Is the California dream fading? It's a question I ponder often, especially when looking at the complexities of our housing market. The California housing market continues to face headwinds in 2025, experiencing a slowdown marked by declining sales and prices in May. This dip is driven by continued economic uncertainty, lingering tariff wars, and persistently high mortgage rates, undermining buyer confidence and demand. Let's dig into why this is happening and what it means for you, whether you're a potential buyer, a current homeowner, or just curious about the Golden State's real estate scene.

California Housing Market Faces Major Downturn Amid Economic Concerns

A Rollercoaster Ride: Where Are Home Sales and Prices Heading?

Imagine you're on a rollercoaster – that's California's housing market right now. We've seen some exhilarating climbs, but lately, it feels like we're on a downward slope. The California Association of Realtors (C.A.R.) reported that in May 2025, existing single-family home sales totaled 254,190 on a seasonally adjusted annualized rate. That's down 5.1 percent from April and 4.0 percent from May 2024.

Here is the summary:

• Home Sales: Down 5.1% from April, 4.0% from May 2024.
• Median Home Price: $900,170, down 1.1% from April, 0.9% from May 2024.
• Year-to-Date Sales: Up only 0.3% statewide.

Statewide, the median home price in May was $900,170, reflecting a 1.1 percent decrease from April and a 0.9 percent decrease from May of the previous year. Although modest, it signals a shift in market dynamics.

Why is this happening?

From my perspective, it's a combination of factors. The initial surge in demand following the pandemic has cooled down, and the reality of higher borrowing costs is setting in. People are hesitant. Will they be able to afford the monthly payments, especially when factoring in other expenses? And the uncertainty around the overall economy doesn't help.

Interest Rates: The Elephant in the Room

Let's talk about interest rates. They play a huge role in housing affordability, and they've been anything but stable lately. While the 30-year fixed-mortgage interest rate averaged 6.82 percent in May, down from 7.06 percent in May 2024, persistent economic uncertainties are keeping these rates elevated, hindering the momentum in the California Housing market. Imagine trying to buy a house and having your budget constantly squeezed by fluctuating interest rates – it’s incredibly frustrating!

Inventory: A Mixed Bag

Inventory, or the number of homes available for sale, is another piece of the puzzle. Total active listings in May rose on a year-over-year basis by nearly 50 percent. This is a pretty significant jump, and it suggests that we're moving away from the extreme seller's market we've seen in recent years. This increase gives buyers more options, but it also means sellers might need to be more flexible on price.

The Unsold Inventory Index (UII), which measures how many months it would take to sell all the homes on the market at the current sales rate, was 3.8 months in May, up from 3.5 months in April and 2.6 months in May 2024. A higher UII means it's taking longer to sell homes, giving buyers more leverage.

Check out this table summarizing inventory trends:

Metric	May 2025	April 2025	May 2024
Unsold Inventory Index (UII)	3.8	3.5	2.6
Active Listings	Up ~50%	N/A	N/A

Regional Differences: It's Not Just One California

California is a big state, and the housing market varies significantly from region to region.

Let's break down the regional performance:

• Central Coast: Experienced the largest sales drop from last year, down 8.4 percent. However, it saw the highest price increase, up 6.2%. It is primarily due to a number of factors in cluding insurance availability or affordability.
• San Francisco Bay Area: Sales fell 8.2 percent, and prices declined 3.8 percent.
• Southern California: Sales decreased 7.6 percent, but prices rose slightly by 0.9 percent.
• Central Valley: Sales dipped 5.2 percent, and prices edged up 0.6 percent.
• Far North: The only region with a slight sales gain of 0.5 percent, but prices fell 3.8 percent.

This shows that while some areas are struggling, others are holding relatively steady. Understanding these regional differences is crucial when making real estate decisions.

Buyer Sentiment: Are People Still Optimistic?

Despite the challenges, there's a glimmer of optimism among potential homebuyers. C.A.R. reported that consumers who believed “now is a good time to buy” climbed to 26 percent in May, the highest level since February 2022. This suggests that some buyers are seeing opportunities in the current market, perhaps hoping to snag a deal as prices moderate and inventory increases.

Why the optimism?

I think it's because people recognize that the market can't stay red-hot forever. The thought is that if prices stabilize or even dip slightly, and inventory improves, it could be a good time to buy before interest rates potentially rise again. The old adage, “Buy when others are fearful” comes into play.

