Thinking about investing in California real estate in 2025?
Now might be a good time to take a closer look. After a few challenging years marked by low sales and high prices, California’s housing market is starting to show signs of recovery. Recent data from the California Association of Realtors (C.A.R.) and other sources point to rising sales activity, more stable prices, and a gradual improvement in inventory.
In this blog, we break down the latest statewide trends, highlight what’s happening in the Bay Area and Southern California, and explore key stats and ongoing affordability issues, especially for rental property investors, landlords, and HOA managers.
California’s housing market entered 2025 with a rebound in buyer activity and transactions. Sales volumes have picked up from the lows of 2022 and 2023, thanks in part to slightly lower mortgage rates and a modest increase in the number of homes for sale.
Meanwhile, home prices remain high but are growing at a more moderate pace than in previous years.
Core statewide trends include:
In February 2025, sales of existing single-family homes (seasonally adjusted annual rate) reached 283,540, the highest in over two years. This was up 11.6% from January and 2.6% higher than February 2024, signaling a year-over-year increase after a sluggish 2023.
By March 2025, sales eased slightly to 277,030 (a 2.3% month-over-month decrease) but remained 4.9% above the March 2024 levels. Year-to-date home sales through the first quarter were up about 1.9% compared to the prior year.
California’s median home price has been relatively stable with modest gains. February 2025 saw a median of $829,060, a slight 1.2% dip from January (due to a seasonal slowdown) but 2.8% higher than the same time a year earlier. In March 2025, the median price jumped to $884,350, up 6.7% month-over-month as the spring buying season began, and 3.5% higher than in March 2024.
Overall, prices are rising by mid-single digits annually – a far cry from the double-digit surges of 2021, but still on the rise. C.A.R. attributes this to persistent housing supply shortages and market competition.
The supply of homes for sale has grown from last year’s extreme lows. The Unsold Inventory Index (time to sell current supply) was 4 months in February 2025, up from 2.9 months the previous year, as more listings hit the market. Total active listings in February grew at the fastest pace in two years, marking the 13th consecutive month of annual supply gains. Even so, inventory remains below long-term norms—good news for sellers and property owners, as competition among buyers continues to support prices.
Mortgage interest rates, which had spiked above 7% in 2022 and 2023, stabilized in the mid-6% range by early 2025. The average 30-year fixed rate was about 6.8% in February 2025, roughly flat from a year earlier, but below the late-2023 peaks. These still-elevated rates continue to dampen affordability, yet the slight easing from recent highs has enticed some buyers back. C.A.R.’s forecast expects rates to gradually trend down toward the high 5% range by the end of 2025, which could further unlock demand.
However, the broader economic conditions are mixed. Job growth in California is forecast to slow to 1.1% in 2025, and unemployment is expected to rise to around 5.6%, but GDP and inflation are expected to improve.
“The moderation in mortgage rates that began at the start of the year, coupled with a noticeable increase in homes for sale, provided a much-needed boost to California’s housing market in February,” said C.A.R. Chief Economist Jordan Levine, adding that “the housing market is likely to see continued improvement through the second and third quarters of 2025.”
After several years of population decline, California’s population saw a modest rebound in 2024, growing by about 232,000 people (to 39.43 million), according to the U.S. Census Bureau. This growth, driven by resurgent international migration even as some residents continue to move out of state, may bolster housing demand in 2025.
Nevertheless, the state still faces a long-term housing shortage due to underbuilding. New construction, while ongoing, is not yet enough to fully alleviate the supply-demand imbalance that keeps vacancies low and prices high.
What does this mean for property owners? The 2025 outlook is cautiously optimistic. Sales activity is rising, which supports property values and signals improving market confidence. Price growth remains steady, helping avoid the risks of a volatile boom-bust cycle. While competition for new acquisitions may persist, strong rental demand is expected to continue as many buyers remain priced out.
In the next section, we’ll take a closer look at home sales trends and regional market trends.
By the numbers, California’s housing market is climbing out of a deep slump in transactions. 2023 marked a multi-decade low in home sales, but 2024 saw a slight improvement, and 2025 is on track for further gains. Below is a snapshot of key home sales statistics:
C.A.R. reports that approximately 269,030 existing single-family homes were sold in California in 2024, marking a 4.3% increase compared to 2023. This reflects California’s first annual sales gain in three years, signaling a modest rebound from 2023’s historically low sales level.
In the first quarter of 2025, seasonally adjusted sales averaged around 271,000 units (SAAR), which is about 2% higher than in the same period last year.
Notably, February 2025’s annualized sales rate of 283,540 was the strongest monthly pace since late 2022, before retreating slightly in March. This indicates momentum is building compared to the very slow start of 2024.
California’s statewide median price for an existing single-family home was $838,850 in January 2025 and $884,350 by March 2025. This is up from about $789,000 a year prior in Jan 2024, according to car.org.
