As of July 5, 2025, the Southern California housing market is showing encouraging signs of recovery following a challenging period marked by rising interest rates and limited housing inventory. According to the latest data, the median home price in Southern California has risen to approximately $866,400, reflecting a 4.8% increase compared to the same period last year. While the market is still working through affordability challenges, the increased availability of homes and a slight reduction in mortgage rates are helping to stabilize the region’s real estate dynamics.
The Shift Toward Suburban and Inland Housing Markets
One of the most notable trends in the Southern California real estate market in 2025 is the growing interest in suburban and inland regions. While coastal areas such as Los Angeles and Orange County remain highly sought after, many buyers are increasingly looking to more affordable areas in the Inland Empire, San Bernardino, and Riverside counties. These areas, which offer relatively lower home prices, are attracting first-time homebuyers and those seeking more space at a more affordable price.
Cities like Riverside, Ontario, and Temecula have seen notable price increases, as buyers, especially younger professionals and families, seek homes with larger square footage and proximity to major employers while avoiding the high costs associated with coastal urban centers. The Inland Empire has become a hotspot for those who are still working remotely or looking for a more affordable lifestyle while staying within commuting distance of Los Angeles.
In particular, the Inland Empire’s affordability has made it a go-to choice for buyers from urban centers. This shift is reshaping Southern California’s housing landscape, as once-overlooked areas now offer the opportunity for long-term homeownership in a region known for its high living costs.
Rising Demand and Easing of Inventory Constraints
In 2025, the Southern California real estate market is benefiting from an increase in inventory, which has somewhat alleviated the intense competition that characterized the market in 2023 and early 2024. Housing stock in previously undersupplied areas, especially in suburban and exurban markets, has made it easier for buyers to find homes that match their needs without engaging in fierce bidding wars.
While inventory is still constrained compared to pre-pandemic levels, the number of available homes has gradually increased, helping to stabilize prices and offer more options for buyers. As the market becomes more balanced, the once-typical scenario of multiple offers and escalating prices has largely faded, giving buyers more breathing room to negotiate.
Mortgage Rates and Their Impact on Buying Power
Mortgage rates have been another key factor in the market’s recovery. Following a period of rising rates in 2023 and 2024, rates have recently seen a slight decline, hovering around 5.1% for a 30-year fixed mortgage in July 2025. This reduction has helped improve buyers’ purchasing power, making it easier for those on the fence to enter the market. First-time homebuyers, who were significantly impacted by previous higher rates, now have more opportunities to secure a home in Southern California’s competitive market.
However, affordability remains a challenge, especially in high-demand coastal regions. For many prospective buyers, securing financing with a relatively high median price of homes is still a barrier. As interest rates continue to fluctuate, future trends may depend on whether additional mortgage rate cuts or further easing of inventory constraints can make housing even more accessible for a broader range of buyers.
Looking Ahead: What’s Next for Southern California’s Real Estate Market?
Despite ongoing challenges such as affordability and the availability of starter homes, the outlook for the Southern California housing market for the remainder of 2025 is largely positive. As mortgage rates stabilize and inventory continues to increase, the market is expected to remain healthy, with gradual price growth and more opportunities for buyers, particularly in suburban areas.
For sellers, the market remains favorable, particularly in areas with increased demand like the Inland Empire and San Diego’s outskirts, where buyers are looking for more affordable options. For buyers, patience and flexibility will be key in navigating the current market, as opportunities for negotiation and better deals are emerging.
The Southern California real estate market continues to evolve, and those who stay informed and adapt to changes in interest rates and inventory levels will be best positioned to take advantage of the market’s recovery.