Looking Ahead: What Can We Expect?

Predicting the future is always tricky, but here are a few thoughts based on the current trends:

1. Price Moderation: I expect home prices will continue to moderate, especially as we move into the second half of the year. Seasonality will play a role, with prices typically cooling off during the fall and winter months.
2. Inventory Growth: As new listings continue to come onto the market, buyers will have more choices. However, the pace of inventory growth may slow down in the coming months.
3. Interest Rate Sensitivity: The market will remain highly sensitive to changes in interest rates. Any significant increase could further dampen demand, while a decrease could provide a boost.
4. Regional Variations: The performance of the housing market will continue to vary across different regions of California. Some areas will likely see greater price declines than others.

What does it all mean for you?

If you're a buyer, this could be a good time to get into the market. You'll have more options, less competition, and potentially more room to negotiate on price. Just be sure to do your homework, get pre-approved for a mortgage, and work with a knowledgeable real estate agent.

If you're a seller, you might need to adjust your expectations. It's no longer a guaranteed quick sale at top dollar. Be prepared to price your home competitively and consider making some upgrades to attract buyers.

Here's the truth: It may be a good time to seek the help of a real-estate professional who knows the intricacies of the local real estate market.

Final Thoughts: The California housing market continues to face headwinds, but it's important to remember that real estate is a long-term investment. The market will eventually rebound, and California will remain a desirable place to live.

You see news headlines talking about rising inventory and slowing sales, and the ghost of 2008 starts to flicker in the back of your mind. So, the big question on everyone's lips, including mine, is: Will the California housing market crash like the Great Recession? In my opinion, while there are certainly worrying trends, a full-blown crash mirroring the severity of 2008 is unlikely, though a significant market correction is definitely on the table.

Let's dive into why I'm leaning this way. It's true, the data paints a picture that warrants a closer look.

Is the California Housing Market Heading for a Crash or Correction?

Echoes of the Past: Rising Inventory and Sluggish Sales

The numbers don't lie. We're seeing a significant jump in the number of homes available for sale in California. According to Realtor.com, active listings in April surged to a post-pandemic high, even surpassing levels seen in April 2020. What's even more striking is that this increase is more pronounced in California compared to the national average. Inventory in the Golden State is up a whopping 50% year-over-year, while the national rise is around 31%.

At the same time, the pace of home sales is undeniably slow. For the past several months, total sales of single-family homes and condos in California have been hovering below the lows we witnessed during the Great Recession on a 12-month rolling basis. That's a sobering statistic. Even the California Association of Realtors reported a further dip in existing home sales in March.

Why This Isn't 2008 (Yet)

While the rising inventory and slowing sales are reminiscent of the pre-crash days, there are fundamental differences that lead me to believe we won't see a repeat of the 2008 catastrophe.

• Stricter Lending Standards: This is arguably the biggest difference. Back in the mid-2000s, lending practices were… well, let's just say loose. Subprime mortgages were rampant, allowing people with shaky financial footing to take on loans they couldn't afford. When the housing market faltered, a wave of defaults and foreclosures followed, triggering a cascading effect. Today, lending standards are much tighter. Banks are far more rigorous in their approval processes, meaning the vast majority of current homeowners are more creditworthy and less likely to default.
• Stronger Economy (for now): While there are concerns about a potential recession, the underlying economy, particularly the job market, has been relatively resilient. During the lead-up to the Great Recession, we saw significant job losses, further exacerbating the foreclosure crisis. While job growth may be slowing, we aren't currently experiencing the same level of widespread unemployment.
• Different Reasons for Inventory Increase: While rising inventory can signal slowing demand, the reasons behind the current increase aren't solely negative. Some of it is simply the market normalizing after the frantic buying frenzy during the pandemic. More sellers are entering the market, which, in a healthy market, is a good thing. The issue is that buyer demand hasn't kept pace.

The Affordability Crisis: A Major Headwind

However, to say everything is fine would be naive. California faces a significant challenge: affordability. The median home price in California is astronomically high, often more than eight times the typical household's annual income. This makes homeownership an increasingly distant dream for many, especially first-time buyers.

Rising mortgage rates over the past year have only compounded this problem, pushing monthly payments even further out of reach. As one analyst put it, “High home prices and rising mortgage rates put homeownership out of reach for many would-be buyers.” This lack of affordability is undoubtedly a major factor contributing to the slowdown in sales.

