California Housing Market Forecast 2025

California Housing Market Forecast 2025: What Buyers and Sellers Need to Know

The California housing market is gearing up for a year of growth in 2025, with improving conditions for both buyers and sellers. According to the latest forecast from the California Association of REALTORS® (C.A.R.), lower interest rates, increased inventory, and a steady economy will drive the market forward. Here’s what to expect if you’re planning to buy or sell a home in California next year.

A Surge in Home Sales: What’s Changing?

Existing single-family home sales are projected to rise by 10.5%, reaching 304,400 units in 2025. This is a significant jump from the projected 2024 sales figure of 275,400 units. With more homes hitting the market, buyers and sellers can expect increased activity.

Why It Matters:

• For buyers, more inventory means more options.
• For sellers, increased demand ensures homes won’t sit on the market for long.

Home Prices Continue to Climb: Price Projections

The median home price in California is forecast to rise by 4.6% in 2025, reaching $909,400. This follows a projected 6.8% increase in 2024. Persistent demand and limited supply are driving these price increases.

What It Means for Buyers and Sellers:

• Buyers: Act sooner rather than later to avoid higher prices.
• Sellers: Rising prices present a strong opportunity to maximize your return.

Lower Mortgage Rates Are a Game-Changer

The Forecast

The average 30-year fixed mortgage rate is expected to decline to 5.9% in 2025, down from 6.6% in 2024. While still above pandemic-era lows, these rates are more favorable compared to the long-term historical average of nearly 8%.

Why It Matters:

• Buyers: Lower rates make monthly payments more affordable.
• Sellers: More buyers entering the market means increased competition for your property.

Housing Affordability Holds Steady: The Reality

Housing affordability is expected to stabilize at 16% in 2025, the same as 2024 but down from 17% in 2023. This means that a limited percentage of California households can afford a median-priced home, keeping affordability a challenge despite better interest rates.

What It Means for Buyers:

• First-time buyers should explore down payment assistance programs.
• Work with a knowledgeable real estate agent to navigate the competitive market.

Improved Inventory Levels: The Good News

Active listings are forecast to increase slightly, rising by just over 10% in 2025. This moderate improvement will ease some of the inventory crunch, though supply will remain below historical norms.

Why It Matters:

• Buyers: More choices mean less pressure to overbid.
• Sellers: Highlighting your property’s unique features will remain key in a competitive market.

Key Economic Indicators: A Stable Economy

• GDP Growth: The U.S. GDP is projected to slow to 1.1% in 2025.
• Unemployment Rate: California’s unemployment rate is expected to inch up to 5.6%, reflecting slower job growth.
• Inflation: CPI is forecast to moderate to 2.0%, easing economic pressures.

These indicators suggest a stable economic environment, supportive of steady growth in the housing market.

The Big Picture

The 2025 California housing market is set to offer opportunities for both buyers and sellers:

• Buyers: Lower interest rates and a slight inventory increase provide better conditions for navigating the market. Acting quickly to secure a home before prices rise further is key.
• Sellers: Rising home prices and strong demand make 2025 an excellent time to list your property. Pricing competitively and working with an experienced agent will help you attract serious buyers.

Conclusion

The 2025 housing market in California is shaping up to be dynamic, with growth in home sales, rising prices, and improved inventory. Whether you’re buying or selling, understanding these trends and planning accordingly will help you make the most of the opportunities ahead.

Are you ready to make a move in 2025? Contact a trusted real estate professional to guide you through the process and ensure a successful transaction.