California Housing Market: Forecast and Trends 2025-2026

Based on the latest data, it looks like California's housing market in 2025 is showing signs of stabilization and modest growth, with home sales picking up and prices holding steady, and even inching upward slightly year-over-year. While it’s not a boom time, it’s certainly not a bust either, and there are opportunities for both buyers and sellers.

I've seen the California housing market go through wild swings. We've experienced periods of explosive growth and tough downturns. What's interesting right now is the feeling of a market finding its footing. After a bit of a rollercoaster, the September 2025 numbers from the California Association of REALTORS® (C.A.R.) offer a clearer picture of what we can expect as we move closer to 2025. It’s a good time to understand these trends so you can make smart decisions.

Here’s what the data is telling us about California's real estate market in 2025:

California's Housing Market Trends 2025

Home Sales: A Gentle Upward Trend

One of the most encouraging signs for California's housing market in 2025 is the rebound in home sales. In September 2025, we saw existing, single-family home sales reach a seasonally adjusted annualized rate of 277,410. This is a solid jump of 5 percent from the previous month (August 2025) and a healthy 6.6 percent increase compared to September 2024.

This isn't just a one-off spike. Year-to-date, home sales were up 0.4 percent. This ongoing, even if modest, rise in sales volume suggests that more people are successfully buying and selling homes across the state. After a period where sales might have felt sluggish, this uptick is a very welcome development. It indicates that demand is present, and deals are getting done. As Heather Ozur, a REALTOR® from Palm Springs, noted, “It’s great to see that home sales bounced back in September to their highest level in seven months as mortgage rates hit their lowest point since last October.” This connection between mortgage rates and sales activity is a key driver.

Home Prices: Stability with Slight Gains

When it comes to home prices, the story in September 2025 is one of stability with a touch of positive growth. The statewide median home price for existing, single-family homes was $883,640 in September 2025. While this was a slight dip of 1.7 percent from August 2025, it’s important to look at the year-over-year change. Compared to September 2024, the median price was up 1.8 percent, reaching $868,150.

This pattern of a slight monthly dip followed by a year-over-year gain is common in a market that isn't overheating but is also not in a downturn. It shows that while there might be minor fluctuations, the overall value of homes is holding strong and even appreciating modestly. For sellers, this means their property is likely worth more than it was a year ago. For buyers, it suggests that while prices aren't plummeting, they are also not skyrocketing out of reach at a rapid pace, especially if they can secure a good mortgage rate.

Jordan Levine, C.A.R.'s Senior Vice President and Chief Economist, highlighted this balance: “The housing market showed modest improvement in September, with both sales and prices up from a year ago.” He also cautioned that broader economic factors could influence the pace of recovery, but the underlying trend is positive.

Housing Supply: Inventory Growth Continues, But Eases

Understanding the housing supply is crucial for gauging the market's health. The Unsold Inventory Index (UII) provides a snapshot of how many months it would take to sell all the available homes on the market. In September 2025, the UII was 3.6 months, which is slightly down from 3.9 months in August but the same as it was in September 2024.

This means that while total active listings have been increasing for a while (up 16.2% year-over-year), the rate of growth has slowed down. This is a subtle but important point. It indicates that while there are more homes available than a year ago, the momentum of increasing supply is easing. This is typical as the market heads into the fourth quarter, often a slower season. For buyers, this means that while inventory might be better than in recent years, it's not a buyers' free-for-all. The market conditions still generally favor buyers more than sellers, but the significant advantage sellers might have had in the past is diminishing.

Median Days on Market: A Slightly Longer Wait

The time it takes for a home to sell is another key indicator. In September 2025, the median number of days to sell a California single-family home was 32 days. This is up from 24 days in September 2024. This increase in the time it takes to sell suggests that buyers have a bit more time to consider their options. It also means that homes that aren't priced perfectly or don't present well might sit on the market a little longer.

For sellers, this reinforces the need to price their homes competitively and ensure they are well-presented. For buyers, this slightly extended timeframe can be a positive, allowing for more strategic decision-making and negotiation. The average statewide sales-price-to-list-price ratio was 98.2 percent in September 2025, down from 100 percent in September 2024, which further supports the idea of a market where buyers have a bit more room for negotiation than a year ago.

Buyer's or Seller's Market? Leaning Towards Buyers, But Balanced

So, is 2025 shaping up to be a buyer's market or a seller's market? Based on the data, it's leaning more towards a balanced market with a slight edge to buyers.

Here’s why:

• Inventory: While the growth in inventory is slowing, there are still more homes available than in the hottest markets of the past.
• Days on Market: Homes are taking a little longer to sell, giving buyers more breathing room.
• Sales-to-List Price Ratio: The ratio is below 100%, meaning homes are generally selling for slightly less than their asking price, indicating some negotiation power for buyers.

