The national housing market is heading toward a major transformation that Redfin has called The Great Housing Reset. After several years defined by fast rising mortgage rates, limited inventory, and intense affordability challenges, 2026 is shaping up to be a year that begins a new cycle. Instead of a recession or a dramatic market downturn, economists foresee a period of recalibration, gradual improvement, and a more stable long term foundation.

For homeowners in Palos Verdes, this shift is more than national news. It represents a powerful turning point that may influence inventory levels, buyer demand, pricing strategy, and long term planning. The Peninsula is a unique market. Our breathtaking ocean views, exceptional schools, hillside estate communities, quiet cul de sacs, and low crime environment create an unmatched quality of life. Because demand exceeds supply and buildable land is scarce, Palos Verdes consistently behaves differently from the broader United States. National trends shape the backdrop, but our micro markets in 90274 and 90275 respond in ways that reflect our neighborhood specific dynamics.

Understanding how The Great Housing Reset could influence Palos Verdes is essential for anyone who may buy or sell property over the next two years. Below is a detailed exploration of Redfin’s predictions and the specific opportunities, challenges, and advantages they create for our local market.

The Big Picture: Why 2026 Represents a Shift

Across the country, the last three years have been dominated by several overlapping forces. Mortgage rates surged from the two and three percent range to well over seven percent. Many homeowners felt locked in by their low rate loans. Inventory collapsed to historically low levels. First time buyers struggled to compete. High inflation and wage growth mismatches made affordability one of the biggest political and economic issues in the country.

Redfin’s forecast for 2026 indicates movement toward balance. It does not suggest a dramatic return to the conditions of 2021. Instead, it points to something healthier and more sustainable. Slight price growth, modestly lower mortgage rates, growing wages, increased sales volume, and potential government intervention aimed at affordability create a backdrop where buyers and sellers can navigate the market with more confidence and predictability.

For Palos Verdes, a stable economic environment is often the ideal environment. Homes on the Hill remain long term investments because buyers are drawn to lifestyle, scenery, education, and community. When the national market stabilizes, our local market experiences smoother movement, more consistent buyer activity, and clearer pricing expectations. This helps both buyers and sellers plan strategically.

Prediction One: Mortgage Rates Will Dip Into the Low Six Percent Range

One of Redfin’s most influential predictions is that the Federal Reserve will cut interest rates in 2026 due to a softer labor market and a need to normalize monetary policy. Mortgage rates are expected to settle in the low six percent range. While this is higher than the historically low rates of the pandemic era, it represents a meaningful improvement from the elevated rates of 2024 and 2025.

What This Means for Buyers in Palos Verdes

A drop from the seven percent range into the six percent range can significantly increase purchasing power. Many local buyers have been waiting for relief. Even a one percent decline in interest rates can save hundreds of dollars per month on a typical loan and tens of thousands of dollars over the life of a mortgage.

Palos Verdes buyers tend to be highly educated, strategic, and financially sophisticated. They understand the long term value of investing in this extraordinary coastal community. Lower rates give them more flexibility to pursue ocean view homes they may have thought were just out of reach. It also encourages move up buyers to trade one home for another, something many have avoided because the payment jump was too steep.

What This Means for Sellers in Palos Verdes

For sellers, this rate environment can activate buyers who have been holding back. Increased affordability often means increased showing traffic, stronger open house attendance, and more competitive offers. When buyers feel more confident, they make decisions faster.

In communities like Lunada Bay, Valmonte, Montemalaga, and the gated city of Rolling Hills, a more favorable mortgage environment can spark brisk movement in segments of the market that have been unusually sluggish. Sellers who prepare their homes well and list with a strong pricing and marketing strategy may benefit greatly from this renewed momentum.

Prediction Two: Wages Will Grow Faster Than Home Prices

Redfin anticipates that the median home price in the United States will rise by only one percent year over year in 2026. This is significant because it marks a period where wages are expected to grow more quickly than housing costs. The last time this happened consistently was immediately following the 2008 to 2009 financial crisis.

