April 20, 2026 – After a brief early year lift, California’s housing market is returning back to a familiar pattern: buyers remain cautious, sellers are reluctant to list, and each new headline seems to ripple through rates and confidence. March brought softer closed sales even as some forward-looking indicators hinted that demand has not disappeared - it’s simply waiting for the right moment. With inflation risks still in play and global uncertainty weighing on sentiment, the next few months may stay uneven. Still, recent rate moderation and steady pending activity suggest a narrow but real window for renewed momentum as the spring season unfolds.

California home sales pull back in March before the Iran conflict: The housing market in California remained sluggish in March as home sales pulled back after improving in the prior month. Sales of existing homes declined 3.5% from February and dipped 2.5% on a year-over-year basis for the third straight month. March’s decline from a year ago was the biggest in eight months and the level of sales last month - 265,320 - remained below the 300k benchmark for the 42^nd consecutive month. Job market concerns and general economic uncertainty continued to hold back buyers, but the conflict in the Middle East and the volatility of the stock market might also have resulted in more buyers cancelling their contracts at the last minute. Despite mortgage rates rising sharply throughout most of March and reaching a 7-month high late last month, statewide pending sales of existing single-family homes continued to climb from both the prior month and the same month last year. While the surge in rates in March will likely keep closed sales subdued in April, moderations in rates at the end of the month could motivate buyers to reenter the market and improve sales activity in May and June.

Home prices climb for the second straight month in the Golden State: Following its traditional seasonal pattern, the statewide median home price rose strongly from February to March but only inched up slightly on a year-over-year basis. California’s median price increased 7.1% from February and the size of the jump was in line with the average 7% increase in price movement observed between February and March in the past 20 years. March’s price gain of 0.4% from a year ago was more moderate in comparison but was the second straight month of positive price growth since the back-to-back dip in January. As the market enters the spring homebuying season, prices are expected to climb but lingering concerns about the Iran conflict and the risk of higher inflation may continue to constrain the pace of price growth in the months ahead.

Supply tightens up further at the end of the first quarter: Housing inventory tightened up further in March as the market geared up for the homebuying season. The Unsold Inventory Index (UII) declined 17.5% from February to March and was down 5.7% on a year-over-year basis. While total active listings followed the traditional seasonal pattern and continued to climb on a month-over-month basis, they fell below the year-ago level for the second time in a row. The annual pullback was due partly to fewer new listings being added to the market as many potential home sellers remained on the sideline because of the lock-in effect. With inflation concerns reignited and mortgage rates remain elevated, many homeowners may delay their listing decisions in the near term until there is more clarity on the economic outlook. As such, inventory constraints could remain a major hurdle for the market in this buying season.

Small business optimism declines as sales uncertainty rises: The NFIB Small Business Optimism Index fell 3 points (pts) to 95.8 in March, dropping below the 52-year average of 98.0 for the first time since April 2025. The Uncertainty Index, on the other hand, rose 4 pts from February to 92, remaining well above its historical average of 68, as the Iran conflict lingers on. The net percent of positive profit trend fell 11 pts from February to a net negative 25%, a reflection of more business owners reporting lower earnings in the last three months than owners reporting higher earnings in the same time period. The dip was the primary contributing factor for the decline in the overall optimism index. The net percent of business owners expecting better business conditions also fell 7 pts to a net 11%, which was another major contributor to the overall index’s decline. With more small businesses reported that they were experiencing supply chain disruptions, more of them raised their prices. Actual price change was up following three consecutive months of decline, with the net percent of owners raising average selling prices rose 1 pt from February. The net percent of those who plan to adjust their selling price in the next three months, on the other hand, dropped 4 pts last month, an indication that upward pressure on prices could be easing in the months ahead.

Homebuilder confidence drops to seven-month low: U.S. homebuilder sentiment fell again in April as rising interest rates and mounting economic uncertainty temper builders’ optimism, according to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). The April HMI fell four points from the prior month to 34, reaching the lowest level since September 2025 and staying below the break-even point of 50 for 24 straight months. The survey’s measure of future sales also dropped seven points last month and reached the lowest level in 10 months. The conflict in the Middle East has pushed up mortgage rates, reignited inflation fears, and pulled consumer sentiment down to a record low in the past few weeks. Higher fuel prices also increased building material costs and elevated near-term economic risks for builders. With costs rising, builders are cutting back on incentives, with the share of builders reporting cutting prices dipping one pt. to 36% from 37% in March. The average price reduction also edged down to 5% from 6% in the prior month. With the situation in Iran yet to be settled, builder pessimism will remain in the near term.

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