California Housing Market: Forecast and Trends 2025-2026

Are you thinking about buying or selling a home in California? If so, you're probably wondering what's happening in the current California housing market. As of April 2025, we're seeing a mix of trends: home prices are hitting new highs, but sales are a little soft. It's a complicated picture, so let's break it down to help you make informed decisions. In short, the California housing market is still seeing rising prices, but sales are slightly down, making it a tricky time for both buyers and sellers.

California Housing Market in Mid-2025: What You Need to Know

Home Sales

Okay, let's talk numbers. According to the California Association of REALTORS® (C.A.R.), existing single-family home sales in California totaled 267,710 in April 2025, at a seasonally adjusted annualized rate.

• This is down 3.4% from March 2025.
• It's also down a tiny 0.2% from April 2024.

So, while sales are slightly exceeding last year's levels for the first four months, they've been below that 300,000 mark for quite some time now which is about 31 months. This tells me people are being a bit cautious out there.

Home Prices

Here's where things get interesting. Even though sales are a little sluggish, home prices are still climbing. The statewide median home price in April 2025 hit a new all-time high of $910,160.

• That's up 2.9% from March 2025.
• And up 0.7% from April 2024.

This marks the 22nd consecutive month of year-over-year increases. However, the annual price gain was the smallest since July 2023. It's like the price increases are starting to slow down, but they're still going up!

Are Home Prices Dropping in California?

While we're seeing record high prices, it's important to note the pace of growth is slowing. C.A.R.'s Senior Vice President and Chief Economist Jordan Levine notes that despite reaching a new record, prices are moderating. Economic uncertainty has slightly dampened demand, while a steady increase in inventory has contributed to more moderate price growth this year.

So, are home prices dropping? Not yet, but the rate at which they're increasing is slowing down. Keep an eye on this trend! I think this is important for both buyers and sellers to keep in mind as we move through the rest of the year. If you are a seller, you should consider listing your house, and if you are a buyer, now is a good time to get your financing in order so that you can make a move.

Comparison with Current National Median Price

Now, let's put California's prices into perspective. While California's median home price is over $910,000, the national median price in March 2025 was around $403,700. That's a huge difference! California is significantly more expensive than the rest of the country when it comes to housing. The national median price saw a year-over-year change of +2.7%.

Here's a quick comparison:

Metric	California (April 2025)	National (March 2025)
Median Home Price	$910,160	$403,700
Year-over-Year Price Change	+0.7%	+2.7%

This comparison really highlights how unique the California housing market is compared to the rest of the United States.

Housing Supply

What about the number of homes available for sale? This is called housing supply, and it plays a big role in whether it's a buyer's or seller's market.

• The Unsold Inventory Index (UII) in April 2025 was 3.5 months, unchanged from March and up from 2.6 months in April 2024.
• Total active listings rose on a year-over-year basis at the fastest pace since January 2023, reaching a 66-month high (since October 2019).
• New active listings also rose year-over-year by double-digits for the fourth consecutive month.

What does this mean? There are more homes on the market now than there were a year ago. This increase in supply can help moderate price increases.

Is California a Buyer's or Seller's Housing Market?

So, with rising prices but increasing inventory, is it a buyer's or seller's market in California? It's complicated, but leaning more towards a balanced market than it has been in recent years.

• Sellers still have the upper hand due to relatively low inventory and high demand in many areas.
• Buyers have slightly more negotiating power than they did a year ago, thanks to the increased supply.

Think of it like this: sellers can still command high prices, but buyers have more choices and aren't quite as desperate.

Market Trends

Let's dive into some other notable market trends in the California housing market:

• Regional Differences: Sales increased in three of the five major regions compared to last year, but declined in the Far North and San Francisco Bay Area. The Central Coast saw the biggest jump in sales.
• County Variations: Sales increased in 33 of the 53 counties tracked by C.A.R., with some counties seeing huge gains. However, some counties also saw significant declines in sales.
• Days on Market: The median number of days it took to sell a home was 21 days in April, up from 16 days in April 2024. Homes are staying on the market a bit longer.
• Sales-Price-to-List-Price Ratio: This was 100% in April 2025, meaning homes are selling for about what they're listed for.

Here's a table summarizing some key county-level data:

County	Median Sold Price (April 2025)	Year-over-Year Price Change	Sales Change YTY%
Los Angeles	$850,270	2.9%	-2.6%
San Diego	$1,015,000	-3.1%	9.4%
Orange	$1,417,450	-1.6%	-4.1%
Riverside	$645,000	0.5%	0.5%
Sacramento	$550,000	0.3%	6.2%
San Francisco	$1,780,000	-1.1%	1.4%

Impact of High Mortgage Rates

One of the biggest factors influencing the California housing market right now is mortgage rates. Higher mortgage rates make it more expensive to buy a home, which can cool down demand.

Currently, in mid-May 2025, the average 30-year fixed mortgage rate is around 6.76%, and the 15-year fixed rate is about 5.89%, according to Freddie Mac.

Most forecasts predict mortgage rates will remain at or slightly above this level for the rest of the year.

According to various forecasts, mortgage rates will end 2025 between 6.0% to 6.2%.

Here's what higher mortgage rates mean for you:

• For Buyers: You'll pay more each month for your mortgage, and you might qualify for a smaller loan.
• For Sellers: You might have fewer potential buyers, and you might need to be more flexible on price.

My Take on the California Housing Market

As someone who has been following the California housing market closely, I believe we're in a period of transition. The days of crazy bidding wars and skyrocketing prices seem to be behind us for now. We're moving towards a more balanced market, where buyers have more options and sellers need to be more realistic about their expectations.

Of course, real estate is local, so it's important to pay attention to what's happening in your specific area. What's true in Los Angeles might not be true in Sacramento, or Redding or in San Diego. The San Francisco Bay Area is a completely different world of its own.

And don't forget about the broader economic picture. Factors like inflation, job growth, and consumer confidence can all impact the housing market.

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.