The California housing market is set for a bright year in 2025, as lower mortgage rates and an improved housing supply create favorable conditions for both buyers and sellers. According to the California Association of REALTORS® (C.A.R.), home sales and prices are expected to increase as the market benefits from these positive shifts.
Growth in Home Sales and Prices
In 2025, existing single-family home sales are forecasted to reach 304,400 units, a significant 10.5% increase from 2024’s projected total of 275,400 units. This rise marks a promising return to activity as more buyers and sellers re-enter the market, taking advantage of favorable conditions.
California’s median home price is also expected to see steady growth, increasing by 4.6% to $909,400 in 2025. This follows a projected 6.8% rise in 2024, bringing the median home price to $869,500, up from $814,000 in 2023. Despite a competitive market and a persistent housing shortage, these trends reflect a healthy balance of demand and supply.
Lower Interest Rates Encourage Market Activity
One of the key drivers of this positive outlook is the forecast for lower mortgage rates. By 2025, the average 30-year fixed mortgage rate is expected to drop to 5.9%, down from 6.6% in 2024. While still higher than the pre-pandemic rates, this is well below the historical average of nearly 8% over the last 50 years. These lower rates will give buyers more purchasing power, making homeownership more attainable for many, especially first-time buyers.
C.A.R. President Melanie Barker highlighted this opportunity, stating, “Lower borrowing costs and an increase in homes for sale will entice more buyers and sellers into the market. This creates the perfect scenario for those who have been waiting for the right time to buy or upgrade their home.”
A Balanced Market with Rising Inventory
Another encouraging trend is the projected increase in housing inventory. While supply levels will remain below historical norms, active listings are expected to grow by over 10% in 2025. This slight increase will help ease the “lock-in” effect that has kept many homeowners from selling their properties due to higher mortgage rates. As rates continue to decline, homeowners and investors who have delayed selling will be more likely to list their properties, further boosting market activity.
A Healthy and Competitive Market
Despite these positive developments, the housing market is expected to remain competitive due to the persistent shortage of homes for sale. However, price growth is anticipated to be more moderate in 2025, with home values rising at a slower pace compared to the rapid gains seen in previous years. C.A.R. Chief Economist Jordan Levine emphasized that “demand will increase alongside a limited housing supply, but price growth will be more gradual. We expect the state’s median home price to rise modestly by 4.6%.”
What Does This Mean for You?
For buyers, the combination of lower interest rates and an increasing inventory means more options and better affordability. Whether you’re a first-time buyer or looking to upgrade, 2025 could be an ideal time to make your move. Sellers, too, stand to benefit from the improving market conditions, with more buyers ready to enter the market and increasing home prices making it a good time to list.
Final Thoughts
The 2025 housing market forecast paints an optimistic picture for California. With more homes available, lower interest rates, and rising prices, both buyers and sellers will have opportunities to achieve their real estate goals. As the market continues to stabilize, 2025 is shaping up to be a great year for real estate in the Golden State.