Desert Investor Quarterly
Your source for High Desert multifamily real estate trends
Brought to you by Wiest Realty, Inc. (DRE: 01183800)
Where are we in the current real estate cycle?
Our experience here at Wiest Realty, Inc. (CA DRE 01183800) has taught us that many “investors” have little or no understanding of real estate cycles. We can’t count how many times investors have asked us:-
“When will the next recession start?” Most of us are concerned about the bottom line which is price movement. When will prices drop (or when to sell) and when will price increase (when to buy). Median price trends don’t necessarily correspond with recession cycles. It’s just as important to know what’s happening as well as why it’s happening.
We expect median price flattening or declines since supply has been in the 4 to 4.4 month area during the first two months of 2026. California unsold inventory stood at 2.7 months in December 2025 but surged to 4.4 months in January 2026. California year-over-year median prices have mostly been below the zero line since May 2025. Traditional affordability rose only slightly between the 3rd quarter of 2025 (17%) and the 4th quarter (18%) and February 30-year rates remain in the low 6% area. Typically, traditional affordability hits a bottom and bounces back to an uptrend. During this cycle affordability has been below the 20% danger line since mid 2022.
Here are the red flags:-
- 1. Median single family home year-over year price momentum fell below the 0% line back in May and remained below the 0% level except for four months which showed only small gains. The "wealth phase" appears to be over for now. In fact, median prices are approaching the the short term "normal line".
- 2. Supply momentum (on a year-over-year basis) had been generally increasing between May 2025 and February 2026 although later months (September 2025 through February 2026) showed single digit increases.
- 3. Traditional affordability for Q4 2025 stood at 18% That means only 18% of California households can afford to buy the median priced home with 20% down using a 30-year fixed rate loan. If you read our charts, you’ll know that under normal circumstances an affordability rate of 18% means price declines are likely when supply is rising. We believe the only factor keeping median prices from falling further is relatively low supply (below 4.5 to 5 months). At this point, median prices are taking a hit with supply at 4+- months.
- 4. Consumer Sentiment is falling. Although this is considered a leading indicator by itself, its forecasting reliability is less than perfect. However, it is a factor to weigh in your decisions. Since January 2025, year-over-year consumer sentiment momentum has been negative for 13 out of the last 14 months.
- 5. California unemployment is the 2nd highest in the nation (5.5% as of December 2025). Only Washington DC at 6.7% has a higher rate. Unemployment is considered a lagging indicator; meaning something bad has already happened that is causing the unemployment rate to rise.
People seemed to be over-joyed at the last Fed Funds rate decrease. However, the rate on the 30-year fixed loan is California is still around the 6% APR mark.
The 30-year fixed rate loan is more a function of inflation; not the Fed Funds rate. Even the 10-year treasury is a better indicator as 30-year mortgage rates tend to fall 200 to 300 basis points+- above the ten-year treasury rate.
Momentum data indicates that year-over-year median prices crossed the zero line in May 2025. This is generally considered a sell signal. Downward year-over-year momentum was generally sustained through February 2026. General median price drops between August and February have been common since 2011, so the small upticks in August and September 2025 median prices were a bit of a surprise. The figures for February 2026 showed only a 0.2% year-over-year median price momentum gain. As we predicted earlier last year, we expected the median price softening trend to extend at least through February 2026. Check out momentum charts on our web site. So far, the general data we have for the state suggests the wealth building stage is over for now.
If you’re thinking of selling, it looks like you’ve missed the peak in our market area. However, the good news is, media prices are still high in spite of price momentum bouncing around the 0% line. Supply is keeping prices from falling hard in spite of low affordability and high interest rates.
If you’re thinking of holding off on selling – remember it took 16+- years (adjusted for inflation) for the 2022 median price peak to equal the 2008 price peak. Do you want to wait that long to sell?
What are your objectives?
Do you know:
- ▪ What your yields would be on your individual properties if you sold today, next month, next year?
- ▪ What annualized yield you need on your assets to achieve a monetary goal by the time you retire?
- ▪ Where will your yield come from or how it will be divided; cash flow or when you sell?
- ▪ Is it better to sell high prior to an anticipated recession and buy low when prices rebound?
- ▪ What property type is best to meet your life style, management skills, and time constraints?
- ▪ Should you invest locally or out of state?
Wiest Realty, Inc is a full-service real estate brokerage providing expert guidance in residential and commercial property sales, leasing, and investment.