California Housing Market Predictions for 2024-2025

Overall, the California real estate market is robust, with high property values supported by an active job market, as well as perks like fantastic year-round climate, exceptional parks and beaches, and excellent education rate. For newly married couples, growing families, retirees, and professionals of all ages, the state is a desirable location.

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The acceleration in interest rates has caused the California housing market to start exhibiting characteristics of a market shift as of June 2024. California's home sales and prices decreased in June as the housing market slowed. And as the market continued to decline, housing demand dropped to levels unseen in the previous two years and its worst decline since May 2020. According to the California Association of Realtors®, the state's median home price dropped by 4.0% to $863,790in June—a decline compared to the announced record-high of $900,170 set in May.

The median price in June increased by 5.4% from $819,630 in June of the prior year. The high-end market started to slow down in June, which led to a change in the mix of sales that contributed to the reduced median house price. Home sales across the state so far this year were down 10.9 percent in June.

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California's overall supply prospects improved once again in June, as seen by the state's unsold inventory index (UII) reaching its highest level in two years. Additionally, active listings in June increased month over month by 28.8% from May, reaching their highest level since November 2019.

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Factors Influencing Housing Market Value Growth in California 2024

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Whether you’re looking to invest in a new home in California or sell your current one, it's essential to understand some of the key factors that influence the value of the housing market. Here are 8 factors to consider:

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1. Demographics

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Recent years have seen a sharp rise in national home costs, driven primarily by demographics. Gender, family structure, occupation, income, age, and immigration trends are some of the factors influencing California's housing market value in 2024—while socioeconomic status isa major factor.More people are in the pursuit of better lifestyle quality, making significant investments in the suburban regions—and in turn, increasing the demands for real estate assets.

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Essentially, this type of demographic shift serves as an illustration of the fundamental economic equation: increased demand plus a constrained or inelastic supply equals higher home market value.

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2. Interest rates

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Interest rates also have a major impact on 2024 California’s Housing Market Value Growth. It has been shown that an increase in the interest rate also increases the cost to obtain a mortgage, which slows demand and home price growth—a case that has become evident during the market shift as of June 2024.

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3. The overall economy

The health of California's economy as a whole has an impact on property values. Economic metrics like the GDP, employment statistics, manufacturing activity, retail pricing, and so on, are typically used to measure this. The state boasts the greatest economy with several cities contributing to the entire nation’s current economic standing.

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4. Government policies and/or subsidies

Friendly government policiesare another element that can have a significantinfluence on property demand and prices. Of course, for as long as tax credits, deductions and subsidies are in place, the government can promote and stimulate California’s real estate value and attract more foreign investors.

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5. Property location

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The biggest demand and highest prices are due to convenience and accessibility to urban centers, employment opportunities, and amenities. Beyond merely the beautiful beaches and ocean-view neighborhoods, San Diego, Los Angeles, San Jose, Sacramento, and San Francisco are all driving the rise in housing market value.

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6. Investors

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Investors’ bull rush into the housing market is another factor influencing housing market value growth in California 2024. The more the potential it presents (such as expected rental income and capital growththrough a resale) to external investors the more California’s real estate industry blooms.

7. Inspection report

One of the influencing factors of housing market value growth is the inspection report. Homes that are more recent with close to none typically appraise for more price value. Many buyers in California will pay top dollar for a home with an outstanding inspection report.

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8. Comparable properties

Comparable properties focus on the recent sale prices of comparable homes in a specific neighborhood. "Comps" is a common term used to describe these comparable residences. Most California real estate specialists will use comps to assess your property's value, whether it's through a house appraisal, a comparative market analysis performed by an agent, or an Opendoor review.

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9. Appraisal Value

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The value of a home is determined by a licensed appraiser's professional assessment.  If the appraised home value is significantly higher than the agreed-upon market value, the lender will need to return to the negotiating table or amend the mortgage to reflect the appraised value in order to avoid lending more money than can be retrieved as collateral.

