Southern California Real Estate Market Analysis: Current Prices and 2025 Predictions
The housing market in Southern California is experiencing a nuanced picture of stability and growth amid ongoing challenges in 2025.
**Home Prices:**
The median home price in Southern California stood at approximately £888,000 in May 2025, marking a slight increase of around 0.9% year-over-year, but a decrease of 1.1% from April 2025[1]. For the broader California market, median home prices are expected to reach about £909,400 in 2025, indicating a moderate price growth of 4.6% compared to 2024[2][3].
**Home Sales:**
Southern California has seen a 7.6% decrease in home sales year-over-year as of May 2025, reflecting the ongoing impacts of higher mortgage rates[1]. However, the statewide forecast is more optimistic, with the California Association of Realtors projecting a 10.5% increase in existing single-family home sales, reaching about 304,400 units in 2025[2][3].
**Housing Supply:**
The inventory in Southern California stands at approximately 3.9 months of unsold homes, indicating a relatively tight but slowly improving supply compared to earlier periods of scarcity[1]. Across California, housing supply is increasing, with months of inventory rising from 2.6 months in March 2024 to about 3.5 months in early 2025, providing more options for buyers[4][5].
**Market Influencing Factors:**
Elevated mortgage rates remain a significant factor, with 30-year fixed rates hovering around 6.77% as of mid-2025, higher than the historically low levels of prior years, which depress affordability and slow sales[1]. Rates are expected to slightly decrease towards 6.0%-6.5% by the end of 2025 but remain elevated overall[1][3].
The "lock-in" effect is notable, where many homeowners are reluctant to sell due to having low-interest mortgages, thus limiting supply[3]. Economic uncertainty is dampening buyer confidence, while rising insurance costs in some areas also affect market dynamics[1].
Despite these headwinds, the market shows signs of resilience, with home prices holding relatively steady and inventory slowly growing, partly due to increased construction and migration patterns[4][5]. Rents are cooling in some tech-driven markets, easing pressure on renters and potentially influencing housing demand dynamics[5].
**Overall Outlook:**
Southern California's 2025 housing market is characterised by stable to modestly rising home prices, some recovery in sales volumes statewide, a gradual increase in housing supply, and persistent challenges from high mortgage rates and economic uncertainty impacting affordability and buyer behaviour. The overall outlook suggests cautious optimism with a market balancing between reservation and growth potential.
Additional data shows that total active listings in May rose nearly 50% year-over-year in California. The Southern California housing market continues to lean towards a seller's market, but with an Unsold Inventory Index (UII) of 3.8 months, it's becoming more balanced[6]. The UII in California was 3.8 months in May 2025, up from 3.5 months in April and 2.6 months in May 2024[7]. Home price appreciation is expected to slow further in 2025, with growth rates potentially declining to the 2-4% range[8].
[1] California Association of Realtors. (2025). May 2025 California Home Sales and Price Report. [online] Available at: https://www.car.org/download/marketdata/marketstats/singlefamilyresidential/res202505/res202505.pdf
[2] California Association of Realtors. (2025). 2025 California Housing Forecast. [online] Available at: https://www.car.org/news-research/housing-forecast/california-housing-forecast
[3] Freddie Mac. (2025). Primary Mortgage Market Survey® (PMMS®) Week Ending June 26, 2025. [online] Available at: https://www.freddiemac.com/pmms/weekly-survey-results
[4] National Association of Realtors. (2025). Existing-Home Sales Rise in April 2025. [online] Available at: https://www.nar.realtor/newsroom/existing-home-sales-rise-in-april-2025
[5] Zillow. (2025). Zillow 2025 Housing Market Outlook. [online] Available at: https://www.zillow.com/research/data/forecast/
[6] California Association of Realtors. (2025). California Housing Affordability Index. [online] Available at: https://www.car.org/news-research/housing-affordability
[7] California Association of Realtors. (2025). May 2025 California Home Sales and Price Report. [online] Available at: https://www.car.org/download/marketdata/marketstats/singlefamilyresidential/res202505/res202505.pdf
[8] National Association of Realtors. (2025). Quarterly Residential Market Composite Index. [online] Available at: https://www.nar.realtor/market-data/surveys/realtors-confidence-index/quarterly-residential-market-composite-index
- In 2025, Southern California's real estate investment market exhibits a moderately growing market, with a slight increase in median home prices.
- The mortgage market plays a significant role in the current housing market, as elevated mortgage rates impact affordability and sales volumes.
- The real-estate market in Southern California shows signs of balance, with an increase in unsold homes and a slow growth in housing supply.
- The overall outlook for the real-estate market in Southern California suggests cautious optimism, as it moves towards a more balanced market with growth potential, influenced by factors like mortgage rates, economic uncertainty, and construction.
