California Housing Market: Forecast and Trends 2025-2026

Is the California dream still alive? If you're thinking about buying or selling a home in the Golden State, you're probably asking yourself that very question. Well, here's the quick answer: It's a bit of a mixed bag. Home sales in the California housing market are lagging a bit, but prices are mostly holding steady. It's not the crazy frenzy we saw a couple of years ago, but it's not a crash either. Let's dive into the details and see what's really going on.

Current California Housing Market Trends: A Mid-2025 Look

Home Sales

Home sales are an important indicator of the market's health. Are people buying homes? If so, how many?

According to the California Association of REALTORS® (C.A.R.), existing single-family home sales in California totaled 261,820 in July 2025. That's on a seasonally adjusted annualized rate, meaning they've adjusted the numbers to account for the time of year.

Here's the breakdown:

• Down 1.0 percent from June 2025 (264,400 homes sold).
• Down 4.1 percent from July 2024 (272,990 homes sold).
• Year-to-date, home sales are down 0.4 percent.

What does this mean? Well, fewer homes were sold in July compared to both the previous month and the same time last year. In fact, July marked the fourth straight month of year-over-year sales declines. This suggests that the spring homebuying season didn't quite live up to expectations.

Home Prices

Now, let's talk about home prices. This is what most people are really interested in, right?

The statewide median home price in California in July 2025 was $884,050.

• Down 1.7 percent from June 2025 ($899,790).
• Down 0.3 percent from July 2024 ($886,420).

So, home prices have decreased slightly both month-over-month and year-over-year. It's not a huge drop, but it's definitely a sign that the market isn't as hot as it used to be.

Are Home Prices Dropping in California?

The short answer is, yes, slightly. But it's not a freefall. As C.A.R.'s Chief Economist, Jordan Levine, pointed out, the market appears to be cooling off slightly, with home prices dipping for the third straight month. However, he also mentioned that California's median home price could still see a modest annual increase in 2025 if the market stabilizes. This points to the fact that even with these slight price adjustments, there's a possibility of overall gains by the end of the year.

Here is a table summarizing the changes in home prices at the regional level:

Region	Median Home Price Change (Year-over-Year)
Central Coast	+4.9%
Far North	+3.1%
Central Valley	0.0%
San Francisco Bay Area	0.0%
Southern California	-0.7%

Housing Supply or Inventory in California

Housing supply is another critical factor. How many homes are available for sale?

• The Unsold Inventory Index (UII) was 3.7 months in July, down slightly from 3.8 in June but up from 2.9 months in July 2024. This means it would take 3.7 months to sell all the homes currently on the market at the current sales rate.
• Total active listings were up 37.7 percent from a year ago, reaching a 69-month high. This means there are significantly more homes on the market now than there were last year.

The increased housing supply is giving buyers more choices and reducing the pressure on home prices.

Is California a Buyer's Housing Market in 2025?

This is the million-dollar question! Right now, I'd say it's leaning towards a more balanced market, maybe even slightly favoring buyers.

• A balanced market means that neither buyers nor sellers have a significant advantage.

The rise in inventory and the slight dip in prices suggest that buyers have more negotiating power than they did a year ago. Homes are sitting on the market longer, and sellers might need to be more flexible on price to attract offers.

Market Trends

So, what are the key market trends driving these changes?

• Elevated mortgage rates: Higher rates make buying a home more expensive, which can discourage some buyers.
• Economic concerns: Uncertainty about the economy can also make people hesitant to make big purchases like homes.
• Increased inventory: More homes on the market give buyers more options and reduce competition.

Impact of High Mortgage Rates

Speaking of mortgage rates, they are a big deal. When interest rates go up, it costs more to borrow money to buy a home. This can make homes less affordable, especially in a state like California where prices are already high.

Currently, U.S. weekly averages as of 08/21/2025, the average 30-year fixed mortgage rate is around 6.58% and 15-Yr FRM is about 5.69%, according to Primary Mortgage Market Survey® by Freddie Mac. The 30-year fixed-rate mortgage remained flat this week.

Here's a table summarizing some of the key data:

Mortgage Type	Interest Rate (Approx.)
30-Year Fixed Rate	6.58%
15-Year Fixed Rate	5.69%

According to various forecasts, the 30-year FRM rate will end 2025 between 6.0 to 6.5 percent. While mortgage rates have dropped to their lowest level since October 2024, the latest uptick in inflation could reverse the recent rate improvement trend and push rates back up closer to 7 percent. As such, housing demand is likely to remain soft through August until buyers and sellers get a better sense of what direction the market and economy are going.

My Two Cents

From my perspective, the California housing market is undergoing a necessary correction. The rapid price appreciation we saw during the pandemic was unsustainable. A slight cooling-off period is healthy for the long-term stability of the market.

For buyers, this means you might have a bit more breathing room. Take your time, shop around, and don't feel pressured to overpay. For sellers, it means you need to be realistic about pricing and be prepared to negotiate. The days of instant offers above asking price are largely gone.

Looking Ahead: The future of the California housing market is uncertain, but I expect it to remain relatively stable for the rest of 2025. Mortgage rates will continue to be a key factor, and economic conditions will play a significant role. While the market may fluctuate, it is expected to remain resilient.

California Housing Market Forecast 2025-2026

The California‘s housing market forecast for 2025 anticipates a rise in both home sales and prices, with the median home price potentially reaching $909,400. This positive outlook is fueled by a projected improvement in housing supply and a more favorable interest rate environment, attracting more buyers and sellers back to the market.

