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. Well, here's the short answer: it's a bit of a mixed bag right now. While year-to-date sales are slightly up compared to last year, recent data reveals a slowdown in both sales and prices in May 2025, indicating some headwinds in the market.

Let's dive deeper into the trends and what they mean for you, whether you're a buyer, seller, or just curious about the Golden State's real estate scene.

Current California Housing Market Trends in 2025:

Home Sales: A Dip in May

Home sales in California have seen a decrease recently. According to the California Association of REALTORS® (C.A.R.), existing single-family home sales totaled 254,190 in May 2025, on a seasonally adjusted annualized rate. This represents:

• A 5.1% decrease from April 2025 (267,710 homes sold)
• A 4.0% decrease from May 2024 (264,850 homes sold)

The sales level in May was the lowest in the last four months and the biggest year-over-year decline since December 2023. While this might seem alarming, it's important to remember that year-to-date sales are still up 0.3% compared to the same period last year.

Comparison with National Home Sales

Nationally, the housing market is also experiencing some cooling.

• According to the National Association of REALTORS® (NAR), home sales in the U.S. saw a 0.7% decrease year-over-year in May 2025 (down from 4.06 million in May 2024).

So, California's slowdown isn't happening in isolation. Economic uncertainties and mortgage rate fluctuations seem to be impacting the market nationwide.

Home Prices: Are They Dropping?

The median home price in California is a hot topic. While prices surged earlier, recent data suggests a slight pullback. In May 2025, the statewide median home price was $900,170. This is:

• A 1.1% decrease from April 2025
• A 0.9% decrease from May 2024 ($908,000)

C.A.R. attributes this dip to factors like elevated interest rates, concerns about insurance availability and affordability, economic uncertainty, and sellers being more willing to reduce prices.

Comparison with National Median Price

How does California compare to the rest of the country? The national median price in May 2025 was $422,800, with a year-over-year change of +1.3%. As you can see, California homes are significantly more expensive than the national average, so even a small price drop can be meaningful for buyers.

Housing Supply: More Homes on the Market

One piece of good news for buyers is that the housing supply in California is increasing. 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, was 3.8 months in May 2025. This is up from:

• 3.5 months in April 2025
• 2.6 months in May 2024

Total active listings have increased by nearly 50% year-over-year and have been growing at a double-digit rate for the past 15 months. This means buyers have more choices and potentially more negotiating power.

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

With increasing inventory and slightly declining prices, it might seem like California is shifting towards a buyer's market. However, the market dynamics vary by region and even by county. Some areas are still seeing price increases, while others are experiencing more significant declines.

Generally, a balanced market has a UII of around 5-6 months. A UII below that indicates a seller's market, while a UII above that suggests a buyer's market. California is inching closer to a balanced market, but it's not quite there yet.

Market Trends:

Let’s break down some key market trends that are shaping California's housing market:

• Increased Inventory: As mentioned earlier, there are more homes available for sale, giving buyers more options and potentially reducing competition.
• Slightly Decreasing Prices: While not a dramatic drop, the slight decrease in median home prices offers some relief for buyers who have been priced out of the market.
• Rising Days on Market: Homes are taking longer to sell. The median number of days to sell a single-family home was 21 days in May 2025, up from 16 days in May 2024. This suggests that buyers have more time to consider their options and negotiate.
• Variations Across Regions: The market is not uniform across the state. Some regions, like the Central Coast, are still seeing price increases, while others, like the San Francisco Bay Area, are experiencing declines.

Impact of High Mortgage Rates

Mortgage rates play a significant role in housing affordability and demand. As of June 26, 2025, the average 30-year fixed mortgage rate is around 6.77%, and the 15-year fixed-rate mortgage is about 5.89%, according to Freddie Mac.

These rates are considerably higher than the historically low rates we saw a few years ago. This has a direct impact on buyers' purchasing power and can lead to a slowdown in sales.

What the Experts are Saying

According to C.A.R. President Heather Ozur, “With home prices leveling off and more homes coming onto the market, it’s a great time for well-qualified buyers to enter the market. Lower prices are making homes more affordable, and the growing inventory means buyers have more choices. It’s a rare window where people can find their ideal home at a good value — making now an ideal time to buy.”

C.A.R. Senior Vice President and Chief Economist Jordan Levine adds, “Although the market has slowed in recent months, there’s potential for a rebound if economic concerns subside. Consumer sentiment appears to have bottomed out and is now showing signs of improvement, which could support a stronger housing market in the second half of the year. Buyers may take advantage of improved conditions, including deeper price reductions and increased housing inventory.”

Regional Snapshots: A Look at Different Areas in California

Let's break down some regional highlights based on the data provided by C.A.R.:

Region	Median Price (May 2025)	YOY Price Change	Sales YOY Change	Unsold Inventory Index (May 2025)
Central Coast	$1,125,000	+6.2%	-8.4%	4.1
Central Valley	$510,000	+0.6%	-5.2%	3.5
Far North	$385,000	-3.8%	+0.5%	5.3
Inland Empire	$610,000	+1.9%	-5.4%	4.5
Los Angeles Metro Area	$855,000	+1.8%	-8.3%	4.0
San Francisco Bay Area	$1,400,000	-3.8%	-8.2%	2.9
Southern California	$888,000	+0.9%	-7.6%	3.9

Key Takeaways and My Personal Opinion

The California housing market in June 2025 is a complex picture. Here are my thoughts on what's happening:

• It's not a crash: While sales and prices have cooled off, it's not a dramatic collapse like we saw in 2008. The market is simply adjusting to higher interest rates and economic uncertainty.
• Opportunity for Buyers: Increased inventory and slightly lower prices create opportunities for buyers who have been waiting on the sidelines. If you're financially prepared and have a long-term outlook, now might be a good time to start looking.
• Realistic Expectations for Sellers: Sellers need to be realistic about pricing their homes. Overpricing can lead to longer days on market and potential price reductions. Working with an experienced real estate agent is crucial to navigating the current market conditions.
• Local Expertise Matters: The California housing market is highly localized. What's happening in San Francisco might be very different from what's happening in San Diego. Rely on local real estate professionals for accurate and up-to-date information.

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.