Future Trends and Predictions for California'sReal Estate Market in 2025-2026
California Housing Market Shows Signs of Rebound in 2025
The California housing market is gearing up for a moderate rebound in 2025, as predicted by the California Association of Realtors (C.A.R.). The forecast suggests that existing single-family home sales will increase by 10.5%, reaching around 304,400 units, and the median home price will rise approximately 4.6% to reach $909,400.
This improvement is primarily due to lower mortgage interest rates, with the average 30-year fixed-rate mortgage predicted to decline from 6.6% in 2024 to 5.9% in 2025. Additionally, the housing inventory is expected to increase modestly, although it remains below historical averages.
Key factors shaping the forecast include interest rates, inventory, price growth, and demand. Lower 30-year fixed mortgage rates are making borrowing more affordable, stimulating buyer demand. The "lock-in effect"—where homeowners with low-rate mortgages delay selling—is easing as rates drop, encouraging more listings and slightly improving supply.
Though prices will continue to rise, the rate of appreciation is moderating to a sustainable 3-5% range, down from the rapid gains during the pandemic years. Strong and steady demand persists due to California’s economic fundamentals and continued attractiveness of suburban and semi-rural areas, boosted by remote work trends that increase demand for more space.
Areas affected by wildfires, such as Altadena and Pacific Palisades, are facing unique challenges. These areas have seen steep declines in home sales and significant price erosion. Many property owners in these areas are selling their burned lots rather than undertaking a time-consuming rebuilding process.
Looking beyond 2025, the outlook suggests a stable housing market with steady price growth and gradual inventory improvements. Market stability is likely to benefit both buyers—who face improved affordability and more options—and sellers, who can still expect reasonable price appreciation and active demand, particularly if homes are move-in ready.
It's important to note that the California housing market varies significantly from region to region. Regions like Far North and Central Coast are experiencing stronger sales growth. The statewide median home price in June 2025 was $899,560, a 0.1% decrease from both May 2025 and June 2024. Total active listings are up more than 40% year-over-year, reaching a 68-month high.
In Pacific Palisades, the median home price also showed a substantial decrease, falling by 23.7% from $3,310,000 in 2024 to $2,525,000 in 2025. The California unemployment rate is anticipated to tick up to 5.6% in 2025, compared to a projected 5.4% in 2024. California's nonfarm job growth is expected to decline to 1.1% in 2025 from 1.5% in 2024.
The U.S. GDP is projected to slow to 1.1% in 2025, compared to 1.9% in 2024. Despite these challenges, the forecast predicts that the California housing market will remain resilient, with a more balanced market environment going forward.
[1] California Association of Realtors (C.A.R.), California Housing Market Forecast, 2025. [2] Freddie Mac, Primary Mortgage Market Survey, June 2025. [3] National Association of Realtors, Existing-Home Sales Rise in June, July 2025.
- The California Association of Realtors (C.A.R.) predicts that the growth in the California housing market in 2025 will be fueled by a decline in mortgage interest rates, with the average 30-year fixed-rate mortgage expected to drop from 6.6% in 2024 to 5.9% in 2025.
- The housing inventory in California is expected to increase moderately, despite remaining below historical averages, which should benefit both buyers and sellers.
- The California housing market is projected to see steady price growth and gradual inventory improvements beyond 2025, making it a potential area for real-estate investing.
- Areas like Pacific Palisades, affected by wildfires, face unique challenges in terms of housing market recovery, with the median home price showing a substantial decrease from 2024 to 2025.
