📢 Randy Zimnoch's 🏠 Predictions for 2026 and 4th Quarter Recap of the Real Estate Market
- RealtyNational
- Feb 11
- 10 min read
My quick life update before my market update (if you are not interested in my life shenanigans, scroll down to the good stuff below).
4th quarter was filled with lots of family time on the east coast as we celebrated the holidays in Pennsylvania and Florida. I always enjoy this time of the year and our girls absolutely love it as well! We even snuck in a professional photo shoot! :)
Now let's get into the market updates
LOOKING BACK AT QUARTER 4:
Market was slow overall as expected but held up better than the previous year in the 4th quarter. Inventory kept dropping week after week while rates were improving.
Inventory was only up by about 500 year over year, by my count.
Considering we spent almost the entire calendar year with inventory 2,000-2,500 higher compared to 2024, I would not have expected to end the year so close.
The detached median price of $1,050,000 was flat compared to November, and up 5% YOY.
Dec 2024: detached median price fell -2.7% month over month and ended the year up 5.37%
Dec 2023: detached median price fell -3.16% month over month and ended the year up 9.09%
The attached median price of $680,000 was up 3.03% compared to November ($660,000), and also up 3.03% YOY.
Dec 2024: attached median price fell -2.15% month over month and ended the year up 1.54%
Dec 2023: attached median price fell -2.62% month over month and ended the year up 11.11%
Median price per square foot was flat month over month at $565, but ended the year down -2.25%.
Dec 2024: median price per sf fell -0.7% month over month, and ended the year up 7.24%
Dec 2023: median price per sf fell -4.43% month over month, and ended the year up 10.45%
The drop in median price per square foot, in contrast to the rise in median price, just tells me that buyers were getting more bang for their buck in the houses they are buying.
Here's the median price per square foot on a chart:
I was very surprised to see how well values did over the holidays. From my vantage point, that pointed to a strong signal for Q1 and Q2 appreciation in 2026, especially with the mortgage rates dropping nicely.
Another positive sign for future value appreciation was the uptick (albeit small) in the sales price to list price ratio.
As you can see, this metric typically has a seasonal bent to it, with December usually being the low point for the year. To see that % tick up in December was intriguing. The last time it did that was in December 2021.
PREDICTIONS FOR 2026:
Economically speaking, California as a whole will struggle compared to most of the rest of the country. A lot of new jobs will be created as the AI boom starts to hit Main Street, but not much of that is happening here. Our higher cost of living keeps renters stuck for longer. I believe California's job market will suffer more than most due to poor business policies, egregious government spending, and high taxes. I think 2026 is the year we will start to feel that divergence vs. what the rest of the country experiences, but it will play out over many years after this one. This is a headwind for buyers and will also likely result in more listings due to net migration out.
Despite all that, it does appear Q1 and Q2 will be a solid market for both buyers and sellers again. Last year, the median price per sq ft increased 2.8% between December 2024 and May 2025. Mortgage rates are a full 1% lower than this time last year, and the median price per sq ft is down 5% from May 2025. Inventory isn't much higher and there are more buyers out there. I could see us regaining most, if not all of that ground, before the end of June.
I think Q3 and Q4 will be similar to 2025. Slow, frustrating, price declines, etc. We still have a big affordability gap that we need to work through.
Attached housing will continue to underperform compared to detached housing. The pros and cons of owning attached houses (in particular, condos) are hard to justify. The experience of owning a condo is not that much different than renting an apartment, yet the cost is 2x-3x as much. On top of that, older HOAs continue to face challenges with insurance, adding another layer of risk for owners. The arrows are just there to show the divergence of the trend lines. I'm not suggesting they will both continue to fall at that pace.
Mortgage Rate Predictions:
I think the long-term trend line for lower rates can and will continue. The situation with rising yields in Japan and the absolutely silly level of government spending are two very strong headwinds for bonds. That said, I think inflation comes down to acceptable levels this year, lowering the floor for long-term rates to come down. I think we'll be somewhere around 5.5% - 5.75% by end of year. A stronger economy keeps them from going much lower, even with Trump pulling whatever strings he can.
