California home sales and price are projected to increase as buyers and sellers return to the market,
enticed by lower interest rates and better housing supply conditions.
- Existing, single-family home sales are forecast to total 304,400 units in 2025, an increase of 10.5 percent from 2024’s projected pace of 275,400.
- California’s median home price is forecast to climb 4.6 percent to $909,400 in 2025, following a projected 6.8 percent increase to $869,500 in 2024 from 2023’s $814,000.
- Housing affordability* is expected to remain stable at 16 percent next year after slipping to a projected 16 percent in 2024 from 17 percent in 2023.
A more favorable interest rate environment is expected to ease the “lock-in” effect and increase housing inventory, encouraging both buyers and sellers to return to the market, according to a housing and economic forecast released today by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).
In its baseline scenario, C.A.R.’s “2025 California Housing Market Forecast” projects a 10.5% increase in existing single-family home sales, reaching 304,400 units in 2025, compared to the estimated 275,400 sales in 2024. This 2024 projection is already a 6.8% improvement from the 257,900 homes sold in 2023.
The California median home price is forecast to rise by 4.6% in 2025, hitting $909,400. This follows a projected 6.8% increase to $869,500 in 2024, up from $814,000 in 2023. The ongoing housing shortage and competitive market conditions will continue to drive prices higher next year.
“With more homes available for sale and borrowing costs coming down, we expect both buyers and sellers to be more active in 2025,” said C.A.R. President Melanie Barker, a Yosemite REALTOR®. “Demand, especially from first-time buyers, will grow as mortgage rates drop to their lowest levels in over two years. Sellers who have been holding back due to the lock-in effect will have more opportunities to find homes that better meet their needs as rates decline.”
C.A.R.’s 2025 forecast also anticipates U.S. GDP growth slowing to 1.1%, down from the projected 1.9% in 2024. California’s nonfarm job growth rate is expected to decline from 1.5% in 2024 to 1.1% in 2025, with the state’s unemployment rate rising slightly to 5.6% from 5.4%.
Inflation is expected to continue moderating, with the Consumer Price Index (CPI) averaging 2.0% in 2025, down from 2.9% in 2024. The average 30-year fixed mortgage interest rate is forecast to decrease from 6.6% in 2024 to 5.9% in 2025. Although this is higher than pre-pandemic levels, it remains lower than the historical average of nearly 8% over the past 50 years.
While housing supply conditions will improve in 2025, the increase in active listings will be moderate, rather than dramatic. Over the next 18 months, as interest rates decline further and the lock-in effect loosens, more properties will become available. Homeowners who have delayed selling and investors anticipating a market rebound will be motivated to list their properties as home prices rise. Although supply will remain below historical norms, active listings are expected to increase by just over 10% as market conditions and the lending environment improve.
“Even as inventory loosens with lower rates, demand will also grow, keeping the market competitive and driving home prices higher,” said C.A.R. Senior Vice President and Chief Economist Jordan Levine. “Price growth will be slower, but the persistent housing shortage will ensure continued competition. Assuming a stable economy, home prices should rise modestly, with the median price across California climbing by 4.6% to $909,400 in 2025.”
p = projected
f = forecast
* = % of households who can afford median-priced home