However, it’s not a landslide for buyers. Prices are still up year-over-year, and sales are increasing. This means that desirable properties in well-located areas will still move quickly and command strong prices. Sellers who price their homes correctly and present them well will still find success. It’s a market where smart strategy pays off for both sides.

Regional Trends: A Patchwork of Performance

California is a big state, and the housing market performance isn't uniform. Different regions and counties show varied trends.

Regional Performance (Year-over-Year Sales Gains):

• Central Coast: Saw a strong 11.8 percent increase in sales.
• Southern California: Experienced a robust 11.3 percent jump in sales.
• Central Valley: Demonstrated solid growth with a 10.2 percent rise in sales.
• San Francisco Bay Area: Recorded a good increase of 9.8 percent.
• Far North: Showed positive momentum with an 8 percent sales increase.

Regional Performance (Year-over-Year Median Price Gains):

• Far North: Led the pack with a significant 2.9 percent increase.
• San Francisco Bay Area: Posted a 2.7 percent gain.
• Southern California: Saw prices rise by 2.3 percent.
• Central Coast: Experienced a 1.2 percent increase.
• Central Valley: This was the only major region with a slight annual price dip of -0.2 percent.

This regional breakdown highlights how different economic factors, local job markets, and housing affordability play a big role. For instance, while the Central Valley might be showing stronger sales growth, it has a lower median price, making it more accessible. The Bay Area, with its high median price, is seeing price increases, but perhaps with more negotiation happening due to the higher entry point.

County Data: Pockets of Strong Growth and Declines

Looking at individual counties, the picture becomes even more detailed.

Counties with Strongest Year-over-Year Sales Growth:

• Kings County: A remarkable 46.3 percent increase.
• Calaveras County: A significant 42.0 percent jump.
• Santa Cruz County: An impressive 37.9 percent rise.

Counties with Strongest Year-over-Year Median Price Growth:

• Mono County: An astonishing 53.4 percent increase.
• Mariposa County: A substantial 51.6 percent increase.
• Del Norte County: A notable 23.0 percent increase.

On the flip side, some counties saw sales declines:

• Trinity County: A significant drop of -50.0 percent.
• San Benito County: A decrease of -23.9 percent.
• Mono County: Experienced a -22.2 percent decline in sales (interesting, as its prices surged).

Counties with notable year-over-year median price declines include:

• Trinity County: -15.2 percent.
• Calaveras County: -12.8 percent.
• San Benito County: -12.4 percent.

These county-level variations are fascinating. They often point to local economic factors, development projects, or even the specific inventory mix in that area. For example, Mono County's dramatic price increase alongside a sales decrease might indicate that very few high-value properties sold, skewing the median price upward, or that there's very limited inventory driving up prices for any sales that do occur.

What This Means for You in 2025

California's housing market in 2025 is shaping up to be a more balanced environment than we've seen in recent years. I believe that the market is maturing. The wild speculation has calmed down, and we're seeing a return to more fundamental drivers like affordability, interest rates, and local economic conditions. The key for anyone involved in California real estate in 2025 is knowledge and strategy.

California Housing Market Forecast: What to Expect in 2026

The California housing market is poised for a gentle upturn in 2026, with home sales and the median price expected to inch up slightly. According to the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.), we can anticipate existing single-family home sales to reach around 274,400 units, a 2% increase from 2025. The median home price is projected to hit a new record, climbing 3.6% to $905,000. While this might sound like a straightforward prediction, dig a little deeper, and you'll find a more nuanced picture shaped by economic shifts, interest rates, and a slowly improving affordability situation.

My Take on the 2026 Outlook

As someone who's been following the California real estate scene for a while, I can tell you that “inching up” feels like a pretty accurate description. We've seen some wild swings in the past, and frankly, a period of relative stability is what many buyers and sellers are hoping for. C.A.R.'s forecast suggests that stability is on the horizon, but it's not going to be a free-for-all. Affordability is still a major hurdle, but there are glimmers of hope.

A Look at C.A.R.'s Projections

Let's break down what C.A.R. is predicting for the coming years:

Year	SFH Resales (000s)	% Change	Median Price ($)	% Change	Housing Affordability Index (%)	30-Yr FRM (%)
2024	269.2	4.40%	$865,400	6.30%	16%	6.70%
2025p	269.0	-0.10%	$873,900	1.00%	17%	6.60%
2026f	274.4	2.00%	$905,000	3.60%	18%	6.00%

p = projected, f = forecast

As you can see, 2025 is looking like a bit of a holding pattern, with sales essentially flat compared to 2024. However, the median price is still expected to tick up slightly. The real movement, according to this forecast, is in 2026, where we see both sales and prices showing more noticeable, albeit still moderate, growth.