Keep in mind, predicting where rates are going is a fool's errand, so take this with a grain of salt, however, the chart below is encouraging to see looking back a year till now.
STRATEGIES FOR SELLERS:
Pricing your property slightly below market value is strongly recommended in order to bring all the attention to your listing, as it should bring in multiple offers right now, setting you up for the potential of bidding up the sales price.
Since CA MLS allows us to use ranges, what we started doing again is use the bottom number of the desired range as the list price and then mention the range in the first sentence of the public remarks.
This allows us to get more eye balls on the property, get people in the door and then negotiate the offer up into the range, especially if we have two offers on the table, but it has even worked for us with only one offer as well.
We do it this way because if we actually put in the range in the MLS as the list price, then, the MLS will syndicate the higher number of the range to websites like zillow, redfin etc, and that does not work in our favor.
You can withhold offering concessions in quarter 1 since inventory is pretty low overall now and rates are favorable.
I still highly recommend to offer to pay the buyer's agent commission that is requested in the contracts, because a good amount of buyers don't have the extra cash to pay their buyer's agent on top of the down payment and all the closings costs.
However, my rule of thumb with sellers is that if the offer comes in much lower than what you were reasonably expecting, and it has let's say 2.5% to 3% commission being requested, then we would counter the offer up of course, but we can also counter the commission down to 1.5% to 2%, and let the buyer's agent either get their buyer to go up on price or lower their commission, or both.
Also, if you have an FHA or VA loan with a low interest rate (2% or 3%), then, those loans are actually assumable by the new buyer, so it's a great way to get more attention to your property, because what buyer wouldn't want a low interest rate in this high interest rate environment that we are in currently.
NOTE: there are many caveats to this approach, so if you want to discuss this in more detail, reach out to me as I have become an expert in assumptions over the last two years.
If a property is sitting on the market for a while, usually around the 45 day mark, we would cancel the listing and re-list it again as new because this will show up in costumers' inboxes as a new listing. When we do this, we also change the main photo, re-arrange other photos, maybe virtual stage some, and potentially reduce the list price as well.
STRATEGIES FOR BUYERS:
Buyers leverage has diminished overall due to much lower inventory again and rates being almost a full point lower compare to where they were a year ago. So if you see a well priced listing, expect that there will be several offers on that property.
Look for properties that have been on the market for a while, as those sellers might be more motivated to negotiate and provide larger discounts, concessions and later repair request credits once under contract.
Opportunities to buy with an assumable loan that carries a low interest rate will become less common as listing agents will pull back on promoting that in their marketing in quarter 1.
However, if you do see one, most of these type of properties will have a large gap between the loan amount and purchase price, so you will either have to have cash for that gap or get secondary financing.
You can watch a training that I did about assumable type transactions here: https://www.youtube.com/@Assumable-Sales
If the assumable loan route really interests you, please reach out to me to talk details as there are many things we would have to go over to see if this route really makes sense for you.
In conclusion, as a buyer, you will start seeing more options little by little, as I anticipate that inventory will continue to increase week after week now, however, don't expect to lock up a property below list price when it first gets listed; instead consider offering full price if you feel the property is competitively priced as you take advantage of the lower interest rates.
And as always, If you are planning on relocating to another state, let me know as I can help locate a great agent in whatever city that you are planning to move to. I will actually identify a couple great agents there, interview them on your behalf and connect you to that agent once I feel like he or she can serve you as I would here. (Bonus: I would stay involved over-seeing your purchase transaction on top of it for you and consult you along the way. That's if you value my opinion, of course.)
IF YOU OWN A HOUSE OR RENTAL OR KNOW SOMEONE THAT DOES:
NEW CALIFORNIA REAL ESTATE LAWS FOR 2026:
California's real estate landscape in 2026 is shaped by significant new mandates that prioritize tenant rights, listing transparency, and housing density. Key laws include a new "habitability" requirement for appliances and strict rules for AI-edited property photos.
