By Mohamed "Moe" Hassan
Real Estate Broker and Mortgage Professional | Southern California
October 2026
As higher mortgage rates weaken demand, buyers are finding more opportunities to negotiate. But lower asking prices don't necessarily translate into more affordable homes.
For years, Southern California homebuyers faced intense competition, bidding wars, and limited opportunities to negotiate. Today, the market is changing. Homes are spending more time on the market in many areas, sellers are becoming more flexible, and buyers have greater opportunities to negotiate prices and concessions.
Yet homeownership remains financially out of reach for many households.
The reason is a disconnect between two forces that determine housing affordability: the price of the property and the cost of financing it.
Home prices are holding up better than buyer demand
According to the California Association of REALTORS®, California's median existing single-family home price reached $899,720 in September 2026, up 1.7% from a year earlier.
During the same period, statewide existing-home sales fell 6.5% year over year.
This combination is revealing. Buyer activity is weakening, but prices have not declined proportionately.
The Los Angeles market illustrates the uneven nature of this adjustment. Redfin reported a median sale price of approximately $1.03 million for the city of Los Angeles in September, down 1.7% year over year. Approximately 29% of listings experienced price reductions.
These figures suggest a market in which buyers have more room to negotiate, but the overall cost of ownership remains elevated.
The mortgage payment matters more than the asking price alone
Consider a hypothetical buyer purchasing an $850,000 home with 20% down.
With a $680,000 mortgage at 6.35%, the monthly principal-and-interest payment would be approximately $4,231.
At 7.40%, the payment rises to approximately $4,708.
That's a difference of $477 per month, or $5,724 annually, without any change in the purchase price.
Over the first five years, that represents approximately $28,620 in additional scheduled payments, although differences in principal repayment and loan balances also matter.
For many households, this increase can determine whether they qualify for financing, whether they can comfortably manage the payment, or whether they must purchase a less expensive property.
A home that appears reasonably priced based on historical comparisons may still be unaffordable under today's borrowing conditions.
Why sellers and buyers are struggling to agree on value
Sellers generally evaluate their properties based on comparable sales, accumulated equity, and expectations about future appreciation.
Buyers must evaluate those same properties through the lens of monthly payments, income, debt obligations, and financing requirements.
These two perspectives do not always produce the same valuation.
A seller may view a $25,000 price reduction as substantial. But for a buyer financing 80% of the purchase at 7.40%, that reduction saves only approximately $138 per month in principal and interest, assuming the down payment percentage remains unchanged.
That may not be enough to overcome the affordability challenge.
As a result, some sellers are reducing prices or offering concessions while buyers remain hesitant to commit.
Seller concessions can be as important as price reductions
National housing data increasingly reflects this shift.
Redfin reported that sellers provided concessions in 44.7% of U.S. home sales in August 2026, compared with 42.6% a year earlier.
These concessions may include closing-cost assistance, repairs, or contributions toward mortgage-rate buydowns.
From a financing perspective, the structure of a concession can matter as much as its dollar amount.
A seller contribution toward an eligible permanent mortgage-rate buydown may provide greater immediate monthly-payment relief than an equivalent reduction in the purchase price.
However, the result depends on the loan program, available lender pricing, contribution limits, and the borrower's qualifications. Temporary buydowns provide short-term payment relief but do not change the underlying note rate.
Buyers should compare the total costs, future payments, and risks rather than focusing exclusively on the initial monthly payment.
The hidden opportunity in a slower market
The present market creates a distinction between affordability and negotiating leverage.
Buyers who remain financially qualified may encounter less competition and more flexibility than they experienced during the peak bidding-war years.
They may be able to negotiate repairs, closing costs, seller credits, or purchase prices that would have been difficult to obtain in a more competitive environment.
But negotiating a better transaction does not necessarily mean securing an affordable mortgage.
The appropriate strategy depends on a buyer's financial position, available cash, intended ownership period, and tolerance for payment risk.
What Southern California's market needs next
A sustainable recovery in housing activity will require improvement in at least one of three areas: borrowing costs, household purchasing power, or home prices relative to incomes.
Lower mortgage rates could expand the pool of qualified buyers, although renewed competition could also place upward pressure on prices.
Meaningful price adjustments could improve affordability, but sellers with substantial equity and low existing mortgage rates may be reluctant to accept them.
Income growth could help bridge the gap, but the scale of Southern California's housing costs makes that a longer-term solution.
For now, the market is experiencing an unusual combination: more negotiating opportunities without a corresponding improvement in overall affordability.
The defining question for Southern California housing is no longer simply whether home prices will fall. It is whether purchase prices, borrowing costs, and household incomes can move back into alignment.
About the author
Mohamed "Moe" Hassan is a Southern California real estate broker and mortgage professional with more than 20 years of industry experience. He is the broker and owner of NextHome Milestone Realty and has served on the California State University, Northridge Alumni Association Board of Directors and committees of the Southland Regional Association of REALTORS®.
Sources and methodology
This analysis uses publicly available September and October 2026 market statistics from the California Association of REALTORS®, Redfin, and Freddie Mac. Mortgage payments are independently calculated using standard 30-year amortization, assuming a fixed loan amount and rate. Figures exclude property taxes, insurance, mortgage insurance, HOA fees, and transaction costs. National seller-concession statistics should not be interpreted as specific to Southern California. The article presents the author's market interpretation rather than the findings of a proprietary MLS transaction study.
Broker I CEO
Cell | 818.741.6969
Broker Lic# 01791947
Corp. Lic# 02229399
No comments yet. Be the first to share your thoughts!