Why the Gentle Climb?

Several factors are expected to contribute to this gradual ascent:

• Interest Rates Cooling Down: This is a big one. C.A.R. forecasts the average 30-year fixed mortgage rate to drop to 6.0% in 2026. This is a significant improvement from the averages seen in recent years and even the 6.6% projected for 2025. Lower mortgage rates mean more buying power for consumers. Even though it's still higher than pre-pandemic levels, it's a move in the right direction and, importantly, lower than the 50-year historical average of nearly 8%.
• Slightly Better Affordability: With lower interest rates and potentially moderate price gains, housing affordability is predicted to inch up. The index is expected to reach 18% in 2026, meaning 18% of households will be able to afford to buy a median-priced home. This is a small but welcome improvement from 16% in 2024 and 17% in 2025. For many Californians, this slight shift could make the dream of homeownership feel a bit more attainable.
• Increasing Inventory: The forecast indicates that housing supply will continue to improve, with active listings potentially rising by nearly 10% in 2026. When more homes are available, it can ease some of the intense competition we've seen in the market. This could give buyers a bit more breathing room and potentially moderate intense bidding wars.

What About the Economy?

The housing market doesn't exist in a vacuum. The broader economic picture plays a crucial role.

• Slowing GDP Growth: The U.S. gross domestic product (GDP) is expected to grow at a slower pace in 2026, around 1%, after a projected 1.3% in 2025.
• Job Growth and Unemployment: California's nonfarm job growth is also projected to slow down, with a 0.3% increase in 2026 after a 0.4% rise in 2025. Consequently, the unemployment rate is expected to creep up to 5.8% in 2026 from 5.6% in 2025 and 5.3% in 2024. While a slight increase in unemployment can be concerning, these numbers suggest the job market, while cooling, isn't collapsing.

C.A.R. President Heather Ozur points out that as economic uncertainty begins to clear and mortgage rates decline, housing sentiment should improve. This is a key piece of the puzzle – people are more likely to make big financial decisions like buying a home when they feel more secure about their jobs and the economy.

Potential Roadblocks and Challenges

It wouldn't be wise to paint an entirely rosy picture. The forecast also highlights several challenges that could still impact the market:

• Inflation: Inflation is likely to pick up, with the annual average Consumer Price Index (CPI) expected to reach 3.0% in 2026, up from 2.8% in 2025. Higher inflation can erode purchasing power and impact what people can afford.
• Home Insurance Crisis: The ongoing issues with homeowners insurance in California are a significant concern. Rising premiums and reduced availability of coverage can make homeownership more expensive and less attractive, especially in fire-prone areas.
• Trade Tensions: Lingering trade tensions between the U.S. and its trading partners can create economic uncertainty, which can ripple through the housing market.
• Stock Market Volatility: A potential stock market bubble could burst, leading to financial instability and affecting the confidence of high-net-worth individuals who are often significant players in luxury real estate markets.

Senior Vice President and Chief Economist Jordan Levine notes that despite these headwinds, the improving lending environment and clearing economic clouds will be key drivers.

What This Means for You

So, what does all this forecast talk mean for you, whether you're looking to buy, sell, or just keep an eye on your investments?

• For Buyers: The forecast offers a glimmer of hope. Lower interest rates and a slight increase in inventory in 2026 could make it a more favorable year for buyers than the preceding ones. However, affordability remains a challenge, so smart financial planning and patience will still be crucial. Don't expect a crash, but rather a market that might be slightly less of a seller's dominance.
• For Sellers: If you've been holding off, 2026 might present a more opportune time to list your home. With stabilizing prices and rising demand, you could see your property fetch a good price. However, the days of astronomical offers might be behind us, and a more realistic pricing strategy will be important.
• For Homeowners: If you own a home in California, the moderate price appreciation suggests that your home equity is likely to continue growing, albeit at a steadier pace than in boom years.

My personal feeling is that California's housing market, given its fundamental strengths in desirability and economic output, will continue to be resilient. The forecast for 2026 suggests a return to a more sustainable growth pattern. It's not a market for speculators looking for quick flips, but for those looking for long-term value and a place to call home, opportunities will likely emerge.

The key takeaway from C.A.R.'s 2026 California Housing Market Forecast is that we're looking at a period of gradual improvement. Sales and prices are projected to rise modestly, driven by falling interest rates and slightly better affordability, while still navigating economic uncertainties and persistent challenges like insurance costs. It's a market that demands a well-informed approach, but one that holds promise for those looking to enter or move within it.