Start 2025 off with a 5.25% (6.245% APR) interest rate With sandy beaches, seemingly eternal sunshine, and many attractions nearby, Southern California is one of the best places to live in the U.S. To that end, the Southern California housing market has been white-hot for a long time now, leading to high home prices and a competitive landscape.
That said, in 2024, home prices grew over the year and only slightly dipped toward the end. So, what does that mean for 2025? Well, it might be tougher to buy a new home, provided that you can secure a high-enough mortgage loan. With these recent increases, the median sale price for homes in Southern California has now surpassed $900,000.
If you’re thinking about purchasing or selling a home in 2025, keep reading to discover valuable information that can empower your decision in the ever-evolving Southern California real estate market.
Trends from California's 2024 Real Estate Market
As with most housing markets across the United States, the California real estate market had something of a tumultuous 2023. However, that stabilized in 2024 and put housing prices on an upward trend for most of the year.
By the end of 2024, the median home price in Southern California was $937,000 in Los Angeles County. However, in the Inland Empire, housing prices were much lower, with a median price of $628,000 in Riverside County.
High-Interest Rates
The Federal Reserve began cutting interest rates as inflation came under control. As of Q4 2024, home buyers were paying in the high 6% to low 7% on a mortgage loan, with many experts expecting that to drop through the year to the mid-6% range.
These stubbornly dropping rates are preventing many buyers, especially first-time buyers, from entering the market. Even though a new homeowner can refinance their loan once rates go back down, the prospect of a higher monthly payment is enough to turn many people off.
Low Inventory
According to the California Association of Realtors, the number of homes sold in 2023 in Southern California was the lowest in 16 years. In 2024, that number improved, but was still low overall compared to years prior to 2023. The C.A.R. is predicting modest growth in 2025, with high housing prices due to low inventory and slow decreases in interest rates being the main reasons for the slow increase in sales.
Regional Shifts
After years of post-pandemic population decline, California's population began to grow again in 2024.
Areas that are seeing growth and increased home sales include Oxnard (outside of Ventura), Sacramento, Riverside/San Bernardino, and Bakersfield. Because major metropolitan areas like Los Angeles County and San Diego are too expensive, residents are moving further out to find more affordable housing.
The Future of California's Real Estate in 2025
So, what is the overall forecast for the Southern California housing market in 2025? According to the likes of Redfin and Norada Real Estate Investments, there are expectations for increased home sales. Home prices will likely increase due to higher competition and fewer houses available. Also, growth will focus more away from major cities to places like the Inland Empire to give buyers better odds of mortgage approval, according to the San Bernandino Sun.
When it comes to new inventory, areas like LA are already oversaturated, so it's hard to build new houses when there are already buildings and people everywhere. For that reason, the top two cities for new housing developments are Sacramento and Riverside/San Bernardino County, according to Norada Real Estate Investment. Since there's more open land in those areas, developers are taking advantage.
Overall, high prices and limited inventory are here to stay. For most California residents, the best option for affordable housing is the Inland Empire or Central Valley. Even smaller cities like Yucaipa and San Jacinto can be within reach.
Price Trends Analysis
So far, we've been discussing California real estate in somewhat abstract terms. If you're hoping to buy a house in the current Southern California housing market, you need hard data to make an informed decision. So, let's break down median prices and factors in multiple areas, including Los Angeles, Orange County, Riverside/San Bernardino, San Diego, and Ventura.
Los Angeles
- Median Home Price - $1.2M
- Median Price Per Sq. Ft. - $707
- Number of Homes Available - Roughly 17,000
- Price Variation - $1 to $195M
- Buyer's or Seller's Market - Neutral
Orange County
- Median Home Price - $1.3M
- Median Price Per Sq. Ft. - $709
- Number of Homes Available - Roughly 23,000
- Price Variation - $170,000 to $89M
- Buyer's or Seller's Market - Seller's
Riverside/San Bernardino
- Median Home Price - $714,000
- Median Price Per Sq. Ft. - $371
- Number of Homes Available - Roughly 3,300
- Price Variation - $1 to $18.1M
- Buyer's or Seller's Market - Seller's
San Diego
- Median Home Price - $950,000
- Median Price Per Sq. Ft. - $720
- Number of Homes Available - Roughly 4,800
- Price Variation - $315,000 to $38M
- Buyer's or Seller's Market - Seller's
Ventura
- Median Home Price - $909,000
- Median Price Per Sq. Ft. - $615
- Number of Homes Available - Roughly 700
- Price Variation - $84,000 to $28M
- Buyer's or Seller's Market - Seller's
California home prices are up across the board, but the most affordable place to live (out of these areas) is Riverside/San Bernardino.
