Southern California Housing Market Sees Dramatic Decline in Sales

The Southern California housing market is showing signs of cooling. Recent data reveals that home sales have taken a dip, and price growth has slowed. While this might sound alarming, it's essential to understand the factors at play and what this means for buyers and sellers.

I've been watching the California real estate market for years, and I've seen these ebbs and flows before. Let’s take a closer look at what’s happening in Southern California.

Southern California Housing Market Sees Dramatic Decline in Sales

The Numbers Don't Lie: Sales are Down

According to the latest report from the California Association of Realtors® (C.A.R.), the Southern California region experienced a notable decline in home sales in May. Specifically, sales dropped by 7.6 percent compared to the same time last year. This decline places the region in line with a broader statewide trend, as most regions in California saw decreased home-buying activity.

To get a better grip on the local markets, here's a closer look at how individual Southern California counties performed:

• Los Angeles: Sales decreased by 7.9%
• Orange: Sales decreased by 16.0%
• Riverside: Sales decreased by 8.2%
• San Bernardino: Sales decreased by 3.3%
• San Diego: Sales decreased by 4.6%
• Ventura: Sales decreased by 1.2%

Why the Sales Decline? A Cocktail of Factors

Several factors are contributing to this cooling trend:

• Lingering Economic Uncertainty: The overall economic climate remains uncertain, impacting consumer confidence. Folks are just a bit more hesitant to make big financial moves when the future feels a bit shaky.
• Elevated Mortgage Interest Rates: While rates have come down from their peaks, they're still higher than what we saw in the recent past. This makes buying a home more expensive, directly impacting affordability.
• Insurance Costs and Availability The rising cost and sometimes outright unavailability of homeowners insurance across parts of the state can really scare buyers.
• Tariff Wars: Yes, they're still a factor, creating economic ripples that affect various industries and can impact real estate indirectly.

Home Prices are Leveling Off

The good news? We are seeing a shift in upward pressure on home prices. The median home price in Southern California saw a modest increase of 0.9 percent year-over-year, reaching $888,000 in May. While still an increase, this growth is notably slower than what we've seen in previous years, and even declined over the month of April as the data below shows.

Here’s a county-by-county breakdown of median home prices in Southern California:

County	May 2025	% Change (Year-over-Year)
Los Angeles	$835,480	+2.9%
Orange	$1,419,500	-0.2%
Riverside	$638,000	-1.0%
San Bernardino	$497,940	+5.6%
San Diego	$1,050,000	+2.4%
Ventura	$985,000	+6.5%
Imperial	$377,450	-6.8%

More Homes on the Market: Inventory is Up

One of the most significant shifts in the market is the increase in housing inventory. The Unsold Inventory Index (UII), which measures the number of months it would take to sell all homes on the market at the current sales rate, has been rising. In May, the UII for Southern California was 3.9 months, up from 2.7 months a year ago.

This means there are nearly 50% more homes available than there were last year and a great increase from the prior month! In real terms, this increased inventory gives buyers more choices and reduces the pressure on bidding wars.

What Does This Mean for Buyers?

If you're in the market to buy, this cooling trend could be good news:

• More Negotiation Power: With fewer buyers and more homes on the market, you have more room to negotiate on price and terms.
• Less Competition: You're less likely to find yourself in a bidding war, which means you can take your time and make a more informed decision.
• Potential for Price Reductions: As inventory continues to grow, sellers may be more willing to lower their prices to attract buyers.
• A Window of Opportunity: As C.A.R. President Heather Ozur very aptly says, “With home prices leveling off and more homes are coming onto the market, it's a great time for well-qualified buyers to enter the market”.

What Does This Mean for Sellers?

If you're thinking of selling, you might need to adjust your expectations:

• Realistic Pricing: Overpricing your home is a surefire way to scare away potential buyers. It's crucial to price your home competitively based on current market conditions.
• Highlight the Positives: Focus on showcasing your home's best features and making it as appealing as possible to potential buyers.
• Be Patient: Homes are taking longer to sell. The median number of days it took to sell a home in California was 21 days in May, up from 16 days a year ago. Be prepared for a longer sales process.
• Consider Making Some Improvements: A fresh coat of paint, updated landscaping, or minor repairs can go a long way in attracting buyers.

A Regional Perspective

It’s important to remember that real estate is hyper-local. What’s happening in Los Angeles might be different from what’s happening in San Diego. Here’s a brief overview of major regions in California:

• Southern California: Sales down, prices up (modestly).
• Central Coast: Sales down, prices up significantly.
• San Francisco Bay Area: Sales down, prices down.
• Central Valley: Sales down, prices up slightly.
• Far North: Sales flat, prices down.

Looking Ahead: Will the Southern California Housing Market Rebound?

Predicting the future is always a risky game, but here's what the experts are saying:

• Consumer Sentiment is Improving: C.A.R.'s Senior Vice President and Chief Economist Jordan Levine points out that consumer sentiment is showing “signs of improvment”, which could boost the housing market in the second half of the year.
• Mortgage Rates are Key: If mortgage rates stabilize or even decline, we could see more buyers re-enter the market.
• The Economy Matters: Overall economic growth and job creation will play a significant role in the housing market's recovery.

My Take?

I think we're entering a more balanced market, where neither buyers nor sellers have a distinct advantage. This is a good thing for the long-term health of the real estate market. While the days of rapid price appreciation may be behind us (for now), real estate remains a solid long-term investment.

As a real estate professional, I encourage everyone to keep a close eye on market trends and seek expert advice before making any decisions. Whether you're buying or selling, having the right information and guidance can make all the difference.

Key Takeaways at a Glance

To summarize, here are the key points to remember:

• Southern California home sales are down significantly.
• Home price growth is slowing.
• Inventory is up, giving buyers more choices.
• Elevated mortgage rates and economic uncertainty are contributing to the cooling trend.
• Buyers have more negotiation power, while sellers need to price competitively.
• Consumer sentiment may improve, potentially boosting the market in the second half of the year.

I hope this comprehensive overview helps you understand the current state of the Southern California housing market. If you have any questions or need personalized advice, don't hesitate to reach out.