Southern California’s housing market has continued to experience steady growth through mid-2025, signaling a period of stabilization in an otherwise fluctuating real estate environment. As of July, the average home price has increased to approximately $866,400—a 4.8% rise compared to the same period last year. Despite some external economic challenges, this growth is driven by an ongoing demand for homes, coupled with a persistent shortage of inventory.
Key Drivers of Market Growth
The modest price increases in Southern California are largely attributed to the area’s enduring appeal and demographic shifts. Despite high costs, the region remains a magnet for tech professionals, remote workers, and buyers seeking a lifestyle that combines proximity to nature, culture, and business hubs. Areas like San Diego and Orange County are particularly popular due to their high quality of life, with families and remote workers flocking to suburban areas for more space. At the same time, a post-pandemic boom has kept demand high in urban areas like Los Angeles and Long Beach.
Moreover, rising interest rates—while somewhat constraining the market—have not deterred buyers with high purchasing power. The influx of tech employees and professionals looking for larger homes to accommodate hybrid work environments has kept demand buoyant.
Impact of Legislative Reforms
In response to California’s housing crisis, the state government has implemented a series of legislative reforms designed to address the significant housing shortage. One of the most notable changes is the rollback of certain provisions of the California Environmental Quality Act (CEQA), a law that has historically been seen as a significant barrier to new housing development. On July 1, 2025, Governor Gavin Newsom signed a landmark bill that exempts most urban housing projects from the extensive environmental reviews that would typically be required under CEQA. This shift is expected to accelerate development, particularly in high-density areas where land is scarce.
The CEQA reform is particularly relevant to Southern California, where a significant portion of housing construction projects had been delayed due to lengthy and costly environmental reviews. The move is designed to allow developers to streamline the permitting process and build housing in a more timely and efficient manner, contributing to increased supply, especially in urban centers like Los Angeles, San Diego, and Riverside.
Regional Variations: Riverside and Coastal Communities
While Southern California’s housing market is experiencing overall growth, different regions are seeing varying trends. Riverside County, for instance, has become a haven for homebuyers seeking more affordable options compared to pricier coastal areas like Santa Monica or Malibu. The suburban appeal of Riverside, paired with new developments featuring Mediterranean-style homes and a blend of luxury and affordability, has led to a surge in demand. Many buyers are attracted by the region’s lower cost of living and larger homes, while still being within driving distance of Los Angeles.
In contrast, coastal communities like Malibu, Venice, and Santa Barbara continue to experience high demand despite challenges like rising wildfire risks, insurance cost hikes, and zoning restrictions. Despite these risks, the allure of coastal living keeps these areas among the most sought-after in the state. The steady interest in these areas has led to stable property values, and affluent buyers, particularly those seeking second homes, are still actively investing in the region.
Challenges in the Market: Affordability and Inventory Shortages
Despite the overall growth in home prices, affordability remains a significant issue in many parts of Southern California. As more buyers enter the market, inventory levels remain stubbornly low, further driving up prices. While builders are working to address the shortage, the rise in construction costs due to supply chain disruptions and labor shortages is making it difficult for new homes to be delivered quickly or at affordable price points.
For first-time buyers, the market remains challenging. Although mortgage rates have stabilized, many buyers still face difficulty qualifying for loans due to the ongoing affordability gap. This issue is most prominent in cities like Los Angeles, where the median home price is nearly 50% higher than the national average.
What This Means for Buyers and Sellers
As Southern California’s housing market shows modest growth, both buyers and sellers must adjust their strategies. Buyers, especially those who have been waiting for a dip in prices, will likely need to act quickly as inventory remains limited. Sellers, on the other hand, may find success by pricing their homes competitively to capitalize on the demand and ensure a faster sale.
For those interested in investing, experts suggest that the market may continue to experience growth, particularly in regions benefiting from the ongoing migration patterns, like Riverside, Inland Empire, and suburban Los Angeles. As housing policy reforms begin to take effect and inventory slowly increases, the market could stabilize further, offering opportunities for buyers seeking long-term investments.
