Affordability Hits a Turning Point: What it Means for You in 2026

For years, the story of the Southern California housing market has been one of “waiting.” Waiting for rates to drop, waiting for prices to cool, and waiting for the right moment to make a move. But as we step into February 2026, the data tells us the wait is finally leading to a significant turning point.

The “Normalization” of the Market

We are no longer in the “shock mode” of the post-pandemic era. After a period of extreme volatility, the market is entering a phase of normalization. Nationally, home prices are forecast to rise at a much more sustainable pace—around 2.2%—compared to the double-digit spikes of previous years. In Southern California specifically, major metros are expected to see a modest appreciation of 1-2%.

Why Affordability is Actually Improving

While home prices aren’t crashing, real affordability (adjusted for inflation) is beginning to thaw for several key reasons:

• Wages vs. Prices: For the first time since 2020, wage growth is expected to outpace home price appreciation. This means that while the sticker price of a home may still be high, it represents a more manageable portion of the average household’s income.
• The 30% Threshold: Experts predict that the typical monthly mortgage payment could slip to 29.3% of median income this year. This is a massive milestone, marking the first time since 2022 that monthly payments have fallen below the critical 30% affordability benchmark.
• Mortgage Rate Stability: Mortgage rates are expected to hover in the low 6% range throughout 2026. This stability—more than a sharp drop—is giving buyers the confidence to plan their budgets without the fear of a sudden rate hike.

A Win-Win for Buyers and Sellers

This “Turning Point” doesn’t just benefit one side of the transaction:

• For Buyers: You finally have more negotiating power. Active for-sale listings are projected to increase by nearly 9% this year, giving you more choices and less pressure to engage in frenzied bidding wars.
• For Sellers: Slower price growth might sound scary, but it actually creates a healthier, more consistent pool of buyers. With roughly 1 in 5 homeowners now holding mortgages above 6%, the “lock-in effect” is fading, allowing more people to sell and move up without losing a once-in-a-lifetime rate.

The Bottom Line

Affordability isn’t changing overnight, but the momentum is undeniable. Whether you are a first-time buyer or looking to leverage your current home’s equity, 2026 offers a level of predictability and balance that has been missing for years.