California Housing Market Forecast 2025-2026: Insights for Buyers

Thinking about the California housing market in 2025? You're not alone! The California housing market forecast 2025 is a hot topic, and for good reason. After a wild ride these past few years, everyone wants to know what's next. Will prices keep going up? Will it be easier to buy a house? Let's dive in and see what the experts are saying.

California Housing Market Forecast 2025

Good News on the Horizon?

The California Association of REALTORS® (C.A.R.) recently released its 2025 California Housing Market Forecast, and it offers a glimmer of hope. They predict that both home sales and prices will go up in 2025. Why? Lower interest rates and more homes for sale. Sounds good, right?

• More Homes Sold: C.A.R. thinks we'll see about 304,400 homes sold in 2025. That's a 10.5% jump from what they expect in 2024!
• Higher Prices (But Slower Growth): The median home price in California is predicted to hit $909,400 in 2025. That's a 4.6% increase from the expected 2024 median price of $869,500. While prices are still going up, the pace of increase is slowing down, which is good news for buyers.

Why the Change? The “Lock-In” Effect and Interest Rates

One big reason for this shift is something called the “lock-in” effect. Many homeowners have super-low interest rates on their current mortgages. They don't want to sell and buy a new house with a much higher interest rate. This has kept a lot of homes off the market.

But guess what? Interest rates are expected to go down a bit in 2025. This should loosen the “lock-in” effect. More homeowners will feel comfortable selling, which means more homes for sale! And lower interest rates also make it easier for people to buy.

C.A.R. thinks the average 30-year fixed mortgage interest rate will drop from 6.6% in 2024 to 5.9% in 2025. That's still higher than pre-pandemic levels, but it's a move in the right direction. This, combined with increased inventory, is what's driving the positive California housing market forecast for 2025.

What About Affordability?

Okay, so more homes for sale and lower interest rates sound great. But what about affordability? Can people actually afford these homes? C.A.R.'s forecast suggests that housing affordability will likely stay around 16% in both 2024 and 2025. This means about 16% of California households will be able to afford a median-priced home. This isn't great, but it's not getting worse either.

California Housing Market Forecast 2025: A Look at the Numbers

Here’s a handy table showing C.A.R.'s predictions:

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

What Does This Mean for You?

If you're thinking about buying a home in California in 2025, the California housing market forecast 2025 suggests it might be a slightly better time than 2024. Lower interest rates and more homes for sale could give you more options.

If you're a seller, you might also benefit from the increased activity and slightly higher prices.

But remember, this is just a forecast. Things can change. Keep an eye on the economy and interest rates. Talk to a real estate professional in your area. They can give you the best advice for your specific situation.

California Housing Market Forecast 2026

While 2025 is projected to see a rebound in sales and continued price growth, 2026 presents a more uncertain outlook. The 2025 forecast assumes a 5.9% 30-year fixed-rate mortgage (FRM), which is a significant drop from 2024's 6.6%. This assumes a continued cooling of interest rates, but any shift in the economic landscape could influence this trend.

Here's what we can consider:

• Interest Rates: If interest rates continue their downward trajectory, we might see a continuation of the 2025 trend, with increased sales and steady price growth.
• Economic Conditions: A strong economy could support robust demand, leading to continued price appreciation. Conversely, a recession or economic slowdown might dampen buyer activity and lead to a more stagnant market.
• Inventory: 2026 will likely see an increase in inventory as more sellers enter the market. This could moderate price growth, as competition among sellers intensifies.
• Affordability: Continued price growth may push affordability further out of reach for many buyers, impacting demand and ultimately influencing market activity.

To predict the 2026 market accurately, we need to consider:

• The direction of interest rates: Will they continue to drop or will they rise, potentially impacting affordability?
• The overall economic climate: Will the U.S. economy remain strong or will we see a slowdown?
• Government policies: Any changes in tax policies or regulations could impact the market.

The 2026 California housing market will likely be shaped by a complex interplay of these factors. While 2025 projects a rebound, 2026 remains a year with significant uncertainty.

Final Thoughts:

So, there you have it – a glimpse into what's on the horizon for the California housing market in 2025 and 2026. While challenges and uncertainties always exist, the overall outlook appears optimistic.