A shortage of homes on the market and higher mortgage rates slammed the door on sales in July, giving little hope for a much-needed summer turnaround.
Sales reached an annually adjusted rate of 263,170 homes in July, down 6% percent from a year ago but up 1.1% from a year ago, according to the California Association of Realtors. Sales dipped to the lowest level in six months and were below the 300,000 level – considered the threshold for a semi-healthy market – for the 46th straight month.
Home sales for the first seven months of the year, considered a better barometer of the market, were up 1.1% from a year ago. Better but far from good.
“The highest mortgage rates of the year hit right in the middle of summer, and that’s pulling back contract signings,” said Dr. Lawrence Yun, chief economist for the National Association of Realtors.
Prices are a high hurdle to clear for many
Blame higher mortgage rates — largely from the on-again, off-again war in the Middle East that continues to affect the economy – for the slowdown.
“California’s housing market pulled back last month as mortgage rates remained elevated and briefly reached a 12-month high in recent weeks,” said CAR president Tamara Suminski. “Despite a slower start to the second half of 2026, improved supply conditions in July combined with the recent decline in mortgage rates, could provide some relief to buyers and give them more options to choose from as the market transition into the off-peak season.”
Maybe. But affordability – prompted in part by mortgage rates – remains a major worry. Fewer than one of every five households could afford to buy the median-priced home in California during the second quarter.
‘Ongoing challenges’
The state’s median-home price – meaning half the homes sell for more, the other half for less – dipped 1.9% to $887,680 from a month earlier but inched up 0.3% from a year ago (see table, below). Home prices dropped below $900,000 for the first time in four months.
Five of the seven regions, from the Oregon border to San Diego, enjoyed modest price gains from a year ago, while the Central Coast had the largest drop at 4.1%.
“July’s housing market performance reflected the ongoing challenges under the current economic and lending environment, but the market continues to show signs of resilience,” said CAR chief economist Jordan Levine. “While broader economic concerns and affordability constraints will remain headwinds in the near-term, moderations in rates could help stabilize demand and market conditions could improve in the months ahead if geopolitical tensions ease further.”
Home prices and sales in July compared to a year ago
| Region | Median home price | % gain or loss vs. a year ago | Home sales vs. a year ago |
|---|---|---|---|
| California | $887,680 | +0.3% | +1.1% |
| Bay Area | $1.29 | -1.2% | -0.1% |
| Central Coast | $1.07 million | -4.1% | +11.1% |
| Central Valley | $501,000 | +0.2% | +2.9% |
| Far North | $399,000 | +0.5% | +0.8% |
| Inland Empire | $600,000 | +1.9% | -1.5% |
| Los Angeles | $849,450 | +0.5% | -0.8% |
| Southern California | $899,000 | +2.7% | +0.1% |
Source: California Association of Realtors
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