California Housing Market: Trends and Forecast 2025-2026

Wondering what's happening in the California housing market? You're not alone! As of April 2025, the California housing market is showing signs of stabilization after a period of volatility. While home sales have eased slightly, prices are holding steady and even showing mild increases. The statewide median home price in March was $884,350, a 3.5% increase from March 2024. Let's dive into the details to understand what this means for buyers and sellers.

Current California Housing Market Trends: A Balanced Perspective for April 2025

Home Sales

While the Golden State is known for its bustling real estate scene, the latest data suggests a slight cooling in sales activity. According to the California Association of Realtors (C.A.R.), existing, single-family home sales in March totaled 277,030 on a seasonally adjusted annualized rate.

• Month-over-month change: Down 2.3 percent from February.
• Year-over-year change: Up 4.9 percent from March 2024.

While there's been a bounce back in sales since early 2025, the sales pace has remained below the 300,000 mark for the past 30 months. This could be attributed to lingering economic uncertainties and fluctuating buyer optimism. The report also indicates that pending home sales declined in March for the fourth consecutive month, signaling a potential slowdown as we move into the spring buying season.

Home Prices

Despite the slight dip in sales, home prices in California have shown resilience. The statewide median home price in March was $884,350, marking a notable increase.

• Month-over-month change: Up 6.7 percent from February.
• Year-over-year change: Up 3.5 percent from March 2024.

This marks the 21st consecutive month of year-over-year price gains, although the improvement has been described as mild. While the median price is expected to climb seasonally in the coming months, market uncertainties and economic concerns could moderate the pace of price growth.

Are Home Prices Dropping?

No, home prices are not necessarily dropping, but the rate of increase has slowed down. While some counties have seen price declines, the overall trend indicates that prices are holding steady and even appreciating in many areas. The market is still competitive.

Comparison with Current National Median Price

How does California stack up against the rest of the country? Let's take a look:

Metric	California (March 2025)	National (February 2025)
Median Home Price	$884,350	$398,400
Year-over-Year Price Change	+3.5%	+3.8%

As you can see, California's median home price is significantly higher than the national median. However, the year-over-year price increases are relatively similar, indicating that the California market is behaving in a more temperate manner compared to recent boom years.

Housing Supply

The housing supply, or inventory, is a crucial factor influencing market dynamics. In California, the unsold inventory index (UII) provides insights into the balance between supply and demand.

• March UII: 3.5 months
• Month-over-month change: Down from 4.0 months in February.
• Year-over-year change: Up from 2.6 months in March 2024.

While the UII decreased slightly from the previous month due to increased sales activity, it remains higher than the previous year, indicating an overall increase in housing supply. Total active listings in March reached a six-month high, marking the 14th consecutive month of annual gains in housing supply. This suggests that buyers have more options available compared to the previous year.

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

Determining whether it's a buyer's or seller's market depends on the balance between supply and demand. Currently, California leans towards a balanced market, with neither buyers nor sellers holding a significant advantage. The increased inventory gives buyers more choices and negotiating power, while the steady price appreciation benefits sellers.

Market Trends

Several key trends are shaping the California housing market:

• Increased inventory: More homes are available for sale, providing buyers with more options.
• Moderate price growth: While prices are still rising, the rate of increase has slowed down, offering some relief to buyers.
• Longer days on market: Homes are taking slightly longer to sell compared to the previous year, indicating a slight cooling in demand. The median number of days it took to sell a home in March was 22 days, up from 18 days in March 2024.
• Stable sales-price-to-list-price ratio: The statewide sales-price-to-list-price ratio was 100 percent in March, indicating that homes are selling for around their asking price.

Impact of High Mortgage Rates

Mortgage rates play a significant role in housing affordability and market activity. As of April 2025, the average 30-year fixed mortgage rate is around 6.83%, and the 15-year fixed mortgage rate is about 6.03%, according to Freddie Mac.

The prevailing sentiment is that rates will likely remain at or slightly above this level throughout the year. This stability in mortgage rates may prompt prospective buyers and sellers to make a move earlier in the spring season, as they are no longer anticipating significant rate declines. The relatively high mortgage rates continue to impact affordability, especially for first-time homebuyers.

Regional Variations

It's important to remember that the California housing market is not monolithic. Conditions can vary significantly across different regions and counties. For example:

• The Central Coast region experienced the largest price growth from a year ago, with a jump of 16.6%.
• The San Francisco Bay Area saw a strong 6.5% increase in sales, with three out of nine counties posting double-digit sales surges.
• Del Norte County registered the biggest sales drop in March, with a decrease of 61.1%.
• Mendocino County posted the biggest price jump, with an increase of 48.2%.

Here's a quick summary of median home prices across different regions:

Region	Median Home Price (March 2025)
Central Coast	$1,107,500
Central Valley	$495,000
Far North	$385,000
Inland Empire	$609,230
San Francisco Bay Area	$1,400,000
Southern California	$877,750

My Two Cents

From my perspective, the California housing market in April 2025 is best described as cautiously optimistic. While sales have cooled slightly, prices are holding up, and inventory is increasing, giving buyers more choices. The stability in mortgage rates is also encouraging, as it removes some of the uncertainty that plagued the market in previous years. However, economic uncertainties and regional variations mean that buyers and sellers need to be well-informed and work with experienced real estate professionals to navigate the market effectively.

The current trends in the California housing market point to a balanced landscape with moderate growth. Keep an eye on local market conditions, stay informed about mortgage rates, and work with a knowledgeable real estate agent to make the best decisions for your individual circumstances.

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.