A Brighter Outlook for California's Housing Market

Over the past few years, the California housing market has been a roller coaster ride. We've seen dramatic swings in interest rates, a shortage of homes available for sale, and a significant impact on affordability. However, based on recent data and projections, it seems that we are entering a period of relative stability and potential growth.

The California Association of Realtors (C.A.R.) has released its 2025 forecast, and the general consensus is optimistic. They project that existing single-family home sales will increase by 10.5% in 2025, reaching 304,400 units. This increase is a significant shift from the recent downward trends caused by high-interest rates and limited inventory.

Factors Driving the California Housing Market Forecast 2025

Several key factors are contributing to this projected growth in the California housing market:

• Lower Interest Rates: The forecast predicts that the average 30-year fixed-rate mortgage will decline from 6.6% in 2024 to 5.9% in 2025. This reduction in borrowing costs will make it easier for buyers to qualify for a mortgage and could spark increased demand. I feel it's a great opportunity for first-time homebuyers to enter the market as it will bring the rates closer to pre-pandemic levels.
• Improved Housing Inventory: Although the housing supply will still be below historical averages, there's an expectation of a moderate increase in active listings. Homeowners who were hesitant to sell due to the “lock-in effect” (when homeowners are hesitant to sell due to existing low interest rates) may be more inclined to list their homes as interest rates decrease and offer more selling flexibility.
• Returning Buyers and Sellers: The combined effect of lower interest rates and a less restrictive inventory situation will likely lead to increased activity from both buyers and sellers.
• Continued Demand: While the rate of price growth is projected to moderate, the demand for housing in California remains high. This strong demand, coupled with limited inventory, will continue to push prices upward.

The California Median Home Price Forecast

The C.A.R. forecast predicts the California median home price will increase by 4.6% to reach $909,400 in 2025. This is following a projected 6.8% increase in 2024 to $869,500 from the 2023 level of $814,000. While this signifies continued price growth, it's important to note that the pace of this growth is anticipated to be slower than in recent years.

My personal take on this is that the housing shortage will continue to impact affordability, even with the predicted increase in inventory. This continued shortage creates a competitive environment that will keep prices elevated in the majority of California's cities.

Housing Affordability: A Persistent Challenge

Housing affordability is a crucial issue for California residents, and the forecast suggests that it will remain a concern in 2025. The affordability index is projected to stay at 16%, meaning that the median-priced home is only affordable to 16% of households. It's a concern that needs to be addressed.

Economic Outlook and Impact on the California Housing Market

The California housing market is not isolated from broader economic trends. The forecast anticipates a slight slowdown in the U.S. and California economies in 2025.

• GDP Growth: The U.S. GDP is projected to slow to 1.1% in 2025, compared to 1.9% in 2024.
• Job Growth: California's nonfarm job growth is expected to decline to 1.1% in 2025 from 1.5% in 2024.
• Unemployment Rate: California's unemployment rate is anticipated to tick up to 5.6% in 2025, compared to a projected 5.4% in 2024.

However, the economic outlook is still considered relatively healthy, which should provide support to the housing market.

California Housing Market Forecast 2025: Historical Data

Here is a table that outlines the key metrics of the California housing market over the past few years and the projections for the coming years.

Year	SFH Resales (000s)	% Change	Median Price ($000s)	% Change	Housing Affordability Index	30-Yr FRM
2018	402.6	-5.2%	569.5	5.9%	28%	4.50%
2019	398	-1.2%	592.4	4%	31%	3.90%
2020	411.9	3.5%	659.4	11.3%	32%	3.10%
2021	444.5	7.9%	784.3	18.9%	26%	3.00%
2022	343	-22.9%	822.3	4.5%	19%	5.30%
2023	257.9	-24.8%	814.0	-1%	17%	6.80%
2024p	275.4	6.8%	869.5	6.8%	16%	6.60%
2025f	304.4	10.5%	909.4	4.6%	16%	5.90%

The California housing market forecast for 2025 indicates a potential rebound in both sales and prices. The projected improvement in inventory and lower interest rates is likely to attract more buyers and sellers. While the pace of price growth is expected to slow down, the underlying demand and limited supply conditions will likely continue to put upward pressure on home prices.

I believe that 2025 could present both challenges and opportunities for those looking to buy or sell in the California housing market. It's crucial to stay informed about current market conditions and to consult with real estate professionals to make well-informed decisions.

What to Expect in the California Housing Market in 2025?

1. Mortgage Rates Will Play a Key Role

• The recent dip in interest rates has been a breath of fresh air for buyers.
• While no one can predict the future with certainty, most experts believe rates will remain relatively stable for the rest of the year, hovering around the 6-7% range.
• This could incentivize more buyers to enter the market, especially if prices continue to moderate.

2. Inventory Will (Slowly) Improve

• The increase in active and new listings is a positive sign.
• However, don't expect a sudden surge in inventory. California has a chronic undersupply of housing, and it will take time to bridge the gap.

3. Price Growth Will Continue, But at a Slower Pace

• Double-digit price appreciation is likely a thing of the past (for now, at least).
• Most analysts predict more sustainable, single-digit price growth for 2025.
• Don't expect a crash – the fundamentals of the California economy remain strong, supporting continued demand for housing.

4. Regional Variations Will Persist

• As always, California's vastness means there's no one-size-fits-all trend.
• The Bay Area, with its robust tech sector, will likely continue to see strong demand, even with some cooling.
• Coastal communities, highly desirable for their lifestyle, will also remain competitive.