Forecast and Market Stability
Whether you're planning on buying or selling a home in California in 2025, what can you expect in the months ahead? Based on the data and evidence we've reviewed so far, here's our breakdown of the forecast.
For Buyers
- Wait Until Interest Rates Go Down - As a home buyer in California, you have two things going against you—interest rates and high home prices. These two factors can contribute to a substantial monthly mortgage rate, so it doesn't make sense to pay up to seven percent interest. Instead, it may be better to wait for the Federal Reserve to lower rates so you can have a more affordable loan.
- Build Your Down Payment - Most buyers can't afford a 20% down payment, especially when median home prices are close to (or exceed) one million dollars. So, if you can put more money down than another prospective buyer, you may be able to secure a property more easily.
- Search for New Construction Homes - The primary advantage of buying a new home is that you usually don't have to haggle for the price or enter a bidding war. Developers sell their properties as-is, and they're move-in ready. As we mentioned, the Inland Empire is seeing the most new development, so you should try buying a new build home in Pomona or Riverside.
- Don't Be Afraid to Haggle - Just because the listed price is high doesn't mean you have to buy the house for that amount. For example, in Ventura, the median listing price is $909,000, but the median sale price is $820K. Similarly, in Los Angeles, the median listing price is $1.2M, with a median sale price of $1M.
- When In Doubt, Refinance - If you're ready to buy, and you find the perfect home, don't wait to purchase it. Because demand is so high, you may miss out on a golden opportunity. Remember that you can most likely refinance your mortgage loan once rates go down, helping you save money in the long run.
For Sellers
- Price High, Then Negotiate - Most homes in Southern California are listed for much more than they sell for. Typically, adding about 10 percent to the market price gives you a nice buffer in which to negotiate. If all goes well, you may be able to get more than you expected from the deal.
- Fix Minor Issues - While demand is high, buyers are more willing to close a deal if the house is move-in ready. So, if some minor repairs or renovations need to be done, you should take care of them before showing the property. In most cases, the money you'll make from the sale can help cover these expenses.
- Plan for After - With home prices so high, you may want to take advantage as quickly as possible. However, if you're just planning to use the money to buy another house in Southern California, you need to be prepared. Pay attention to how much equity you've built and whether it will be sufficient for a housing upgrade.
- Consider Commission Rates - Real estate agents typically charge three percent, and when you sell the house, that means a total of six percent of the sale price. If you want to avoid such high commission rates, you can list the property yourself. However, consider how much time and effort it may take to sell the property. In some cases, hiring an agent is worthwhile.
The Future of Southern California Real Estate
According to Norada Real Estate Investment, the Southern California housing market will likely stay the same for the foreseeable future. As long as demand exceeds supply, home prices will continue to rise, and certain areas will become virtually unaffordable for some home buyers, increasing migration into more affordable areas. Additionally, this trend may mean there will be more renters than ever, even as rental rates rise accordingly.
We can also expect to see more people moving outside of the coastal region in search of affordable housing. The Inland Empire and Central Valley will see higher growth and development than areas like Los Angeles or San Diego. That said, it's unlikely that the bigger cities will decrease their populations significantly. Instead, they will likely remain relatively stable while other cities and regions increase their numbers.
Hopefully, new construction will help narrow the gap between supply and demand, but it will likely take years or more than a decade for it to have a significant impact.
The Bottom Line of Southern California’s Housing Market
Living in Southern California is rewarding, but you need to know how to navigate the hurdles of the housing market. If you can qualify for a high enough mortgage, you should find the home of your dreams. However, you may need to move outside the greater LA area.
Looking for your dream home in Southern California? Here at Century Communities, we have new construction homes with exceptional amenities to fit your needs. Start your search for the perfect home today!