How This Impacts Local Buyers

When wage growth exceeds home price growth, affordability gradually improves. Over time, buyers can close the gap between what they earn and the price of homes they want to purchase. Although Palos Verdes is a luxury coastal community, wage growth still plays a meaningful role for many buyers in the three to eight million range.

A more balanced environment allows two income households, young professionals, and growing families to plan more confidently. It becomes easier to save for down payments. It becomes easier to qualify for loans. It becomes easier to compete for homes that offer a strong long term lifestyle fit.

How This Impacts Local Sellers

Moderate price appreciation is not a negative signal for sellers. Instead, it supports long term market stability. Rapid appreciation often leads to buyer fatigue, speculative behavior, and unrealistic seller expectations. Slow and steady appreciation encourages healthy demand, predictable movement, and stronger contract integrity.

For sellers in Palos Verdes, this means that pricing strategy becomes even more important. With buyers more discerning than ever, homes that are priced precisely and prepared beautifully will attract immediate attention. Overpricing, on the other hand, may cause a listing to sit longer than expected. In a world where wages are rising but home prices are not surging, buyers evaluate value with heightened scrutiny.

Prediction Three: More Buyers Will Choose Non Traditional Living Arrangements

Redfin expects that affordability pressures will push more households toward non traditional living structures. Multigenerational living, accessory dwelling units, and creative shared living arrangements will continue to gain popularity.

Why Palos Verdes Is Perfectly Positioned for This Trend

Palos Verdes has always attracted multigenerational households. The excellent school system, peaceful environment, ocean proximity, and large lots make the Peninsula ideal for families who want to keep loved ones close.

Many homes in Palos Verdes already offer floor plans that accommodate independent living within the main residence. Downstairs suites, converted bonus rooms, guest houses, and ADUs are increasingly common selling points. Even homes that do not yet offer these features often have the lot size and layout to create them.

In Rolling Hills, for example, many properties include barns, detached structures, or expansive acreage that can be used creatively. Valmonte and Lunada Bay offer charming homes with flexible space perfect for extended family. Rancho Palos Verdes neighborhoods such as Miraleste Hills and Country Club frequently appeal to multigenerational living because of their larger lots and sweeping views.

How Sellers Can Benefit

Sellers who highlight multigenerational potential stand out. Features that were once considered secondary now hold primary value. Private entrances, flexible downstairs spaces, large yards, and pre existing ADUs place a home in the top tier of buyer interest.

The Great Housing Reset will only amplify this trend. Households seeking affordability without sacrificing lifestyle will gravitate toward homes that offer functional flexibility.

Prediction Four: Existing Home Sales Will Rise Three Percent

Redfin predicts that home sales nationwide will reach an annualized rate of 4.2 million in 2026, which represents a three percent increase from 2025. This increase is tied to improving affordability, easing mortgage rates, and renewed consumer confidence.

What This Means for Inventory in Palos Verdes

For several years, Palos Verdes has experienced extremely low inventory. Many homeowners who might otherwise have sold their home and moved locally chose to stay because they could not find a replacement property.

If sales volume increases nationally, it often encourages movement locally. When homeowners feel they have viable options, the entire market benefits. More listings lead to more transactions, which leads to more opportunities for both buyers and sellers.

In Palos Verdes Estates, Rolling Hills Estates, and Rancho Palos Verdes, even modest increases in turnover can have an outsized impact. The Peninsula is a small and tightly controlled residential community. More inventory opens doors for move up buyers, downsize buyers, and relocating buyers, creating a healthier overall ecosystem.

How Sellers Benefit

A rising sales environment benefits sellers by creating more urgency among buyers. When homes move more quickly nationwide, buyers who have been waiting for the perfect moment often decide to act. For properties with unique features such as panoramic ocean views, walkability to schools, large yards, or mid century architecture, increased national stability can translate into stronger buyer activity.

Prediction Five: Policymakers May Unite Around the Affordability Crisis

Redfin anticipates that housing affordability will become such a dominant political issue that national policymakers may finally address it in a unified way. There is even speculation that a national housing emergency could be declared.