In percentage terms, the median price in March 2025 was 3.5% higher than in March 2024. For comparison, the median declined slightly in 2023, so prices have risen again in 2024 and 2025 (but at single-digit rates). C.A.R.’s 2025 forecast expects the median to reach approximately $909,400 (a 4.6% increase) for the entire year.
California home prices overall have held near record highs. The current statewide median of around $850,000 to $880,000 is not far from the all-time high, which was briefly reached at around $900,000 in 2022.
The slight cooling and mix shifts in 2023–24 prevented any severe price correction. California home values remain roughly 2.5 times the U.S. median (the median U.S. home value is about $ 404,000 as of early 2025), reflecting the state’s perennial cost premium.
The state average masks huge regional variations. For example, in March 2025, the median price ranged from around $480,000 in the Central Valley to $1.06 million on the Central Coast. Furthermore, coastal metro areas tend to be $800k and above. Such disparities influence where buyers and renters migrate, as some regions offer relatively better value.
Inventory, while improving, is still relatively tight. Active listings were up substantially year-over-year in early 2025 (February’s listings growth was the highest in two years), giving buyers a bit more choice. The Unsold Inventory Index stood at 4.0 months in February and 2.8 months in March 2025 (by calculation) – up from around 3 months a year ago, but still below a balanced 5–6 months’ supply.
New listings have also increased; January 2025 saw the fastest year-over-year (YOY) growth in new listings in nearly four years, as some homeowners realized that ultra-low 3% pandemic mortgage rates wouldn’t return and decided to sell into the current market. More listing activity is a positive sign for market health.
Homes are taking longer to sell compared to the frenzied 2021 market! The median days on market for a California home was 26 days in February 2025, up from 22 days the previous year, indicating that things are moving at a more normal (and less frantic) pace.
Similarly, the sales-price-to-list-price ratio is about 99.9% on average, just a hair under 100%, suggesting most homes still fetch their asking price but with slightly more negotiation room than before. These metrics indicate that while demand exists, buyers are not overbidding as aggressively as they were in the ultra-tight market of a couple of years ago.
California’s trends parallel the broader U.S. housing market to some extent. Nationally, existing-home sales in March 2025 were at a 4.02 million annual rate , down a few percent year-over-year as high mortgage rates curtailed activity. Inventory nationwide was also around 4.0 months. The U.S. median home price was $403,700 in March 2025, which is slightly lower than a year ago, whereas California’s median home price is up year-over-year.
This hints towards how California’s market, while cooling, has remained more resilient in terms of pricing. It also highlights the affordability gap: even the national market, with a median of around $ 400,000, has seen sales volumes slump due to affordability concerns. So, California, with a median price of double that, faces an even bigger challenge.
For rental investors and property managers, market stability is returning. Higher sales provide clearer valuations, while price gains boost equity; however, they also increase acquisition costs. Inventory is improving, but affordability remains a barrier, keeping many renters in place. Mortgage rate shifts will be crucial; lower rates could spark buyer demand, while high rates may sustain rental strength.
Now, we’ll explore regional trends in the Bay Area and Southern California, two very different housing markets.
The San Francisco Bay Area remains one of the most expensive and unique housing markets in the country. In 2025, the Bay Area is experiencing a modest uptick in sales activity, but with relatively flat prices, a sign that affordability constraints and migration patterns are helping to balance the increased demand.
Here’s an overview of the Bay Area market:
Bay Area home sales are recovering from last year’s lows. In February 2025, the region posted a +3.5% year-over-year increase, the highest gain among major California markets. About 23% of Bay Area counties reported double-digit sales growth, signaling improving buyer confidence as prices stabilize and inventory rises. Even in January 2025, despite winter slowdowns, the Bay
Area logged a modest +0.2% YoY sales uptick. After sharp declines in 2022 and 2023, pent-up demand is finally surfacing, especially in more affordable parts of the region.
The Bay Area median home price hovered around $1.25 million in February 2025, down 0.5% from a year earlier. It was the only central region in California to post an annual price decline, although the drop was minimal. By March 2025, a surge in high-end sales was likely to have nudged the median price back up.
Overall, home prices have remained essentially flat over the past year, oscillating within a narrow range. Higher mortgage rates and buyer resistance to sky-high prices have effectively capped further rapid price growth.
A shift toward more affordable counties, such as Solano and Sonoma, is reshaping the Bay Area’s market dynamics. In early 2025, sales surged in these lower-cost regions while expensive markets like San Francisco and San Mateo saw slower growth. This “mix shift” toward mid-priced homes pulled the regional median price slightly downward. February 2025 marked the first year-over-year price drop in five months, driven by increased activity in the sub-$1 million range. Investors should note that demand is strongest for entry-level and mid-tier homes, where buyers still see value.
