The year started with some challenges for California’s housing market. Mortgage rates nudged higher in early January, and devastating wildfires in Southern California brought heartbreaking losses. Home sales slowed statewide, posting their lowest level in over a year, and pending sales saw a notable year-over-year dip.
That said, there’s plenty of reason to feel encouraged as we move into spring — traditionally one of the most active times for buyers and sellers alike. Mortgage rates, while still elevated compared to historic lows, have started to soften slightly in recent weeks. Most importantly, buyers and sellers are adjusting to the new reality: 3% interest rates are likely a thing of the past, and many are moving forward confidently with that in mind.
Assuming the economy remains stable — and so far, all signs point that way — we should see housing demand strengthen throughout 2025.
On the supply side, more homeowners who’ve been sitting on the sidelines are now ready to make a move. Inventory is already ticking up, with new active listings in January showing the biggest annual jump in nearly four years. If that trend continues, we could see a 10% boost in available homes over the next several months, especially if the lending environment continues to improve.
More inventory will help bring some much-needed balance to the market, though it’s worth noting that supply will still fall short of historical norms. That imbalance will continue to put upward pressure on prices. In fact, the statewide median home price saw another annual increase in January — and the rate of growth outpaced the six-month average from late 2024.
All told, if rates continue their gradual decline, we expect California home prices to appreciate modestly this year. The forecast calls for a 4.6% increase, bringing the state’s median price to $905,200.
The bottom line is that yes, the market has shifted, but it’s far from stalled. We’re seeing renewed momentum as buyers and sellers recalibrate, and that’s good news for everyone.
More balance is on the horizon, and the spring season is shaping up to be a strong one.
Source: California Association of Realtors (CAR), March 2025 Housing Outlook
