California’s crucial spring home‑buying season, which normally draws a rush of sellers and hopeful buyers, is at risk of stalling in 2026 as war in Iran, rising petrol costs and jittery mortgage markets unsettle households across the state, according to estate agents and housing economists.
For context, California’s property market had been expected to regain some momentum after a muted 2025. Mortgage rates slipped to their lowest level in three years at the end of February, dropping to just under 6%, which typically would coax more buyers into action. Instead, the reprieve was short‑lived. By last week, rates had nudged back up to around 6.3%, and the wider economic picture had darkened.
How Global Tensions Are Seeping Into California Housing
The news came after a fresh bout of global turmoil. The United States and Israel launched a war against Iran in late February, an escalation that has fed directly into financial volatility, according to Chen Zhao, head of economics research at Redfin, speaking to SFGATE.
Zhao described a ‘huge amount of volatility’ in mortgage markets, with that seemingly modest move from just below 6% to about 6.3% part of a far more turbulent backdrop. The conflict has helped drive up fuel prices, which might sound like a separate headache until you remember how closely Americans watch the price at the pump.
‘Nothing affects consumer sentiment like gas prices,’ Zhao said. ‘So people might start to feel a little bit more hesitant, and that can certainly affect the housing market.’
There is no definitive data yet on how much damage this mix of war and higher petrol costs will do to California home sales. That will only become clear months from now, when analysts can comb through the numbers. For the people trying to buy or sell houses in real time, though, the effect is already being felt in the form of anxiety and second‑guessing.
California’s Market Was Already Struggling To Recover
In case you missed it, the state did not enter 2026 from a position of strength. Home sales across California hit their lowest level in 23 months in January 2026, according to the latest report from the California Association of Realtors. That was before the Iran conflict and the latest spike in petrol prices.
A Redfin survey carried out by Ipsos on 5 and 6 March offers an early indication of how that conflict is feeding into consumer behaviour. Around 25% of Americans told pollsters they were ‘delaying or canceling plans for a major purchase like a home or car because of the military conflict with Iran’.
Redfin compared those results to a similar survey it ran in 2025, when the Donald Trump administration introduced new tariffs. At that point, 24% of respondents said they were putting big purchases on hold. In other words, the war appears to be causing a level of financial unease on par with a major trade policy shock.
The numbers are national rather than specific to California, and they speak to sentiment rather than completed transactions, but they are not easily brushed aside. A quarter of potential buyers thinking twice about major spending is not a trivial headwind.
On The Ground, ‘The Craziest Time’ For Buyers And Agents
Estate agents dealing with California’s bruised but still competitive local markets say the main impact so far is uncertainty.
‘It’s the craziest time I’ve ever seen,’ said Matt Sevenau, a Compass agent who focuses on the state’s Wine Country region, in an interview with SFGATE. ‘It’s so impossible to even have any idea how this plays out.’
In places where the supply of homes remains exceptionally tight, that uncertainty is not translating into a clear slowdown so much as a change in what buyers are willing to tolerate.
San Francisco agent Ilana Minkoff, with Vanguard Properties, told SFGATE that in parts of the city with particularly low inventory, buyers have actually become ‘a little more picky’. She said cash buyers at the top end of the market are still moving quickly on turnkey properties, sometimes bidding far over the asking price. Yet the appetite for renovation projects has cooled.
Given unsettled construction costs and an unpredictable global supply chain, buyers are more wary of homes that need major work. The risk of delays and cost overruns looms larger when the broader economic outlook is cloudy and mortgage rates are bouncing around.
Why California’s Low Supply Keeps Pressure On Prices
For starters, California’s structural shortage of homes has not gone away just because rates are higher and war is on the nightly news. Over recent years, the state’s housing market has endured pandemic lockdowns, rapidly rising borrowing costs and political fights over planning, yet in many cities the basic reality is the same: too few homes for too many would‑be buyers.
Minkoff said that in low‑inventory markets, it still feels like a race to secure a suitable property. The rhetoric might sound familiar to anyone who has watched California’s housing drama over the last decade, but her point is that even amid what she called ‘another crisis’, the perceived value of owning a home has not diminished.
‘Here we are in another crisis, and the perceived value of a home is very important because that’s stability,’ she said. ‘In uncertain times, it is important to live in a place that you love.’
That logic helps explain why the top end of the market appears reasonably resilient, even as surveys flag a broader pullback. Buyers with cash or strong equity can afford to view short‑term swings in mortgage rates or petrol prices as background noise. Buyers who are stretching, or who feel their jobs or savings could be threatened by a deeper downturn, do not have that luxury.
Nothing in the reporting so far confirms whether this period of hesitation will translate into a prolonged slump in California home sales or merely a brief pause before pent‑up demand reasserts itself. Until the hard data catches up, the state’s spring housing season is trapped in a kind of holding pattern, caught between war headlines, wobbling rates and a population still trying to decide how much risk it can live with.
Nothing is confirmed yet about how severely these economic and geopolitical shocks will hit the California market, so any predictions about sales or prices should be taken with a grain of salt.
