California Mortgage Outlook 2026: Rates, Loan Limits & What to Expect

I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. I’ve been in California mortgage lending since 2000 and founded DiVita Home Finance in 2007. I’m known as a creative mortgage broker: when a bank says no, I find the lender and the loan structure that can say yes. This is my running read on the 2026 California mortgage market — what the forecasts said, what actually happened, and what it means if you’re buying or refinancing this fall. Updated late September 2026. Call (800) 239-1103.

I’ve worked through every rate environment since 2000 — the 2008 crash, sub-3% rates in 2020–2021, and the 7%+ shock of 2022–2023. Going into 2026, the consensus was a slow glide toward 6%. Instead, 2026 turned into a year of whiplash: rates dipped early, then climbed, and in September the Federal Reserve raised rates for the first time since 2023. Here’s where things stand.

2026 Forecast vs. Reality

In September 2025, the California Association of REALTORS® (C.A.R.) forecast a 6.0% average 30-year rate for 2026, a statewide median price of $905,000 (+3.6%), and slightly better affordability. Here’s how that’s played out so far:

Metric	C.A.R. 2026 forecast	Actual (latest)
30-year fixed rate	6.0% average	7.03% (Freddie Mac, Sept 24, 2026); C.A.R. put the August average at 6.67%
Statewide median price	$905,000 (+3.6%)	$901,420 in August 2026 (+0.1% year over year)
Sales pace	274,400 homes	269,620 annualized in August (+1.4% year over year)
Affordability (share of households able to buy the median home)	18%	19% in Q2 2026 (down from 22% in Q1)
Unsold inventory	—	3.7 months in August; median 28 days on market

Sources: C.A.R. 2026 forecast, C.A.R. August 2026 sales report and Q2 2026 Housing Affordability Index, Freddie Mac PMMS.

Bottom line: prices have been roughly flat, sales are up slightly, and rates have run higher than almost anyone expected.

What Happened to Rates in 2026

The Fed cut three times in late 2025, bringing the federal funds target to 3.50%–3.75%, and held there through July 2026. Mortgage rates dipped toward 6% in February (Bankrate’s national average hit a 2026 low of 6.01% on February 19), then worked higher through the summer as inflation stayed sticky.

On September 16, 2026, the FOMC voted unanimously to raise the target range by 0.25% to 3.75%–4.00%, saying inflation “remains elevated” and that the move “will support a timelier return” to its 2% goal. The following week, Freddie Mac’s 30-year average rose to 7.03% (15-year: 6.42%), up from 6.30% a year earlier.

Keep in mind that the Fed doesn’t set mortgage rates. Mortgage rates follow the 10-year Treasury and investor demand for mortgage bonds, and they often move before the Fed does. I break that down in why mortgage rates change daily.

My Outlook for Late 2026 and Early 2027

I don’t make rate predictions I can’t back up, and neither should anyone else. Here’s what I’m watching:

• Inflation data. A Fed that just hiked is not about to cut unless inflation clearly cools. Until it does, I’d plan around rates near today’s levels, not a return to 6%.
• The 10-year Treasury. Mortgage rates track it day to day. A weaker jobs report or a flight to safety can pull rates down quickly — and just as quickly reverse.
• Insurance. C.A.R. flagged the home-insurance crisis as a headwind for 2026. In fire-exposed parts of the state, insurance availability can matter as much as the rate. See my FAIR Plan guide.

What that means in practice: buy or refinance on a payment you can live with today, keep the loan easy to refinance (no prepayment penalty, sensible points), and treat a future rate drop as upside, not the plan.

2026 Loan Limits: The Good News This Year

FHFA raised the 2026 conforming loan limits in November 2025:

• Baseline (most California counties): $832,750 (up from $806,500)
• High-cost ceiling: $1,249,125 (up from $1,209,750)

Ten California counties are at the $1,249,125 ceiling: Alameda, Contra Costa, Los Angeles, Marin, Orange, San Benito, San Francisco, San Mateo, Santa Clara, and Santa Cruz. Others sit in between — San Diego $1,104,000, Ventura $1,035,000, Napa $1,017,750, Sonoma $897,000 — and most inland counties are at the $832,750 baseline. HUD’s 2026 FHA limits run from a $541,287 floor to the same $1,249,125 ceiling. Full county tables are in my 2026 conforming loan limits guide.

Why it matters: in a ceiling county, a buyer who can keep the loan at or below $1,249,125 gets agency (Fannie/Freddie) underwriting instead of jumbo rules. Sometimes a slightly bigger down payment — or a piggyback second — is worth it to stay under the line. Sometimes jumbo pricing is just as good for strong borrowers. I price both. See jumbo vs. conforming.

