlook 2027: Sales Expected to Rise as Prices Edge Higher

California Housing Market Outlook 2027: Sales Expected To Rise As Prices Edge Higher

After a challenging year of high mortgage rates, inflation and economic uncertainty, California’s housing market may be heading toward a gradual recovery in 2027. The California Association of REALTORS® (C.A.R.) forecasts modest increases in home sales and prices next year as borrowing costs potentially ease and buyers regain confidence. However, limited inventory and affordability challenges are expected to remain key factors shaping the market. 

California Home Sales and Prices Expected to Rise in 2027

According to C.A.R.’s latest forecast, existing single-family home sales are projected to increase 3.7% in 2027 to 277,900 homes, following an anticipated decline of 1.1% in 2026.

The statewide median home price is forecast to rise 1.4% to $894,400 in 2027, after an expected 0.8% increase in 2026.

A persistent shortage of homes for sale should help support prices, although high borrowing costs and economic uncertainty may keep the recovery gradual. Buyers who have postponed their plans could begin returning to the market if mortgage rates ease.

Inflation Remains a Concern, but Labor Market Expectations Improve

Consumers remain concerned about inflation, particularly elevated energy costs. One-year inflation expectations climbed to 3.9% in September, their highest level since May 2023.

There was some encouraging news, however: consumer expectations surrounding unemployment, job prospects and job security improved. If the labor market remains resilient and inflation pressures moderate, housing demand could strengthen over the coming year.

Real Estate Investors Face Higher Costs

Investment purchases accounted for just 10.9% of California home sales in 2026, the lowest share in five years, according to C.A.R.'s Housing Market Survey.

High purchase prices and borrowing costs have made it more difficult for investors to generate attractive returns, particularly on rental properties. The median price of an investment property rose 8.5% to $797,500, while rental purchases represented a smaller share of investment activity.

Remodeling Activity Remains Resilient

Despite higher material costs, labor shortages and economic uncertainty, remodeling sentiment remained positive in the third quarter. The National Association of Home Builders' Remodeling Market Index increased to 62, above the 50-point threshold that indicates more remodelers view conditions favorably than unfavorably.

Some homeowners are postponing projects, but the results suggest that remodeling demand continues to hold up despite ongoing economic challenges.

What This Means for Southern California

For buyers and sellers in Long Beach, Orange County, and the greater Los Angeles area the outlook points toward a gradual recovery rather than a dramatic market shift.

Buyers may see more opportunities if mortgage rates ease and additional listings become available. Sellers could continue to benefit from limited inventory, but pricing homes appropriately will remain important in a market where affordability is a major concern.

Bottom Line

California’s housing market is expected to improve modestly in 2027, with sales projected to increase and home prices edging higher. Mortgage rates, inflation and available inventory will play major roles in determining how much momentum the recovery gains. For buyers and sellers, understanding local market conditions will be essential as the market moves into the new year.