The Current Market and Where It's Heading

As we wrap up Year 2025 and enter a hopeful First Quarter of 2026, we'd like to thank all our valued clients who continue to ride the tides with us. The market has since seen some great shifts, pivoting into a buyers-market in many markets throughout Southern California. Many markets throughout Southern California have slowed down; climbing sale price trends have tapered off and, in some markets, have even showed a decline in sale prices.

EFK Appraisal Services conducted an updated appraisal for a 4-unit income producing property in Huntington Beach, California during Q3 of 2025. To everyone's surprise, the property value had since dropped. This was very alarming and had to be treated carefully to ensure this was not an appraisal error. Upon further in-depth analysis, data strongly displayed the stark reality that we have hit our cap. "For how long can prices keep climbing?" - Was the common question we all shared.

The debt-to-income ratio and overall average American median income, can, for the most part, no longer keep up with rising home prices.

Homeowners and other involved real estate parties often blame the appraiser for disappointing market value results. To blame an appraiser is grossly erroneous on one's part. Appraisers do not create data nor hold the power place a particular figure on a property's value based on feelings.

Many real estate professionals will concur that values have started to dip in many markets throughout Southern California. EFK Appraisal Services conducted a home appraisal in Q4 2025 for a manufactured home in Big Bear City, California. The appraisal was for FHA /HUD which naturally entails a broad pipeline of reviews and other check and balances. Long story short; the appraiser was strongly encouraged to lower the original market value. Not to say this as insinuating "shady" behind the scenes business was occurring, but rather the Collateral Underwriter, Review Team and Investment Client we're terrified of the high risk. The CU (collateral underwriter) has data analytic resources beyond what appraisers' possess. The review team was trying to protect me, the appraiser. The Chief Appraiser mentioned trends throughout Southern California and the overall Big Bear market has cooled down significantly. Drop the value or else this appraisal will land on a HUD desk, was essentially his warning.

On that note, many homeowners and realtors don't understand there's a host of behind-the-scenes activity. There are a number of barriers an appraisal has to pass. If a homeowner receives a fair market value they're pleased with, there's a chance it will subsequently change post review by the CU and Chief Appraiser. Every party essentially needs to be on the same page. After speaking with the Big Bear property review team, I understood where they were coming, and they understood my perspective, leading to amendments to help meet a middle ground.

The federal reserve has announced propositions to lower mortgage rates in 2026. As of today, January 2026, mortgage rates hover at about 6.1% for 30 year loan, and at 5.5 - 5.9% for fixed 15 year loan terms. These rates vary per bank, lender and loan type. FHA and VA loans have different rates. Private hard money lenders often lend with very high interest rates. When loan shopping, remember that the smaller downpayment results in larger monthly payments. Longer loan terms incur more interest; and you'll end up paying more in the long run. If you have all cash, pay all cash.

During 2025, President Donald Trump proposed the 50 Year Loan Term. This proposal received much backlash. Many speculate that this would cause home prices to increase as the idea of low monthly payments will be the main component consumers will ponder. Today, the average first time homebuyer is in his/her 30s or 40s. This means the borrower possibly won't have the principal paid off until their 80s! That's a lot of debt floating around in the U.S. secondary mortgage market. Despite the backlash, there are some positive aspects if the 50 Year Loan proposal were to fruition. A 50-Year mortgage would lower monthly payments and help consumers who are currently priced-out. This might help buyers, younger generation especially, get their foot in the door. In the future, these 50 Year Borrowers have potential to refinance or pay the principal off in one lump payment when their financial situation advances.

In short, it's important to note the U.S. Housing Market is very broad. No two cities or neighborhoods are the same. Some markets have remained a steady uptick, however, overall, the mass market is cooling and tipping into a buyers' market. Increasing sale prices will likely remain moderate, if any. There are no signs of a crash by experts. But a cluster of California markets (cities) are showing signs of a correction.

Buyer affordability has still remained a concern. The likelihood of mortgage rate cuts in 2026 is strong, but at very minimal margins.

By:

EFK Appraisal Services, Inc