Housing and economic indicators are currently navigating a complex landscape. As oil prices rise and inflation risks re-emerge, markets have pushed interest rates higher, complicating the outlook for both Federal Reserve policy and mortgage borrowing costs.
Despite these headwinds, the California housing market is showing early-season improvement, though higher rates threaten to slow momentum in the months ahead. Here is your breakdown of the latest economic and housing data.
The Fed Holds Steady Amid Inflation Uncertainty
The Federal Reserve opted to keep its policy rate unchanged during the latest Federal Open Market Committee (FOMC) meeting. Surging oil prices have pushed short-term inflation expectations higher, leading the Fed to exercise caution.
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Inflation Forecast: Officials raised their 2026 inflation forecast from 2.4% to 2.7%.
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Rate Cut Projections: The Fed currently projects only one rate cut in 2026 and one more in 2027.
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The Bottom Line: Fed Chair Jerome Powell reiterated that the labor market remains balanced and does not yet justify easing monetary policy.
California Housing Shows Early Spring Vigor
Despite national economic hesitation, California's real estate market experienced a solid bounce back in February.
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Sales Are Up: Sales of existing single-family homes jumped 7% from January’s upwardly revised pace. This surge was largely driven by buyers locking in lower mortgage rates that were available earlier in the year.
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Prices Rebound: Defying the typical historical dip seen between January and February, California’s median home price increased 0.9% to $830,370.
Market Note: While stronger-than-usual pending sales provide hope for a busy March, the recent spike in mortgage rates (hitting a six-month high) will likely keep overall sales activity subdued in the coming months.
Nationwide New Home Sales Take a Winter Hit
U.S. new home sales kicked off 2026 with a sluggish start. In January, new single-family home sales fell 17.6% from December—hitting the lowest level since October 2022.
This plunge was primarily driven by harsh winter weather across the U.S., combined with slightly higher levels of existing housing inventory giving buyers other options. This slowdown pushed new housing inventory up to a 9.7-month supply and dropped the median price of a new home by 6.8% year-over-year to $400,500.
Regional Breakdown of New Home Sales (Year-Over-Year):
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Midwest: +18.0%
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Northeast: 0.0% (Unchanged)
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South: -8.8%
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West: -28.7%
Home Flipping Activity Cools Down
According to ATTOM’s 2025 year-end U.S. Home Flipping Report, the number of homes being flipped by investors continues to decline.
Nationwide, 297,045 homes were flipped last year, a 3.9% dip from 2024 and the lowest level since 2020. Flipped homes accounted for 7.4% of all sales last year, down from a peak of over 9% in 2022.
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Shrinking Margins: The gross profit for a typical flipped home was $65,981, which equates to a 25.5% return on investment (ROI).
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The Outlook: With returns dropping to the lowest levels since 2008 and acquisition costs remaining high, home flipping activity is expected to slow even further throughout 2026.
Would you like more insights on how this trend could impact your real estate decisions? Give us a call or if you'd like to schedule a meeting, email us at [email protected]