Will Prices Finally Budge?

Despite the sluggish sales, home prices in California have remained surprisingly firm. The median list price has been virtually unchanged year-over-year. This stickiness in prices has largely been attributed to a lingering supply shortage compared to pre-pandemic levels.

However, with the significant surge in inventory, I believe we are reaching a tipping point. As more homes sit on the market for longer, sellers will eventually be forced to adjust their expectations and lower their prices to attract buyers. Some experts are already predicting a slowing in home price growth, with the possibility of prices flattening or even seeing a slight decline in certain markets over the next year.

Areas of Concern: Vulnerable Markets

It's also important to note that not all parts of California are created equal. Some areas that experienced the most rapid price appreciation during the pandemic and are now seeing the biggest jump in inventory could be more vulnerable to price corrections. Reports have even identified several California counties as being among the most at-risk nationwide for a housing market downturn based on factors like affordability gaps, underwater mortgages, foreclosures, and unemployment. We need to keep a close eye on these specific regions.

My Final Thoughts: Correction, Not Catastrophe

So, to bring it all together, do I foresee a catastrophic crash in the California housing market akin to the Great Recession? No, not in the same way. The fundamental issues that triggered the 2008 crisis – widespread risky lending – are not as prevalent today.

However, I do believe we are heading towards a significant market correction. The unsustainable levels of price appreciation, coupled with the affordability crisis and rising inventory, will likely lead to price stagnation and even moderate price declines in some areas. This correction, while perhaps painful for some sellers, could ultimately be a healthy thing for the market in the long run, potentially making homeownership more accessible for a larger segment of the population.

The key difference, in my opinion, is the reason for the potential downturn. In 2008, it was a systemic collapse fueled by bad loans. Today, it's more of a market recalibration in response to affordability challenges and a cooling demand.

We need to stay vigilant, monitor the data closely, and understand the nuances of our local markets. The California housing market is complex, but by understanding the underlying factors, we can hopefully navigate this period with a realistic perspective.

Thinking about the California housing market often brings images of ever-climbing prices and fierce bidding wars. But what if I told you the tide might be turning for some areas? Based on recent Zillow forecasts, it looks like 31 major cities in california where home prices are predicted to fall by April 2026.

Yes, you read that right – a potential cooling off in a state famous for its red-hot property values. This isn't just a wild guess; it's based on data trends pointing towards a shift in the coming year or two. So, let's dive into what this could mean for you, whether you're a homeowner, a hopeful buyer, or just keeping an eye on the market.

California Housing Market Correction: Prices Expected to Drop in Over 30 Cities

The Bigger Picture: What's Happening Nationally?

Before we zoom into California, it's helpful to understand the national mood. Zillow's latest crystal ball gazing suggests a couple of interesting things for the U.S. housing market overall. They're predicting that existing home sales will actually increase a bit in 2025, but home values are likely to fall by 1.4% this year (that's 2025). This is a slight adjustment from an earlier prediction of a 1.9% decrease, so things are a tad less gloomy than previously thought, but still pointing downwards for prices.

Why the potential dip? A big reason is rising inventory. We're seeing more homes for sale, partly because sales have been a bit soft this spring. When buyers have more choices, sellers can't always call all the shots on price. It gives buyers a bit more breathing room and time to make decisions.

Now, buyers haven't exactly been rushing out in droves like they typically do in the spring. There's been some hesitation, likely due to economic uncertainty. We've all felt it, right? Wondering about inflation, interest rates, and the general direction of things. The good news is, Zillow thinks this uncertainty might have peaked.

So, for 2025, they're looking at existing home sales hitting around 4.12 million. That would be a 1.4% bump from 2024. It's a little less than they thought last month, but still an increase. What's propping this up?

• More houses on the market (supply)
• Policy uncertainty (like what the Fed might do with rates) hopefully calming down
• Small improvements in housing affordability

It seems like a mixed bag: more sales, but potentially lower prices. It's a market in transition, that's for sure.

California's Cooling Spell: Which Markets Are Facing a Dip?

Now, let's bring it home to California. The Golden State often marches to the beat of its own drum, but it's not immune to these broader trends. In fact, given how high prices have soared here, it makes sense that some areas might be more sensitive to shifts in affordability and buyer sentiment.

