Share this article!

The California Association of Realtors (CAR) is predicting an increase in home sales and prices during 2025 as more buyers and sellers return to the market thanks to lower interest rates and improved housing supply.

CAR forecasts the sale of existing single-family homes to total 304,400 units in 2025, a 10.5% increase from the 275,400 unites projected for this week. The state’s median home price is forecast to soar by 4.6% to $909,400 next year, lower than the projected 6.8% to $869,500 for this year. Housing affordability is expected to remain stable at 16% next year after slipping to a projected 16% in 2024 from 17% in 2023.

“An increase in homes for sale, along with lower borrowing costs, is expected to entice more buyers and sellers to enter the market in 2025,” said CAR President Melanie Barker, a Yosemite realtor. “Demand will grow as we start the year with the lowest interest rates in more than two years, particularly for first-time buyers. Meanwhile, would-be home sellers, held back by the “lock-in effect,” will have more flexibility to pursue a home that better suits their needs as mortgage rates continue to decline.”

“Although inventory is expected to loosen as rates ease, demand will also increase with lower mortgage rates and limited housing supply, which will push home prices higher next year,” added CAR Senior Vice President and Chief Economist Jordan Levine. “Price growth is expected to be slower, but the housing shortage will keep the market competitive outside of big economic shocks, so prices will still rise. Assuming a healthy economy in 2025 that slows but doesn’t shrink, home prices should rise modestly across California, with the state’s median price climbing 4.6% to reach $909,400 in 2025.”