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California Market Competitiveness in 2024-2025

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June 2024 C.A.R. sales and price report. Image via California Association of Realtors

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As one of the hottest markets in the country for the past few years, the California housing market continues to be in a league of its own. According to the California Association of Realtors (C.A.R.)report for California housing market predictions 2024 with data through the end of June, the number of existing home sales has declined while prices of homes have been on the rise (often by double digits) compared to a year ago.

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Existing-home sales

California Association of Realtors report reveals that unit sales in June amounted to 344,970 single-family homes—an 8.4% monthly decrease from 376,560 in May and a whopping 20.9% decrease from a year ago when the annualized sales of housing reached 436,020.

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California median home price

All major regions’ median prices registered year-over-year increases. The Central Coast comes on top with a rise of 10.1%, followed by the Central Valley at 10.0%, and 8.4% for Southern California. With the market expected to shift in the second half of the year, a mid-year C.A.R forecast update indicates that the statewide median home price is expected to rise 9.7% to $863,390 in 2024, representing a solid gain from 2021 yearly median home price of $786,750.

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California housing supply

Due to a lack of inventory, California is still a seller's market, and property prices have risen to an all-time high. The statewide unsold inventory index (UII) increased to its highest level in two years, at 2.5 months, in June, signaling a further improvement in the state's overall supply position. A combination of increased supply and less competition contributed to the index’s improvement. The increase in total active listings in June was 64.4%, which was the highest year-over-year rise in at least the previous 89 months.

California Housing Market Forecast for 2024 – 2025

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Based on the Zillow Home Value Index, California home values have increased by nearly 157.8% over the past ten years. The current typical home value of homes in California is $799,311 (an 18.5% increase over the past year) according to the ZHVI calculation, which is an adjusted measure of the anticipated home values for a specific region and month.

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Real estate predictions 2024 California show that the state is currently a seller's market, which indicates that supply is outpacing demand, giving sellers the upper hand during cost negotiations. The scarcity of listings means demand remains robust—which essentially has driven home prices up by a double-digit growth rate.

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Following a housing and economic projection published by the California Association of Realtors®, supply limitations and rising home prices will drive California home sales to decline slightly in 2024, but transactions will still reach their second-highest level in the previous five years. Based on the current statewide housing market shift, The C.A.R. revised California housing market predictions 2024 projects the number of existing single-family home sales to reach 380,630 units in 2024, a decrease from 416,810 units projected last October.

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The median home price in California is projected to increase by 9.7% to $863,390 in 2024. Prices will continue to climb due to imbalances in supply and demand, but increased mortgage rates and a partial change in the sales mix will likely slow the surge in prices. Increased remote working is expected to contribute to cost control and further help minimize an increase in the statewide median price in 2024. With a median sales price of $1,265,000, Orange County has Southern California's most expensive real estate market.

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Home values in the Bay Area (San Francisco-Oakland-Hayward Metro) have increased by 18.5% in the last year, and according to Zillow Home Value Index (ZHVI) bay area housing market predictions, the increase will continue by another 7% by May 2024.

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As stated in Zillow's most recent estimates for the Los Angeles housing market predictions, home values in the metro area will see a 5.3% by June 2024. Home prices in this area are expected to increase by double digits over the next 12 months due to the disparity between supply and demand.

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Best Growing Cities to Invest in Housing Market in California in 2024-2025

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Best cities in California to build your dream home are as following.

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Los Angeles housing market 2024

Comparatively speaking Los Angeles' housing market is in better shape than other Californian cities. In May 2024, the median sale price in Los Angeles increased by 13.5% over the previous year to $1,050,000.

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The average time a house sits on the market before being purchased is 30 days, down from 37 days the year before. May 2024 saw a decrease in home sales from 2,2,699 in May 2021 to 2,197.Given the supply-demand imbalance,the Los Angeles housing market predictions by Zillow assume a 5.3% rise in home value by June 2024.