I've been watching California real estate for years, and one thing I've learned is that what goes up very, very fast can sometimes take a breather. This isn't necessarily a crash, but more of a market correction or normalization. Based on Zillow's data, here are the 31 metro areas in California, and their projected percentage price decline by April 2026, starting from a baseline of April 30, 2025:

Region Name	Expected Price Decline by April 2026 (%)	My Quick Thoughts
Ukiah, CA	-7.6%	Smaller inland market, might be more sensitive to economic shifts. Big run-up, now a correction?
Eureka, CA	-6.3%	Coastal, but more remote. Similar dynamics to Ukiah perhaps.
San Francisco, CA	-5.2%	The tech hub has seen affordability stretched to its limits. Remote work impacts still settling.
Clearlake, CA	-4.9%	Often an affordability play relative to pricier Bay Area spots.
Santa Rosa, CA	-4.8%	Wine country, popular, but also got very expensive.
Chico, CA	-4.5%	University town, saw growth as people sought affordability.
Napa, CA	-4.1%	Luxury market, but even high-end can feel the pinch.
San Jose, CA	-3.8%	Silicon Valley's core. Similar to SF, affordability is a huge factor.
Vallejo, CA	-3.7%	Another Bay Area market that offered relative affordability, now seeing a pullback.
Red Bluff, CA	-3.7%	Northern California, smaller market.
Sonora, CA	-3.7%	Sierra foothills, popular for escape, but prices rose significantly.
Susanville, CA	-3.7%	Remote northeastern California.
Truckee, CA	-3.6%	Mountain resort town, boomed with remote work. Now some cooling?
Sacramento, CA	-3.0%	Became a hotspot for Bay Area émigrés. That wave might be slowing.
Crescent City, CA	-2.8%	Far north coast, smaller economy.
Santa Cruz, CA	-2.7%	Beautiful, but very expensive. A slight correction isn't shocking.
Stockton, CA	-2.6%	Central Valley, affordability draw.
Redding, CA	-2.3%	Northern CA, another area that saw inflow.
Yuba City, CA	-2.2%	Near Sacramento, likely influenced by similar trends.
Salinas, CA	-1.6%	Agricultural hub, “Salad Bowl of the World.”
Oxnard, CA	-1.4%	Coastal, but generally more affordable than LA or Santa Barbara.
Modesto, CA	-1.3%	Central Valley, another affordability-driven market.
San Luis Obispo, CA	-1.3%	“Happiest City in America,” but happiness comes at a price.
Los Angeles, CA	-1.2%	Massive, diverse market. A slight dip here is still significant in dollar terms for many neighborhoods.
Merced, CA	-1.0%	Central Valley, near UC Merced.
San Diego, CA	-0.7%	Always desirable. A smaller dip suggests underlying strength, but not immune.
Fresno, CA	-0.6%	Major Central Valley city, affordability is key.
Hanford, CA	-0.4%	Smaller Central Valley community.
El Centro, CA	-0.2%	Imperial Valley, unique border economy.
Riverside, CA	-0.1%	Inland Empire, a major recipient of coastal out-migration. Almost flat, showing some stability.
Madera, CA	-0.1%	Central Valley, very slight dip.

Data Source: Zillow, forecast as of April 30, 2025, for declines by April 30, 2026.

Looking at this list, a few things jump out at me.

• Northern California Dominance: Many of the areas with the steepest projected declines, like Ukiah, Eureka, and San Francisco, are in the northern part of the state. San Francisco and San Jose, despite being major economic engines, are on this list. This tells me that even in robust job markets, the sheer cost of housing has hit a ceiling for many. The work-from-home shift might also still be playing out, with some people realizing they don't need to be in the most expensive epicenters.
• Varying Degrees of Impact: Notice the range. Ukiah is looking at a potential 7.6% drop, while Riverside and Madera are almost flat. This highlights that real estate is incredibly local. What happens in one part of California can be very different from another.
• Major Metros Aren't Immune: Seeing Los Angeles (-1.2%) and San Diego (-0.7%) on the list, even with smaller declines, is noteworthy. These are huge, desirable markets. It suggests a broader cooling trend. For me, this isn't panic time; it's more of a “market taking a breath” moment.
• Affordability Havens Adjusting: Places like Sacramento (-3.0%) and many Central Valley cities saw significant price jumps as people fled coastal prices. It's natural for these markets to see some recalibration as that frenzy subsides.