The Bay Area’s luxury home segment has been more subdued heading into 2025. Tech industry layoffs in 2022 and 2023, along with stock market uncertainty, initially dampened confidence among high-end buyers. However, by spring 2025, recovering stock prices and tech IPO activity are beginning to revive luxury demand.
Despite this, luxury buyers remain highly sensitive to mortgage rates of 6–7%, prompting many to rent upscale properties instead of buying. Median home prices in premium markets like San Francisco have stayed relatively flat, while Marin and San Mateo counties still posted modest price gains.
Housing supply in the Bay Area has improved slightly but remains very tight, especially in desirable neighborhoods. Some counties experienced sales declines in February 2025 due to limited inventory and disruptions from winter weather.
In markets like San Mateo and Santa Clara, inventory levels remain under two months, leading to frequent multiple-offer situations. Conversely, San Francisco’s condo and townhome inventory has grown, offering more options for buyers and renters. For single-family homes, low vacancy rates persist, keeping competition fierce among prospective renters.
Homeownership remains out of reach for many, with ownership rates lagging in high-cost urban areas. Rents have been rising again, especially in family-friendly suburbs. While elevated mortgage rates have tightened investor cash flow, long-term appreciation continues to drive interest. In some markets, investor activity leans more local, driven by individuals and family offices rather than large institutions.
For property managers, a growing share of renters in traditionally owner-occupied communities brings new challenges for governance and stability.
The Bay Area market in 2025 is stable and competitive, particularly in the mid-range. Prices are capped by affordability limits, with future gains depending on income growth or lower interest rates. Sales are improving but remain below historical highs.
For rental property owners, values are steady and demand is strong, as many buyers are still priced out of the market. However, shifts in the tech sector or stock market could quickly influence housing demand.
Affordability: Severely low.
Only 21% of Bay Area households can afford the median-priced home (using C.A.R.’s index for higher-income regions) – an implication drawn from the overall CA rate (15%). In elite enclaves like San Mateo County, the minimum income needed to qualify for a median home is over $500,000 ($2 million). The Bay Area’s affordability is the worst in California, which in turn is the worst in the nation.
Southern California’s housing market is vast and diverse, spanning coastal metros, inland suburbs, and everything in between.
In 2025, Southern California (SoCal) is experiencing solid price growth and steady sales, although it was somewhat dragged down by higher interest rates earlier in the year. Here’s what’s happening across SoCal:
Home sales across Southern California were flat to slightly up year-over-year in early 2025, following a steep downturn in 2022 and 2023. In January 2025, sales rose 1.8% year-over-year, but slipped 3.0% YoY in February, partly due to one fewer business day. By March 2025, sales are likely to rebound slightly, with statewide sales up +4.9% YoY.
Severe winter storms and wildfires briefly impacted sales, particularly in parts of Los Angeles County. Overall, SoCal’s large population and strong job base continue to fuel a gradual recovery from the previous downturn.
Southern California home prices are climbing at a steady rate, outpacing those in Northern California. The median home price reached $866,400 in February 2025, a 4.8% year-over-year increase. By March, it rose even further to about $905,790, reflecting strong seasonal demand. Compared to $827,000 in February 2024, this represents high-single-digit annual appreciation. Price increases are broad-based, fueled by constrained supply and steady buyer interest across all market segments.
Within SoCal, some areas are particularly popular. Let’s check them out!
Southern California’s inventory is improving, but it still trails demand. Active listings were up 9.3% year-over-year as of early 2025, and total inventory stood at about 4.0 months, compared to 3.2 months last year. Builders added new supply, especially in the Inland Empire, yet much of it was quickly absorbed by buyers. In prime areas like Los Angeles and Orange County, inventory stayed tight at around 2.5–3 months, keeping market conditions competitive. Limited inventory continues to favor landlords and property owners, as many renters remain priced out of ownership.
Southern California continues to attract a wide range of investors, from individual landlords to major institutional buyers. Single-family rentals in inland markets have been a particular focus, reducing the inventory available for homebuyers. This dynamic keeps first-time buyers competing against cash-rich investors, which strengthens rental demand.
Investor activity is helping to maintain property values and rental comparables at healthy levels. HOA managers should remain vigilant, as higher rental ratios in some communities can impact governance and compliance dynamics.
The regional economy in SoCal remains strong, led by growth in hospitality, tech, biotech, and international trade sectors. However, many homeowners are “locked in” with 3% mortgage rates, which reduces resale inventory, as few want to trade up to a loan with rates of 6–7%. This has encouraged a rise in remodeling and home additions rather than relocations.
For rental property managers, this means more tenants staying put longer and slower churn rates. High borrowing costs also extend the time renters need before becoming first-time buyers.
