California Real Estate Market Recap: Wrapping Up 2025 | The Carnahans

As 2025 draws to a close, California’s housing market is finishing the year on a cautiously optimistic note. Despite ongoing affordability challenges, the state continued to show remarkable adaptability, supported by steadier mortgage rates, gradual inventory growth, and shifting buyer behavior.

Mortgage Rates and Buyer Momentum

After two turbulent years of rate fluctuations, 2025 finally brought a welcome sense of predictability. The average 30-year fixed mortgage settled between 6.2% and 6.8%, allowing both buyers and sellers to plan with greater confidence. Many who stepped back during the pandemic recovery years decided 2025 was the right time to reengage.

Suburban markets and second-tier metros became the real story of the year. Places just beyond major job centers—like parts of the Inland Empire and Central Valley—saw strong activity as buyers sought affordability and space. Creative lending tools, including rate buydowns and hybrid products, helped more transactions move forward.

Housing Supply and Price Movement

While inventory improved slightly, California still operates in a low-supply environment compared to historical averages. Homeowners with ultra-low pandemic-era rates largely stayed put, contributing to the limited resale selection. However, new home construction—especially in expanding inland regions—helped ease some pressure.

Statewide, the median home price hovered near $820,000, reflecting stable values overall with mild appreciation in select counties like San Diego, Orange, and Santa Clara. Sellers who priced strategically and presented their homes well continued to attract serious buyers.

Upper-End and Investor Activity

The luxury real estate sector continued to outperform expectations. Buyers favored sustainable design, privacy, and smart technology, particularly in coastal enclaves such as Malibu, La Jolla, and Silicon Valley. Meanwhile, investors took advantage of strong rental demand, turning attention to multi-family and small commercial properties as long-term wealth strategies.

What’s Ahead for 2026

Heading into 2026, early projections suggest a market leaning toward balance and opportunity. Should inflation maintain its downward trend and rates dip slightly, buyer confidence is likely to accelerate. Limited housing stock will remain a key factor, but steady demand and continued migration within the state should sustain momentum.

In all, 2025 brought a period of stabilization and regained confidence to California’s real estate economy. Those who adapted early—whether through creative financing, smart marketing, or investment repositioning—are poised to thrive in the evolving market landscape.