The Southern California real estate market, long known for its soaring prices and high demand, is showing signs of stabilization in 2025. As experts point to shifts in buyer behavior and a rise in housing inventory, the region’s housing market may finally be settling after years of rapid price increases.
The Southern California real estate market has been in flux for the past decade, with home prices in Los Angeles, San Diego, and other major cities rising rapidly as demand outpaced supply. However, as of June 2025, several indicators suggest the market is beginning to stabilize, which could provide relief for prospective buyers who have struggled with the region’s escalating costs.
A Shift Toward Affordability
According to the California Association of Realtors (C.A.R.), existing single-family home sales in the region are projected to rise by 10.5% this year, reaching an estimated 304,400 units. This is a significant increase from previous years, though it still falls short of pre-pandemic levels. A primary factor behind this growth is a slight increase in housing inventory. Over the past year, more homes have been listed for sale in key metropolitan areas, which has provided buyers with more options. For many years, Southern California has faced a shortage of homes for sale, contributing to the surge in prices.
In addition to increased inventory, mortgage rates have remained lower than anticipated. In June 2025, the average 30-year fixed mortgage rate stood at approximately 4.2%, a slight decrease from the 5% rates seen in late 2024. Lower mortgage rates have provided buyers with more purchasing power, encouraging those who were previously on the fence about entering the market.
Market Trends and Buyer Behavior
One of the most notable trends in the 2025 market is the growing preference for homes in the Inland Empire and other more affordable regions outside of the core urban areas like Los Angeles, San Diego, and Orange County. As the demand for housing in major cities continues to outstrip supply, many buyers are choosing to move further inland, where they can purchase larger homes for less money. Cities such as Riverside, San Bernardino, and even parts of the High Desert have experienced increased buyer activity as people seek to escape the skyrocketing housing prices in coastal regions.
This shift has resulted in higher-than-usual prices in some Inland Empire communities. For example, Riverside’s median home price rose by 5.6% in early 2025, while San Bernardino saw a 4.2% increase. These areas, once considered affordable alternatives to Los Angeles, are now becoming more competitive, leading to what some experts are calling a “new wave of suburban growth.”
The Role of Technology in Real Estate
Technology continues to play a critical role in how people search for and purchase homes. Real estate websites like Zillow, Redfin, and Realtor.com have seen substantial increases in traffic, with potential buyers spending more time online looking for homes before deciding to visit in person. The rise of virtual tours and augmented reality (AR) features, which allow buyers to virtually “walk through” homes, has been a game-changer for the industry, especially in the wake of the COVID-19 pandemic.
Real estate agents are also leveraging social media platforms like Instagram and TikTok to market homes to younger generations. These platforms allow agents to reach a wide audience, often targeting first-time buyers and millennials, who are now entering the housing market in larger numbers. Social media ads, virtual home tours, and interactive experiences are allowing buyers to narrow down their options before ever stepping foot into a property, making the home-buying process faster and more efficient.
Challenges in the Market
Despite the stabilization in home prices, the Southern California real estate market still faces significant challenges. One of the biggest hurdles is affordability. Even with a slight dip in prices, many homes in desirable locations are still out of reach for the average buyer. According to C.A.R., the median price of a home in Southern California in 2025 is expected to reach approximately $909,400, which remains unaffordable for a large portion of the population. In fact, in Los Angeles County, the median home price is expected to exceed $1 million, while San Diego County’s median will hover just below that figure.
As wages in the region have not kept pace with rising housing costs, many working-class families continue to be priced out of the market. First-time homebuyers, in particular, have been struggling to gather the necessary down payment to enter the market, especially in urban areas.
Additionally, while interest rates have dropped, they are still above the historic lows seen during the early days of the pandemic, making it harder for some buyers to qualify for loans. In response to these concerns, several state lawmakers have proposed solutions aimed at addressing the affordability crisis, including rent control measures and funding for affordable housing development.
Looking Ahead: A Balanced Market?
Experts predict that the Southern California real estate market will remain relatively balanced through the end of 2025. While the rise in housing inventory has alleviated some pressure on buyers, the market will continue to be shaped by affordability concerns and the ongoing push for more housing development.
California Governor Gavin Newsom’s recent efforts to pass legislation that encourages more affordable housing construction could be a key factor in stabilizing the market long-term. If successful, these efforts could lead to an increase in the supply of lower-cost homes and rentals, easing the affordability crisis in high-demand areas.
Despite these ongoing challenges, the Southern California real estate market is poised for gradual, sustainable growth over the next several years. For buyers and sellers alike, this stabilization presents a welcome reprieve from the volatility of the past decade.
