The Southern California housing market is experiencing a period of transition, with significant shifts in both demand and affordability. In 2025, the region’s real estate market continues to be shaped by a mix of economic pressures, rising mortgage rates, and a shift in where people are choosing to live.
Housing Prices and Affordability Crisis
In Los Angeles, the median price for a home has reached $910,000 in 2025, a slight increase from 2024 but still far higher than the national average. The rapid price appreciation in cities like Los Angeles, San Diego, and Orange County is a major factor driving many prospective buyers to cheaper suburban and inland areas.
According to the California Association of Realtors, sales in major cities have slowed due to rising mortgage rates, which reached their highest levels since the early 2000s. However, the report also notes that sales volume has slightly increased in outlying areas, particularly in Riverside, San Bernardino, and Ventura counties.
In these regions, prices remain more accessible, and the larger homes available are attracting families who are seeking more space while still being close enough to major employers in Los Angeles.
Suburban Migration and Changing Preferences
One of the key trends in the 2025 Southern California housing market is the migration away from urban centers. As remote work continues to be a viable option for many professionals, families are increasingly opting for homes in the Inland Empire, the San Fernando Valley, and even parts of Santa Barbara County. These areas offer a more affordable lifestyle, lower property taxes, and ample space for home offices.
Riverside, a city that historically had been overlooked, is now one of the fastest-growing areas in the state. It’s seeing a boom in new construction, particularly in the single-family home market, as well as demand for townhomes and condos. These areas offer significant opportunities for first-time buyers looking to enter the market.
Luxury Market and High-Value Properties
On the opposite end of the spectrum, the luxury housing market in Southern California remains strong. In Beverly Hills, Santa Monica, and Laguna Beach, million-dollar properties continue to see high demand from buyers around the world. Southern California’s climate, amenities, and lifestyle make it an attractive location for affluent buyers, many of whom are from out of state or overseas.
As the luxury market continues to perform well, many developers are focusing on high-end condominiums and mixed-use developments that cater to the wealthy and offer an urban, convenient lifestyle.
Conclusion: A Complex Market with Opportunities and Challenges
As 2025 unfolds, the Southern California real estate market will likely continue to be a complex mix of high demand and affordability challenges. While urban areas may experience slowdowns in price appreciation, suburban regions are poised for growth. For both buyers and investors, the key to success will be understanding the regional differences and adjusting expectations accordingly.
