California Real Estate Mid-Year Market Update – 2025

Market Rebound Continues

After a slower 2023-2024, California’s housing market is showing signs of steady growth. According to the California Association of Realtors:

• Median Home Price: Now around $909,400, up roughly 4.6% year-over-year.
• Sales Volume: Up about 10%, signaling increased buyer confidence and more market movement.
• Inventory: Improved compared to last year—up nearly 30%, giving buyers more options.

While demand remains strong, this rising inventory has helped cool off bidding wars in some regions and brought a bit more balance to the market.

Mortgage Rates & Financing

Mortgage rates remain a key factor in buyer behavior:

• Current 30-Year Fixed Rates: Hovering between 5.9% and 6.5% (down from 2024’s peak of 6.8%).
• This rate stability is encouraging more first-time buyers to enter the market and giving current homeowners new refinancing opportunities.

However, affordability is still a major hurdle—especially in high-priced areas like the Bay Area and parts of Southern California.

Regional Highlights

Bay Area

• Silicon Valley is seeing a slight cooling in prices (-2%), but San Francisco is rebounding, with list prices up over 50% year-over-year in some downtown zones.
• Inventory remains tight, especially in areas like Santa Clara and Alameda counties.

Los Angeles & Orange County

• Home prices are holding steady, with modest growth of 1-3%.
• Strong rental demand and limited supply continue to drive up leasing rates.

Inland Empire & Central Valley

• These more affordable regions are seeing stronger growth (5-8%) as buyers look for value.
• New construction is picking up to meet demand, but many developments are still in early stages.

Sacramento

• Growth is steady, with a median price around $550K and balanced supply.
• Popular among Bay Area transplants seeking more space and affordability.

Rental Market Trends

California’s rental market remains robust due to:

• High home prices keeping some would-be buyers renting.
• Continued demand for short-term and accessory dwelling units (ADUs).
• Low vacancy rates in urban centers like Los Angeles and San Diego.

ADUs, in particular, are seeing a surge in popularity among homeowners looking to add rental income or multigenerational living options.

What to Watch for in the Second Half of 2025

• Interest Rates: The Federal Reserve is expected to hold or slightly reduce rates, which could further stimulate demand.
• Zoning Reforms: Recent changes like SB 9 and SB 10 may lead to more development, especially in urban and suburban areas.
• Wildfire Recovery & Resilience: New construction is being incentivized in fire-affected zones, with a focus on more resilient building standards.
• Investor Activity: Multifamily and commercial real estate are starting to regain traction, especially in revitalizing city centers.

Final Thoughts

California’s real estate market in 2025 is more dynamic than it’s been in years—offering new opportunities for buyers and sellers alike. With interest rates settling and more inventory on the market, now might be the right time to make your move, especially if you’ve been waiting on the sidelines.

If you’re thinking of buying, selling, or investing this summer, reach out! I’d be happy to help you navigate your local market.

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