Everyone has an opinion on the direction of the housing market. In looking for answers, many turn to ChatGPT, YouTube, Google, or Instagram. The results only add to the confusion, especially with so many clickbait headlines designed to increase views and revenue. It is best to take a step back from all of the opinions and noise and turn to the facts and trends that have surfaced in 2026:
New Listings – There are slightly fewer sellers this year compared to 2025. Homeowners continue to “hunker down” in their homes, unwilling to move because of their underlying, locked-in, low fixed-rate mortgage. This trend has eased from the lows established in 2023. There were 33% fewer homes listed for sale in 2023 than the 3-year average before the pandemic (2017-2019). That diminished to 22% fewer in 2024 and 15% fewer in 2025. The trend of increasing sellers from year to year ended in 2026. Through May, 35,128 sellers came to market, 760 fewer than last year. It is still 16% more than 2024, and 38% higher than 2023; yet, there are 5,423 missing sellers compared to the 3-year average, 13% fewer. Inventory had been growing year over year because additional sellers were matched against unchanging, muted demand. With slightly fewer sellers this year, the annual inventory growth has ended as well. The trend of slightly fewer sellers than last year should continue for the remainder of 2026.
Inventory – For the first time since February 2024, there are fewer homes on the market today compared to last year. There were 14% more homes in January 2026 than in January 2025. That changed this month. There are now 1% fewer homes than last year (-90). After starting the year with 9,708 homes, the highest level since 2019, the inventory of available homes increased by 4,582 (+47%) to 14,290. The inventory has not yet reached a peak, but is expected to sometime over the summer between July and August. From there, it will slowly decrease for the remainder of the year. The inventory will drop quickly in December during the holiday season, when the fewest homes come to market, and many unsuccessful sellers will throw in the towel and pull their homes off the market.
Demand – Buyer activity remains low due to affordability constraints and has not changed much since 2023. Demand (number of new pending sales over the prior month) increased rapidly from mid-January through mid-February, up 59% from 2,348 to 3,565 pending sales, then grew slowly from week to week and appears to have reached its annual peak at the start of May at 3,959. Currently, demand is at 3,848 pending sales, which is not much different than previous years. It was 3,908 last year, 3,853 in 2024, and 3,919 in 2023. As long as rates remain between 6.5% and 7%, do not expect demand to change much and break higher. Buyer demand will remain relatively flat through August, and then will slowly fall for the remainder of the year. It will pick up steam during the holidays, when demand drops to its lowest level of the year.
Expected Market Time – The Los Angeles County housing market is at a better balance, where proper pricing is crucial in securing success. The hottest price ranges are detached homes priced below $500,000 and $1.25 million. When sellers carefully arrive at a home's asking price, success can be quick. Yet, for much of the market, it is far from instant. After reaching 148 days in mid-January, the Expected Market Time (the number of days it takes to sell all Los Angeles County listings at the current buying pace) dropped to 99 days in February. With the number of homes coming to market outpacing buyer demand, the Expected Market Time has been slowly increasing since March. Currently, it is at 111 days. Last year, it was at 110 days (-1). It was 79 days in 2024 (-32), and 55 days in 2023 (-56). At 111 days, the market is far from instant. From here, expect the market to continue to slow until the inventory peaks. It will remain elevated for the remainder of the year.
Delisted Homes – An elevated number of sellers are pulling their homes off the market, a strong indicator that most sellers do not have to sell. Through May, 12,107 sellers have pulled their homes off the market. That is 15% higher than last year’s 10,529. In 2024, 6,134 homes were pulled off the market (-49%), and it was 5,433 in 2023 (-55%). This is the highest level since the Great Recession. The lack of success among many sellers, even after reducing their asking prices, has led to an increase in the number of delisted homes. It reveals that many sellers are unwilling to lower their asking price to a level low enough to secure a sale.
Mortgage Rates – Buyer demand was poised to take off during the spring, with rates dropping to 6% in February, but the Iran conflict resulted in rates eclipsing 6.5%. Mortgage rates were bouncing between 5.99% and 6% during the last week of February, poised to drop into the 5s for the first time since August 2022. An extremely weak job report was released on Friday, March 6th, which would have resulted in rates falling to about 5.85%. That did not occur because of the immediate impact of rising fuel prices upon the start of the Iran conflict on Saturday, February 28th. Mortgage rates had been permanently parked between 6% and 6.5% from September 3rd of last year to the start of the conflict. Amid fears of inflation, rates climbed and surpassed 6.5% by the third week of March. According to Mortgage News Daily, they are at 6.68% today. Housing is very rate-sensitive. Mortgage rates are the gas pedal for the housing market. When rates fall below 6.5%, it is like pushing on the gas pedal. The lower the rates fall, the faster the market will move, driven by elevated demand as affordability improves. Similarly, as rates climb and surpass 6.5%, market activity slows due to growing affordability challenges. In the absence of the Iran conflict, buyer demand would have surpassed the frozen grip of the past few years. Instead, expect the market's pace to closely resemble last year’s.