Regional Snapshot (August 2026, C.A.R.)

Region / County	Median price	Year over year
San Francisco Bay Area	$1,272,000	–0.2%
Marin	$1,650,500	—
San Francisco	$1,875,000	—
Southern California	$900,000	+2.9%
San Diego	$1,090,000	—
Inland Empire	$600,000	0.0%
Central Valley	$500,000	+1.0%

Bay Area and Marin

Marin remains one of the tightest markets in the state, and above the conforming limit jumbo financing is the norm. What wins offers here is a fully underwritten approval and a lender who can close on the contract timeline. More in Marin County mortgage rates and Marin jumbo loans.

San Francisco condos and TICs

San Francisco’s condo market is still nuanced. Some buildings don’t meet Fannie Mae/Freddie Mac project standards (HOA delinquencies, reserves, litigation, a single owner holding too many units), which pushes buyers to portfolio or non-QM lenders. Tenancy-in-common (TIC) units need specialized fractional lenders. See San Francisco mortgage options and non-warrantable condo loans.

Investors and Southern California

Investors in Los Angeles, Orange County, and the Coachella Valley continue to use DSCR loans (qualifying on rent, not personal income) and short-term hard money or fix-and-flip financing. Short-term rental rules vary by city — Palm Springs, for example, requires STR registration and limits how many operate — so check local rules before you underwrite a property on Airbnb income.

What This Means for You

Lock vs. float

With the Fed tightening and rates moving 0.10%–0.15% in a week, I generally recommend locking once you’re in contract and the payment works. Floating is a bet, and recent weeks have punished it. My rate lock guide covers lock periods, extensions, and float-downs.

Fixed, ARM, or buydown

If you expect to sell or refinance within 7–10 years, a 7/6 or 10/6 ARM may price below the 30-year fixed. A seller-paid temporary buydown can also soften the first years’ payments. See ARM vs. fixed and buydowns.

Self-employed and non-traditional income

Bank statement, P&L, asset-depletion, and other non-QM programs are widely available through wholesale lenders. They cost more than agency loans, and the premium depends on credit, down payment, and documentation — but for borrowers whose tax returns understate their income, they’re often the difference between a yes and a no.

Down payment help

CalHFA and a number of city and county programs still offer assistance, though funding rounds open and close. Ask me what’s currently available before you assume you need 20% down. See down payment assistance in California.

Refinancing

With rates near 7%, rate-and-term refinances mostly make sense for borrowers whose current rate is well above today’s — often those who bought or refinanced in late 2023. For homeowners with a low first mortgage they want to keep, a HELOC or home equity loan usually beats a cash-out refinance. See refinancing in California.

Get a Rate Quote for Your Scenario

I shop 40+ wholesale lenders for your loan type, county, and credit profile. No call center — you talk to me. And if a bank has already said no, that’s usually where I start.

California Mortgage Outlook FAQ

Will mortgage rates go down in California in late 2026?

Not likely in the near term. The Federal Reserve raised its policy rate to 3.75%–4.00% on September 16, 2026, and Freddie Mac’s 30-year average reached 7.03% on September 24. Rates could fall if inflation cools or the economy weakens, but plan around a payment you can afford at today’s rates and treat any drop as a refinance opportunity.

Did the 2026 forecasts get it right?

Partly. C.A.R. forecast a $905,000 statewide median and a 6.0% average rate for 2026. Prices have come in close — $901,420 in August — but rates have run well above 6% for most of the year.

What are the 2026 conforming loan limits in California?

The baseline is $832,750 and the high-cost ceiling is $1,249,125 for a single-family home. Ten counties, including Marin, San Francisco, Los Angeles, and Orange, are at the ceiling; San Diego is $1,104,000 and Sonoma is $897,000.

Is 2026 a good time to buy a home in California?

For buyers who can comfortably afford the payment at today’s rates and plan to stay five or more years, yes — prices have been roughly flat, inventory is higher than in 2021–2022, and competition is less frenzied. If your credit, savings, or job situation isn’t settled, fixing that first is the better move.

Should I wait for rates to drop before buying?

Waiting only pays if rates fall substantially while prices stay flat. When rates drop, more buyers return and prices tend to rise. For most ready buyers, the better strategy is to buy a home you can afford now, structure the loan so it’s easy to refinance, and refinance if rates fall meaningfully.

Related Resources

• Current Mortgage Rates in California
• Should I Buy Now or Wait?
• Why Mortgage Rates Change Daily
• 2026 Conforming Loan Limits in California
• How Much House Can You Afford in California?
• Mortgage Pre-Approval Checklist
• First-Time Home Buyer Programs in California

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