California Real Estate Market Slows Sharply

High interest rates, insurance costs, and new taxes contribute to 31% drop in home sales

Published on Mar. 4, 2026

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California's real estate market is showing signs of a major slowdown, with home sales down 31% compared to the last 18 years. Factors contributing to the decline include high interest rates, rising insurance costs due to wildfires, and new real estate taxes like Measure ULA in Los Angeles. Construction has also slowed due to high costs and regulations, leading to low inventory. The author argues that two terms of Governor Gavin Newsom have created an environment of pessimism, and that the state needs major changes to address the real estate crisis.

Why it matters

California's real estate market is a key economic indicator, and the sharp slowdown raises concerns about the state's overall economic health. The real estate slump could have ripple effects on jobs, tax revenue, and consumer confidence. Addressing the factors behind the decline, such as high costs and burdensome regulations, will be crucial for California's future prosperity.

The details

Home sales in California are down 31% compared to the last 18 years, a much steeper decline than the 6% national falloff over the same period. High interest rates are keeping buyers on the sidelines, while sellers are reluctant to trade their low-rate mortgages for new ones at much higher rates. The state's insurance market has also been disrupted, with restrictions on premium increases and a spate of wildfires driving up costs for homeowners. New real estate taxes, like Measure ULA in Los Angeles, have further slowed sales at the upper end of the market. Construction has slowed due to high costs, permitting issues, and environmental regulations, leading to low inventory. The state's high unemployment and companies leaving California have also contributed to a lack of confidence in the state's future.

  • California home sales are down 31% compared to the last 18 years.
  • The national home sales falloff over the same period is 6%.

The players

Gavin Newsom

The current Governor of California, whose two terms have contributed to an environment of pessimism according to the author.

Howard Jarvis Taxpayers Association

An organization that has mobilized to defend Proposition 13, which limits annual increases in property tax, and is collecting signatures for a new ballot initiative to limit new local real estate taxes.

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What they’re saying

“Real estate is fundamentally about optimism. Two terms of Gavin Newsom have provided the opposite — and his replacement could be worse.”

— Joel Pollak, Author (nypost.com)

What’s next

The author suggests that addressing the factors behind the real estate slump, such as high costs and burdensome regulations, will be crucial for California's future prosperity.

The takeaway

California's real estate market is in a sharp slowdown, with home sales down 31% compared to the last 18 years. This decline is much steeper than the national trend and raises concerns about the state's overall economic health. Addressing the underlying issues, such as high insurance costs, new taxes, and construction challenges, will be essential for California to regain confidence and prosperity in the real estate sector.