Southern California’s 2025 housing market is healthy but constrained. Sales volumes have stabilized, and home prices are posting steady gains, underpinned by strong demand and limited supply. For landlords and rental property owners, conditions are highly favorable, with rental demand remaining strong as many residents choose to stay renters longer. Rent growth is expected to continue, although rising property taxes and insurance costs may erode margins. Overall, the outlook remains positive for those who own or manage properties across the region.
Affordability: Better than the Bay Area but still tough – e.g., Los Angeles County’s affordability index ~20% (only 1 in 5 households can buy a median home) in 2024. The Inland Empire is slightly more affordable (~30% can afford the median), but that’s relative. Many middle-class families in SoCal continue to rent due to high prices.
Housing affordability remains California’s most significant real estate challenge in 2025. Despite the recent cooling in home price inflation, the combination of high prices and higher interest rates has pushed affordability to historically low levels. This has vast implications for the rental market and property management, as more people are forced to rent longer.
Housing affordability in California reached a critical low in 2025. According to C.A.R.’s Housing Affordability Index, only 15% of households could afford to purchase a median-priced home of about $874,290 as of Q4 2024. This ties the record low first set in 2023 and marks a sharp decline from over 56% affordability a decade ago.
In practical terms, 85% of Californians are now priced out of homeownership at current rates and prices. This deep affordability gap is reshaping the state’s housing dynamics, fueling long-term renting.
The income needed to buy a median-priced home in California is approximately $222,000 per year, assuming a 20% down payment and a 6.8% interest rate on a mortgage. Meanwhile, the median household income in the state is only around $80,000, far below the qualifying threshold.
Affordability challenges vary slightly by region but remain grim across the board. In Q4 2024, the San Francisco Bay Area had an affordability index of around 21%, with San Mateo County even lower at 12%. In Southern California, affordability was worst in Orange County (9%) and slightly better in the Inland Empire (20%).
Even relatively affordable areas like Sacramento and Fresno had an affordability rate of around 30%. California’s overall homeownership rate dropped to 55.5%, well below the national average of 65.6%, confirming a growing majority-renter trend statewide.
Rental affordability, while slightly better than ownership, remains a significant burden for Californians. The median rent for a two-bedroom apartment statewide is approximately $2,500. Cities like Los Angeles and San Diego see rent increases of 5–10% year-over-year. Over half of renters spend more than 30% of their income on housing, creating significant financial stress.
Many workers, particularly those earning the minimum wage, must work 70 hours or more a week just to afford basic rental costs. This intense competition for rental units continues to drive up rents, especially in job-dense metropolitan areas.
For property owners and landlords, California’s affordability crisis presents both opportunities and challenges. A locked-in renter population ensures low vacancy rates and consistent demand for well-maintained rental properties. Many renters, particularly young professionals and families, will continue renting well into their 30s and beyond. This environment supports potential rent growth, but landlords must navigate increasingly strict rent control measures, such as AB 1482. Providing quality, well-located rentals remains a smart long-term strategy as the divide between renters and owners deepens.
The worsening affordability issue has prompted California lawmakers to take action, though progress is slow. Initiatives like SB 9 (allowing duplexes on single-family lots) and incentives for Accessory Dwelling Units (ADUs) aim to increase housing supply. Expanded down payment assistance programs are also under discussion to help first-time buyers.
On the rental side, expect more tenant protections, stricter rent control proposals, and evolving local ordinances. For property managers and investors, staying updated on regulatory changes is essential in this rapidly shifting landscape.
Now, the question arises: Will affordability improve in 2025? Possibly, but only slightly. If mortgage rates fall to around 5.5–6% and home price growth remains modest, the Housing Affordability Index (HAI) may rise to around 20%. Still, that’s historically low. Real relief would require a major drop in prices or significant income growth, both of which seem unlikely in the short term.
Policymakers are focused on boosting supply, but progress will take time.
California’s affordability crisis keeps demand for renters high.
California’s housing market is gradually recovering in 2025, with modest sales growth, stable price gains, and improving inventory. While the Bay Area remains expensive and slow-moving, Southern California is seeing stronger demand. Still, affordability challenges continue to limit homeownership and sustain high demand for rentals.
For rental property investors, landlords, and HOA managers, this means the pressure to provide well-managed, high-value rental housing remains strong. As more Californians rent for the long term, your role in creating stable, attractive living environments is more critical than ever. Staying proactive and efficient is key, and that’s where ManageCasa comes in.
As California’s affordability crisis deepens and more households turn to long-term renting, the pressure on property managers and landlords to operate efficiently has never been greater. ManageCasa is built for this moment, a cloud-based platform that helps rental property owners and HOA managers navigate today’s demands with ease.
With tools tailored for California’s evolving rental market, ManageCasa simplifies the day-to-day, from seamless rent collection and tenant screening to centralized maintenance management and custom reporting. Whether you’re managing a few units or entire communities, our platform helps you make smarter decisions and provides stronger tenant experiences.
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