As of July 4, 2025, Southern California’s housing market is beginning to stabilize after a period of rapid price increases and limited inventory. The California Association of Realtors (C.A.R.) forecasts a 10.5% increase in existing single-family home sales for 2025, with an expected total of 304,400 homes sold. Meanwhile, home prices are expected to rise more modestly by 4.6%, bringing the median home price to $909,400. These changes mark a shift from the extreme volatility seen in previous years, signaling a more balanced market moving forward.
Market Trends and Dynamics:
Several key factors are contributing to this stabilization:
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Increased Home Inventory: After years of low supply, Southern California is seeing more homes listed for sale. Inventory levels are up 12% compared to the previous year, providing buyers with more choices and easing some of the pressure from earlier bidding wars. According to Zillow, the inventory surge is particularly evident in suburban and inland regions such as the Inland Empire, where more affordable homes are being listed.
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Price Growth Moderation: While home prices in Southern California remain high, the growth rate has slowed. After a period of double-digit annual increases, home prices are expected to rise by a more sustainable 4.6%. This price moderation provides potential buyers with some relief, especially after the market’s peak in the pandemic years, where prices surged by as much as 15% annually in some areas.
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Lower Mortgage Rates: The Federal Reserve’s decision to reduce interest rates has led to lower mortgage rates, which are now hovering around 5%, down from over 6% last year. This has made home loans more affordable, encouraging both first-time buyers and those looking to refinance.
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Shift Toward Inland and Suburban Areas: Coastal cities such as Los Angeles and San Diego are seeing less activity, as homebuyers increasingly move to more affordable inland regions. The Inland Empire, for example, has experienced steady price increases (around 1.9%) and remains an attractive option for buyers priced out of the coastal markets.
Regional Insights:
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Los Angeles Metro Area: The LA metro area’s median home price is $855,000, which is an increase of 1.8% from last year. However, home sales have decreased by 8.3%, indicating that while prices are rising, the pace is slower than in previous years. Many buyers are opting for more affordable areas outside the immediate metro region, such as Long Beach and Pomona.
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San Francisco Bay Area: The Bay Area has seen a more noticeable slowdown, with home prices dropping by 3.8% to a median of $1.4 million. This is due in part to remote work trends that have allowed people to leave expensive cities like San Francisco in favor of more affordable places in neighboring states or inland California.
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Inland Empire: The median home price in the Inland Empire is $610,000, with a modest year-over-year increase of 1.9%. Sales have slowed slightly by 5.4%, but the region remains one of the most affordable in Southern California and continues to attract homebuyers seeking more space and better value.
Expert Opinions and Projections:
Real estate experts believe that the market will continue to stabilize throughout the second half of 2025. “The market has cooled from the intense seller’s market of the past few years, but there’s still demand, particularly in the suburbs and more affordable areas,” said Dr. Mark Perry, an economist at UCLA. “This is a healthy adjustment, and it’s good news for both buyers and sellers who were frustrated by bidding wars.”
Conclusion:
Southern California’s housing market in 2025 is heading towards a more balanced environment. While home prices are still rising, they are doing so at a more moderate pace. The increased inventory and lower mortgage rates are giving buyers more opportunities to purchase, while still maintaining a healthy level of competition. For both homebuyers and sellers, 2025 is shaping up to be a year where stability and opportunity take precedence.