What Affordability Efforts Could Mean for Palos Verdes

Although Palos Verdes is structurally a luxury coastal market, national and statewide affordability initiatives can still influence local buying patterns. Programs designed to help first time buyers, reduce down payments, or support ADU development can bring more qualified buyers into the environment.

While Palos Verdes zoning is unique and often conservative, the state of California continues to heavily encourage the creation of ADUs and flexible housing options. Policy momentum could further cement these trends. Financial incentives, tax benefits, and grants aimed at increasing supply or supporting moderate income buyers may indirectly boost local demand.

Local Impact on Sellers

More buyer participation, especially in the two to four million dollar range, strengthens market stability. Sellers benefit from larger buyer pools and more consistent competitive pressure. Communities benefit from younger families moving into the school district, which reinforces the strong educational reputation that has always been a foundation of Palos Verdes property values.

How The Great Housing Reset Aligns With Palos Verdes Market Behavior

The Palos Verdes market tends to outperform national trends because it is driven by lifestyle rather than speculation. People move here for the cliffs, views, rural charm, equestrian culture, and top tier education. They stay for the serenity and the community.

As a result, our market reacts differently during periods of economic change. Here is how The Great Housing Reset may intersect with local realities.

Limited Inventory Remains a Source of Strength

Even with increased sales volume, Palos Verdes will continue to experience relatively low inventory. Our land use restrictions, steep topography, and built out neighborhoods limit significant development. This protects long term home values and ensures that demand consistently outpaces supply.

High Quality Presentation Will Matter More Than Ever

Buyers in 2026 will be well informed and highly discerning. They will expect value, beauty, and move in ready presentation. Homes that shine will sell quickly. Homes that need work but are priced accurately will also sell. Homes that are overpriced or poorly prepared will struggle, even in a favorable market.

Pricing Strategy Is Essential

The Great Housing Reset does not mean a return to rapid price appreciation. It means balance. Balanced markets reward sellers who price precisely. Strategic pricing supported by professional analysis, current comps, micro market expertise, and an understanding of buyer psychology will be essential.

Marketing and Exposure Will Determine Success

As always, Palos Verdes homes require world class marketing to reach the right audience. Stunning photography, videography, drone coverage, targeted digital campaigns, print storytelling, and exposure through the Forbes Global Properties international network ensure sellers reach not just the buyer next door but buyers across the globe.

What Should You Do To Prepare For 2026

Whether you plan to sell soon or simply want to understand your property’s position in the evolving market, now is the time to prepare.

For Homeowners Considering Selling

Begin evaluating upgrades, pre-listing improvements, and staging opportunities. Homes that feel polished command stronger attention and better offers. Analyze your micro market carefully because each neighborhood on the Hill behaves differently. Lunada Bay, Valmonte, Masongate, Eastview, and Rolling Hills all respond uniquely to economic trends.

For Homeowners Thinking Long Term

Even if you do not plan to sell in 2026, understanding your home’s future value trajectory helps with financial planning, retirement strategy, generational planning, and investment decisions.

For Buyers Planning a Move

Buyers should watch interest rate movements closely. If rates fall into the six percent range, it may be the perfect window to secure a home in an extraordinary area that consistently protects long term value.

Final Thoughts: Opportunity and Stability Ahead

The Great Housing Reset offers reasons for optimism. This is not a market collapse. It is not a return to the rapid and unsustainable appreciation of the past. It is a gradual move toward balance. It is an environment where buyers regain confidence and sellers have a better chance of achieving successful outcomes without extreme volatility.

For Palos Verdes, this shift aligns beautifully with the long term strengths of our market. The Peninsula remains one of the most desirable coastal communities in California. Our exceptional natural beauty, excellent schools, and extraordinary lifestyle continue to attract buyers from around the world.

If you would like a personalized analysis of what The Great Housing Reset means for your property or your buying plans, I would be honored to help. Every home and every neighborhood on the Hill tells a unique story. Understanding how national trends intersect with that story is the key to making informed, successful decisions in 2025 and 2026.