Tenant & Landlord Regulations
Mandatory Appliances (AB 628): Starting January 1, 2026, working stoves and refrigerators are considered essential for "habitability". Landlords must provide and maintain them in all new or renewed leases. Tenants may opt out in writing to use their own appliances.
Security Deposit Updates (AB 414): Landlords must return security deposits electronically if requested by the tenant and allow for alternative return arrangements. For leases starting after July 1, 2025, landlords must take move-in/move-out photos to document any deductions.
Social Security Defense (AB 246): Provides an affirmative eviction defense for tenants whose rent nonpayment is directly caused by delayed Social Security benefits.
Bulk Internet Opt-Out (AB 1414): Tenants can opt out of mandatory bulk internet or cable packages and deduct those costs from their rent if forced.
Home Sales & Marketing
AI Photo Disclosure (AB 723): Effective January 1, 2026, any listing photo that has been digitally altered or AI-generated (beyond basic lighting or cropping) must include a clear disclosure and a link/QR code to the original, unedited image.
Thirdhand Smoke Disclosure (AB 455): Sellers must disclose any known tobacco or nicotine residue (including from vaping) inside a home. Failure to disclose can give buyers a right to cancel the purchase.
Gas Appliance Replacement (SB 382): Sellers must disclose state or local requirements regarding the future replacement of gas-powered appliances with electric ones.
Federal "FinCEN" Reporting: Beginning March 1, 2026, all-cash purchases of residential property by legal entities or trusts must be reported to the federal Financial Crimes Enforcement Network to combat money laundering.
Development & Wildfire Safety
Transit-Oriented Density (SB 79): Effective July 1, 2026, this law overrides local zoning to allow denser, taller housing (up to 75 feet) within half a mile of major transit hubs.
Wildfire Recovery Protections (AB 851): Prohibits unsolicited purchase offers in fire-affected ZIP codes in Los Angeles and Ventura counties through 2027 to prevent predatory practices.
Ember-Resistant Zones (AB 1455): Requires a 5-foot "Zone 0" buffer around homes in high-risk areas to be free of combustible materials.
HOA & Construction Changes
HOA Fine Caps (AB 130): General HOA fines are capped at $100 per violation unless they pose a direct health or safety risk.
Private Plan Review (AB 253): If a local building department takes more than 30 days to review building plans, homeowners may hire private, certified reviewers at their own expense to speed up the process.
INFORMATION PREVIOUSLY PROVIDED IN MY REPORTS:
Big Beautiful Bill Act
As it relates to real estate, the Big Beautiful Bill Act reinstates and makes permanent the mortgage insurance premium deduction, which can help homeowner with low down payments: READ MORE HERE
The bill temporarily increases the state and local tax (SALT) deduction cap from $10,000 to $40,000, potentially benefiting homeowners in high-tax states: READ MORE HERE
The bill makes permanent the 100% first-year bonus depreciation deduction for qualified property acquired and placed in service after January 19, 2025. READ MORE HERE
Short Term Rental Laws officially came into Effect on May 1st, 2023
There are still licenses available contrary to what most would expect!
To View All STR Regulations for the City of San Diego or to apply for a license, Click Here
OTHER USEFUL RESOURCES:
Have you ever wondered what you might be able to additionally build on your property?
Search and discover what is possible on any property. Browse property and permit details. Apply for permits and rebates. Learn if an ADU is possible
Are your electric bills out of control? If so, consider installing solar panels like many of our clients have. Reply to this email and I will connect you with a couple trusted solar contacts so you can compare prices and service.
Let me know if you have anything specific that you want to discuss with my team and I. We are here to help you navigate through it all and yes, I would love it if you can refer me to anyone that is thinking about buying or selling in Southern California. Thank you in advance!
Hope that you have an amazing start to 2026!
p.s. Thank you to Mindy for these kind words and for trusting us with the sale of her home!
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