As we approach 2026, I'm often asked: "Where is the market going?" I don't have a crystal ball, but I do have data—and here's what the trends suggest for our local Temecula/Murrieta market.
Interest Rate Outlook
After the volatility of 2023-2024, rates have stabilized in the mid-6% range. The Fed has signaled gradual cuts may continue into 2026, potentially bringing 30-year fixed rates to the high-5% range. This would unlock pent-up buyer demand from those who've been waiting on the sidelines.
Inventory: Still Tight
The "lock-in effect" continues—homeowners with sub-4% mortgages are reluctant to sell and buy at today's rates. This keeps inventory low, supporting prices despite affordability challenges.
My Predictions
- Price Appreciation: 3-5% in most Temecula Valley neighborhoods. Nothing like 2021's frenzy, but steady gains.
- New Construction: Builders are offering incentives (rate buydowns, upgrades) that effectively reduce net prices. Watch this segment closely for deals.
- Luxury Segment: Properties above $1.5M may see longer days on market as buyers become more selective.
The Bottom Line
2026 looks like a year of normalization—not a crash, not a boom. Real estate remains a solid long-term investment, especially if you're buying for lifestyle rather than speculation.
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