Homeownership Matters
California’s housing crisis commands attention from every level of government – from local officials and state leaders to gubernatorial candidates. Last weekend, the Sacramento Bee published an opinion piece by CALIFORNIA ASSOCIATION OF REALTORS® President Tamara Suminski.
The piece, which is part of C.A.R.’s larger “Homeownership Matters” public affairs campaign, outlines strategies California lawmakers can adopt to increase homeownership opportunities in the state. These include expanding existing statutes to protect all housing development from delays caused by frivolous lawsuits, incentives that encourage institutional investors to transition single-family homes back to owner-occupied housing, and continued funding of programs like the California Dream for All shared-equity program that provides down payment assistance and other incentives to first-time homebuyers.
A Surprising Share of Homeowners have High Mortgage Rates
The share of U.S. homeowners with high rates on their mortgages has jumped sharply in just the last few years. That’s having a marked impact on the refinance market and a somewhat more muted impact on home sales.
In 2022, after mortgage interest rates hit more than a dozen record lows, sparking a refinance bonanza, barely 10 percent of homeowners had 30-year fixed mortgages with rates above 5 percent. Just four years later, that share jumped to over 30 percent, according to ICE Mortgage Technology.
About 20 percent of borrowers have mortgages with a rate over 6 percent. However, slightly more than half of U.S. mortgage holders (51.5 percent) still have rates under 4 percent. Home sales have been less than robust over the last few years, with the National Association of REALTORS® reporting a historically low 4.06 million sales last year, basically unchanged from 2024. This, after hitting a 15-year high of 6.12 million home sales in 2022. More recent sales, combined with some cash-out refinancing, pushed the share of higher-interest-rate borrowers up.
Buyers backed out of deals at a record rate last month
Homebuyers were canceling deals at a record rate in December, a sign that they feel more comfortable being choosy in a market that continues to favor buyers. More than 40,000 home purchase agreements in the U.S. were canceled in December, according to Redfin, equating to about 16.5 percent of total contracts that month. That’s up from 14.9 percent a year prior, and it’s the highest share of December cancellations since Redfin began tracking the data in 2017.
The rise in cancellations coincided with a shift in the housing market, according to Redfin. High housing costs and rising inventory have made homebuyers more selective. Markets with more listings tended to have higher cancellation rates. Sellers were also pulling their listings at an elevated rate last fall, but there are signs that they’re easing back into the market.
Housing affordability affects homeowners: More falling behind
Housing affordability challenges are weighing on not only would-be buyers, but also on a growing share of existing homeowners, new data suggests. Late-stage mortgage delinquencies (those with payments at least 90 days past due) rose 18.6 percent in December from a year earlier, according to research from credit scoring company VantageScore.
While the share of mortgages at that stage of nonpayment remains small at about 0.2 percent – up from just under 0.17 percent in December 2024 – the growth is occurring at a faster pace than for delinquencies involving other types of consumer credit, including auto loans, credit cards and personal loans. Compared with nonpayment levels seen during the financial crisis in 2008 to 2010, “this is a considerably lower delinquency rate,” said VantageScore’s Chief Strategy Officer and Chief Economist Rikard Bandebo. “But it’s still a concerning sign that [delinquencies] are increasing.”
2026 Real Estate Outlook: What Economists are Watching
Housing economists weigh in on the forces most likely to shape housing business in 2026—from mortgage rates and inventory to demographic and regional shifts. While notable headwinds persist, they agree on one thing: The housing market is showing signs of a rebalance—and a rebound—in 2026.
- Equity remains, but home prices moderate: Home price growth will be minimal—roughly 2% to 3%—about the same as overall consumer price inflation. Generally, wage growth will be above that. So, it’s a year where people’s income begins to rise a little faster than consumer price inflation and home prices—and this is a welcoming development. We want people to have more purchasing power. Home prices are in no danger of any major decline, and even a 3% gain will bring smiles to many homeowners.
- Less pressure on buyers: Inventory levels are about 20% above one year ago, so there are more choices for consumers. We’re not back to pre-COVID inventory yet, which I would consider normal, so we’re still in a slight housing shortage condition. But consumers do not have to rush decisions the way they did before—there are more choices out there and less prevalence of multiple offers.
- The American dream is still alive: The desire for homeownership has not fallen. Many renters say that if the conditions are right, they would like to become homeowners. The past couple of years have been frustrating because of elevated mortgage rates, but things will be much better to achieve that American dream of ownership in 2026—with more inventory choices and mortgage rates falling.