What's Causing This Shift in California?

From my perspective, several ingredients are mixing together to create this potential cooldown:

1. Affordability, Affordability, Affordability: I can't say this enough. California home prices, coupled with mortgage rates that are much higher than a few years ago, have simply pushed many buyers to their limits, or out of the market altogether. When fewer people can afford to buy, demand softens, and prices can follow.
2. Increased Inventory: As Zillow noted nationally, more homes are coming on the market. In California, I'm seeing sellers who might have held off finally deciding to list, perhaps realizing the peak frenzy is over. This gives buyers more choice and less pressure to bid up prices.
3. Economic Winds: While the California economy has many strengths, particularly in tech and entertainment, any whiff of broader economic slowdown or uncertainty in specific sectors (like tech layoffs we saw) can make people cautious about making huge financial commitments like buying a home.
4. The “Normalization” Factor: The past few years were, frankly, a bit wild in real estate. The super-low interest rates and pandemic-driven housing shuffle created an unusually hot market. What we might be seeing now is a return to more typical market behavior. A 3-7% decline in some of these markets after years of double-digit gains isn't a catastrophe; it's a correction.

So, What Does This Mean for You?

This is where the rubber meets the road. How does this forecast affect your plans?

If You're a Potential Buyer:

• Opportunity Knocks (Softly): This could be good news! A price decline, even a modest one, combined with more homes to choose from, can ease some of the pressure. You might have more room to negotiate.
• Don't Expect Fire Sales: A 5% dip in San Francisco is still a very expensive house. This isn't 2008 all over again. Lending standards are tighter, and we don't have the same level of distressed properties.
• Mortgage Rates Still Matter: A price drop can be easily offset by high interest rates. Keep a close eye on rates and factor them heavily into your budget. My advice? Get pre-approved so you know exactly what you can afford.
• Focus on the Long Haul: Trying to perfectly “time the market” is a bit of a fool's errand. If you find a home you love, in a neighborhood you like, and it fits your long-term financial plan, that's often more important than squeezing out an extra percentage point on the price.

If You're a Potential Seller:

• Adjust Expectations: You might not get the peak-2022 price you were dreaming of. Be realistic about current market conditions in your specific neighborhood.
• Price It Right: In a softening market, an overpriced home will just sit. Work with a good local agent to price your home competitively from the start. Chasing the market down with price reductions is no fun.
• Presentation Matters More Than Ever: With more competition, your home needs to shine. Invest in staging, good photos, and address any needed repairs.
• Patience May Be Needed: Homes might take a bit longer to sell than they did a year or two ago.

What About Rents?

Here's an interesting wrinkle from Zillow's forecast: while home values might dip, they expect rents to keep climbing. They project single-family rents to rise by 3.2% in 2025, and multifamily (apartment) rents to go up by 2.1%.

This makes sense to me. If buying remains challenging due to affordability, more people will stay in the rental market, particularly for single-family homes which offer more space. This sustained demand, even with some increase in rental listings, will likely keep upward pressure on rents. It's a reminder that the housing market has many interconnected parts.

My Personal Take: This is a Recalibration, Not a Rout

Having weathered a few California real estate cycles, I see this forecast not as a cause for alarm, but as a sign of the market seeking a new equilibrium. California's fundamental appeal – its economy, climate, and lifestyle – remains strong. There's also a chronic undersupply of housing that isn't going away overnight.

These projected declines, for the most part, are relatively modest when you consider the huge run-up in prices over the last decade. For many markets, it's a shaving off of some of the recent, more frenzied gains.

A Few Caveats to Keep in Mind:

• Forecasts are Educated Guesses: Zillow has great data, but the future is never certain. Economic conditions, interest rate policies, or even unforeseen events can change the trajectory.
• Hyper-Local is Key: Remember that “San Francisco MSA” or “Los Angeles MSA” covers a vast area. Conditions can vary significantly from one neighborhood to the next, even one street to the next.
• This Isn't 2008: It's important to repeat this. The underlying conditions are different. We don't have the same risky lending practices or the sheer volume of foreclosures that fueled the last major downturn.

So, if you're in California, or looking to be, the news that 31 California housing markets are expected to see price decline by April 2026 is definitely something to pay attention to. It signals a shift towards a market that might offer a little more balance, a bit more breathing room for buyers, and a call for realistic expectations from sellers.

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.