2026 California Housing Outlook from CCRE Panelists

At CCRE’s February 11 panel, California’s Housing Market: Navigating Rates, Demand and Change, moderator Dr. Jerry Nickelsburg, Faculty Director of the UCLA Anderson Forecast, guided a forward-looking discussion on the economic forces shaping housing markets nationally and across California in 2026.

The panel featured:

·       Kayla Bruun, Lead Economist, Morning Consult

·       Robert Dietz, Chief Economist, National Association of Home Builders

·       Mischa Fisher, Chief Economist, Zillow

·       Danielle Hale, Chief Economist, Realtor.com

Together, these experts examined consumer sentiment, supply constraints, demographic shifts, and policy headwinds influencing housing demand and affordability in the year ahead.

A divided economy is influencing housing demand in new ways.

Panelists began by discussing the broader macroeconomic backdrop. Kayla Bruun of Morning Consult described the current environment as a “K-shaped economy,” where higher-income households have benefited from tailwinds such as asset growth and AI-driven sectors, while lower-income households face persistent labor market and inflationary headwinds. However, she noted that in early 2026, even higher-income consumer sentiment has begun to contract, influenced in part by rising health costs and labor uncertainty.

Dr. Jerry Nickelsburg of UCLA added context on job growth, pointing out that while a February 2026 Bureau of Labor Statistics report showed a better-than-expected 130,000 new jobs, 2024 and 2025 came in 1 million jobs short of earlier estimates, and many new jobs are concentrated in lower-paying sectors such as healthcare and social services. These shifts matter for housing because upper-income households play an outsized role in driving activity at the higher end of the market.

California’s affordability gap is deep and structural.

The conversation underscored that California’s affordability challenges are not simply cyclical. Danielle Hale of Realtor.com highlighted that while U.S. households spend roughly 30% of their income on housing, Californians spend more than 50% on average. She noted that in the 1970s, California tracked closely with national affordability trends, a stark contrast to today.

Mischa Fisher of Zillow provided a tangible example of how strained affordability has become. In markets such as San Diego, he observed, a buyer putting 5% down could see roughly 73% of their income go toward a mortgage payment. While he noted some improvement, the broader challenge remains clear: demand exists, but costs remain prohibitive.

Even as California built approximately 100,000 new units last year, Nickelsburg pointed out that the state simultaneously lost 16,000 homes in the January 2025 wildfires, illustrating how fragile progress can be.

Supply constraints remain the central pressure point.

Robert Dietz of the National Association of Home Builders emphasized that underbuilding following the Great Recession set the stage for today’s shortages. He attributes long-term supply constraints to the “5 Ls”: Labor, Lots, Lending, Legal and reguLatory burdens.

Regulatory costs are particularly acute in California. Dietz noted that while the average national regulatory cost per new single-family home is about $95,000, in California it can reach $200,000 upfront. Labor shortages compound the issue, with the industry still struggling to rebuild its workforce after widespread losses during the recession.

Policy shifts and investor debates may not address root causes.

Panelists also addressed proposals to restrict institutional investment in single-family housing. Dietz cautioned that new-construction exemptions are crucial to maintaining supply growth, noting that single-family homes built for rent represent only about 10 to 12% of total construction. Hale added that large institutional investors have been declining as a share of the market, suggesting the issue may already be moderating.

Ultimately, the panel returned to a consistent theme: California’s housing challenges are not the result of a single variable. Consumer sentiment, demographic shifts, regulatory costs, labor shortages, and market conditions are all operating at once, and often in tension with one another.

While interest rate movements will influence short-term activity, panelists emphasized that long-term affordability and mobility depend on whether the state can meaningfully expand supply, reduce structural cost pressures, and adapt to changing household patterns.

To learn more about the housing outlook from the panel, watch the full discussion.