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San Diego housing market 2024

The housing market in San Diego resembles that of Los Angeles in many ways. San Diego's median sale price increased by 20.5% from the previous year to $916,000. Homes in San Diego are selling quickly; in May 2024, they were on the market for only 10 days.

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The number of homes sold in the San Diego real estate market decreased by 15.9%, from 1,544 in May 2021 to 1,298 in May 2024. Currently, home prices are at their highest peak—and as stated in an article by Norada Real Estate Investments titled “San Diego Housing Market Forecast 2024: Will Prices Drop?” San Diego housing market predictions based on the Zillow Home Value Index assume a 10.3% rise in prices by May 2024.

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San Jose housing market 2024

As of May 2024, the median sale price in San Jose was $1.4 million. From 920 available homes in May 2021 to 761 available homes in May 2024, the housing supply decreased by 17.3%. From last year’s 10 days to the current 9 days, the average number of days on market also shows a decrease.

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San Francisco Housing Market 2024

Due to San Francisco's trend of increasing home prices, the median home price is $1.5 million in 2024, up 4.1% from the previous year. The average number of days decreased from 18 in May 2021 to 16 in May 2024 in San Francisco, indicating that higher prices cause homes to sell a little more slowly in San Francisco than in other California cities.

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The priciest neighborhoods in San Francisco, based on information provided by Apartmentlist data, are Pacific Heights (average rent $3,799), Mission Bay (average rent $3,708), and Northern Waterfront (average rent $3,606).

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According to forecasts for the San Francisco housing market, over the course of the next year, property values could rise by as much as 8.6% due to a lack of available inventory and rising property demand.

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Sacramento Housing Market 2024

According to an article by Norada Real Estate Investments titled “Sacramento Real Estate Market: Prices | Trends | Forecast 2024,” Sacramento housing market predictions indicate that home prices will continue to rise this year. The Sacramento metro area is listed as the 48th top 100 housing market in the country by Realtor.com for the year 2024. The median list price of a home in Sacramento County in June 2024 was $549,900, with a 14.5% annual growth trend. With 1,310 sales in June, down 24% from 1,723 sales in June of last year.

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Common FAQ About California Housing Market 2024-2025

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When will home prices drop in California?

In California, housing prices fell from May to June for the first time in 14 years. The state is not yet in a buyer's market but is instead in what is described as "a slight seller's market." According to The Orange County Register, the Southern California housing market had a similar downturn, with prices and sales dropping from May to June and declining year-over-year price gains.

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The fall season often sees a dip in sales growth, but this year's decline is much more apparent. Except for the luxury property market, where sales are increasing, pending sales have been declining by double digits since June. According to C.A.R data, sales of homes costing $2 million and higher decreased 17.9% statewide between May and June, while the percentage of million-dollar home sales plummeted 8.3%. Prices will continue to decline in the coming months as the market continues to normalize.

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Will home prices rise, fall, or stay steady in 2024?

An article by Los Angeles Times suggests that the possibility of home price declines is becoming more apparent as the slowdown deepens throughout much of the state. The thriving state of California's housing market is anticipated to experience a reduction in median home prices in the coming month going into 2024. A moderate recession with a drop in home prices is likely to happen, suggests Jordan Levine, chief economist of the C.A.R. The rate increase this year will likely carry over into this decline as well.

June 2024 Housing Sentiment. Image via California Association of Realtors

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Is it a good time to buy a home in California?

Approximately 16% of people in July, based on C.A.R.'s monthly Consumer Housing Sentiment Index, believe that it is a good time to build a home, while the other 84% believe the opposite. The overall housing index increased by 3% from June to 59. Only 43% of consumers believe that it will be simpler to find a property to purchase over the next 12 months due to steadily growing prices and borrowing rates. 57% of respondents (5% more than the previous month) stated it won't be any easier to find their ideal home.

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