FOR RELEASE
September 25, 2024

C.A.R. Unveils 2025 California Housing Market Forecast

 

California home sales and prices are expected to rise as both buyers and sellers return to the market, encouraged by lower interest rates and improved housing supply conditions.

 

 

According to the California Association of REALTORS® (C.A.R.), a more favorable interest rate environment, which reduces the "lock-in" effect and increases housing inventory, will encourage more buyers and sellers to enter the market, boosting both home sales and prices next year.

 

C.A.R.’s “2025 California Housing Market Forecast” anticipates a 10.5% increase in existing single-family home sales, reaching 304,400 units in 2025, up from the projected 275,400 in 2024. This follows a 6.8% rise from 257,900 sales in 2023.

 

The median home price in California is expected to rise by 4.6% to $909,400 in 2025, building on a projected 6.8% increase to $869,500 in 2024 from $814,000 in 2023. The ongoing housing shortage and competitive market are expected to continue driving up home prices.

 

C.A.R. President Melanie Barker emphasized that lower borrowing costs and an increase in housing inventory will encourage more buyers and sellers to return to the market in 2025. As mortgage rates decrease, buyers, particularly first-time buyers, will be drawn in, while sellers held back by the "lock-in" effect will have more flexibility to pursue homes that better suit their needs.

 

C.A.R.’s forecast also predicts a 1.1% growth in U.S. GDP in 2025, down from 1.9% in 2024. California's nonfarm job growth will slow to 1.1%, from 1.5% in 2024, and the state’s unemployment rate is expected to rise slightly to 5.6% in 2025 from 5.4% in 2024.

 

Inflation is expected to moderate, with the Consumer Price Index (CPI) averaging 2.0% in 2025, down from 2.9% in 2024. This will contribute to a decrease in the average 30-year fixed mortgage rate, which is projected to fall from 6.6% in 2024 to 5.9% in 2025. While still higher than pre-pandemic levels, this rate will remain below the long-term average of 8% over the past 50 years.

 

Housing supply is expected to improve slightly, with a moderate increase in active listings in 2025. As interest rates continue to decline and the lock-in effect loosens, more homeowners and investors will list their properties, seeing rising home prices as an opportunity to sell. Although housing supply will remain below historical norms, the number of active listings will rise by about 10% as market conditions and lending environments improve.

 

C.A.R. Senior Vice President and Chief Economist Jordan Levine stated that while inventory is expected to loosen, demand will increase with lower mortgage rates and limited housing supply, pushing home prices higher. He anticipates slower price growth, but the ongoing housing shortage will keep the market competitive, resulting in a modest rise in prices across California, with the median price climbing 4.6% to $909,400 in 2025.

2025 CALIFORNIA HOUSING FORECAST

	2018	2019	2020	2021	2022	2023	2024p	2025f
SFH Resales (000s)	402.6	398	411.9	444.5	343	257.9	275.4	304.4
% Change	-5.2%	-1.2%	3.5%	7.9%	-22.9%	-24.8%	6.8%	10.5%
Median Price ($000s)	$569.5	$592.4	$659.4	$784.3	$822.3	$814.0	$869.5	$909.4
% Change	5.9%	4%	11.3%	18.9%	4.5%	-1%	6.8%	4.6%
Housing Affordability Index	28%	31%	32%	26%	19%	17%	16%	16%
30-Yr FRM	4.50%	3.90%	3.10%	3.00%	5.30%	6.80%	6.60%	5.90%

p = projected
f = forecast

* = % of households who can afford median-priced home

Source: www.car.org

Article was initially published on www.car.org.  You can find it by clicking here. 

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