As we move into January, there is no shortage of headlines predicting everything from falling rates to looming housing trouble. With the Federal Reserve beginning to ease policy and inflation showing improvement, many buyers, sellers, and real estate professionals are asking the same question:
What is actually happening in the market right now?
When we step away from speculation and look directly at the most recent data, a much clearer picture emerges.
Mortgage Rates: Lower than last year but holding steady.
Despite a 0.25% Federal Reserve rate cut in December and improving inflation data, mortgage rates have not moved sharply lower. As of late December, the national average mortgage rate sits at 6.27%, according to Mortgage News Daily.
While that may not feel like relief for rate sensitive buyers, context matters. Rates are meaningfully lower than the 7% plus levels seen earlier in 2025 and are now hovering near a 3-year lower range. Over the past several months rates have remained within a relatively tight band, signaling stability rather than upward pressure.
Mortgage rates are driven primarily by long term inflation expectations and bond market behavior, not directly by the Fed Funds rate. The current environment reflects a market that believes inflation is moderating, but not yet fully resolved.
Inflation: Cooling Continues Without a Shock
The most recent Consumer Price Index data supports that view. Headline inflation measured 2.7% year over year, while core inflation came in at 2.6%. Month over month, both headline and core inflation rose 0.2%.
Shelter costs remain the largest contributor to inflation, but the pace of increase has slowed. This moderation has given policymakers room to ease without signaling concern about economic stress.
Employment: Softening, Not Breaking
The latest BLS Jobs Report shows a labor market that is cooling gradually rather than contracting sharply.
- The U.S. economy added 64,000 jobs
- The unemployment rate rose to 4.6%
- Average hourly earnings increased 3.5% year over year
- Average weekly earnings also rose 3.5%
- Prior months were revised down by 33,000 jobs
This reflects the outcome policymakers have been aiming for: slower job growth, steady wages, and no sudden spike in unemployment. From a housing standpoint, this is stabilizing rather than concerning.
Housing Activity: Balanced, Not Collapsing
Existing home sales totaled 4.13 million, essentially flat year over year. Inventory sits at approximately 1.43 million homes, representing 4.2 months of supply.
The median existing home price is $409,000, down 1.4% month over month, but still up 1.2% year over year. Homes are spending an average of 36 days on market, and 18% of homes are still selling above list price. First time buyers represent 30% of purchases.
These numbers point to a market that has slowed from peak activity but remains functional and balanced. Negotiation has returned, but demand has not disappeared.
Equity Remains the Foundation
One of the most overlooked factors in today’s housing conversation is equity. The average homeowner with a mortgage now holds approximately $299,000 in equity, according to the Q3 2025 Mortgage Report.
In California, the average existing mortgage rate remains near 4.56%, meaning most homeowners have little financial pressure to sell. Combined with a mortgage delinquency rate of roughly 2.47%, there is no structural signal pointing toward a foreclosure wave.
This is a key reason why fears of a housing crash continue to lack data support.
Loan Limits Quietly Expand Access in 2026
As we begin the new year, higher conforming loan limits are now in effect, expanding access to conventional financing.
- Baseline conforming limit: $832,750 with 3% down
- High balance areas such as Sonoma County: $897,000 with 5% down
- High-cost markets: up to $1,249,125
These increases allow more buyers to remain in conventional loan programs, often with better pricing and flexibility.
What to Expect From Rates This Year
Most major forecasts expect mortgage rates to remain largely flat throughout 2026. Rather than a steady decline, the expectation is volatility within a narrow range, with occasional sub 6% windows rather than sustained drops.
This is a market that favors preparation and strategy over waiting for perfect timing.
Featured Financing Strategy: Buy Before You Sell
In a market where inventory remains tight and timing matters, flexibility can be critical.
A Buy Before You Sell loan can help by:
- Eliminating sale contingencies
- Removing existing mortgage payments from debt-to-income calculations
- Unlocking up to 70–75% of available equity
For many buyers, this approach restores negotiating power without forcing a rushed sale.
The Bottom Line
As the year gets underway, the data points to a market that is stabilizing, not unraveling. Inflation continues to cool, employment remains steady, mortgage rates have leveled off, and inventory is still tight. Equity remains one of the strongest foundations in today’s real estate market.
This is not a market driven by panic. It is one that rewards planning, flexibility, and informed decisions. For many, the traditional system feels increasingly narrow, and that frustration is understandable. But that does not mean there are no options.
If you have equity in California real estate, or you are looking to purchase with a solid down payment and a clear plan, there may be a path forward even when conventional financing falls short. Whether you are a borrower needing a solution, a broker or agent working to preserve a deal, or an investor seeking thoughtfully structured opportunities, we are here as a resource to help explore what is possible.
