Ask almost any Los Angeles resident how they feel about housing affordability and you’ll hear the same answer: it feels impossible. Prices are high, mortgage rates are elevated, and monthly payments remain painful. Yet, quietly and gradually, affordability in LA may actually be improving even if it doesn’t feel that way.
Nominal Prices vs. Real Prices
Home prices in LA are expected to rise again in 2026, likely in the 2–3% range. On the surface, that sounds like bad news for buyers. But inflation is expected to run higher than price growth, which means real (inflation-adjusted) home prices may decline for a second year in a row.
This matters more than many people realize. When wages rise faster than home prices, affordability improves even if the sticker price still goes up.
In simple terms: homes may cost more dollars, but those dollars may represent a smaller share of household income.
The Slow Normalization Process
The post-pandemic housing surge pushed prices far ahead of incomes. What we’re seeing now is not a crash, but a slow normalization. Price growth is cooling, incomes are rising, and time is doing some of the work that rate cuts alone cannot.
This is why affordability improvements feel invisible. They don’t show up as dramatic price drops. They show up gradually, paycheck by paycheck.
Mortgage Rates Still Matter A Lot
Even modest declines in mortgage rates have an outsized impact on affordability. A drop from 6.75% to 6.0% can reduce monthly payments by hundreds of dollars. Historically, LA buyers respond quickly when rates dip toward that level.
Forecasts suggest rates may average in the mid-6% range in 2026, with potential dips into the high-5s if the economy softens. Those dips even if temporary could bring sidelined buyers back into the market.
The Lock-In Effect Is Still a Constraint
Affordability isn’t just about buyers it’s also about sellers. Roughly 80% of homeowners with mortgages have rates below 6%. That lock-in effect discourages selling, keeping inventory tight and prices supported.
But over time, life events jobs, family changes, downsizing override rate lock-in. As more homeowners are forced to move, inventory will gradually increase, helping affordability at the margin.
What This Means for Buyers
Affordability in LA isn’t going to snap back overnight. But 2026 may mark a turning point where conditions stop getting worse and start slowly getting better. Buyers who stay informed, flexible, and prepared may find opportunities especially during periods of rate volatility.
The takeaway: affordability isn’t fixed. It’s evolving. And in 2026, the direction may finally be improving.