Supply Rises, Affordability Remains a Challenge
The California housing market in March 2025 demonstrated resilience amid ongoing economic uncertainty and fluctuating mortgage rates. Existing single-family home sales grew 4.9% year-over-year, reaching a seasonally adjusted annualized rate of 277,030. However, this figure marked a 2.3% decline from February and continued a 30-month sales streak below 300,000. Pending sales declined for the fourth consecutive month, signaling a potentially subdued spring homebuying season as buyer sentiment weakened due to concerns over mortgage rate volatility and the broader economic outlook.
Inventory improved significantly, with total active listings rising at the fastest pace since January 2023, reaching a six-month high and marking the 14th consecutive month of annual gains in housing supply. New active listings increased by double digits for the third straight month, as more sellers entered the market, possibly encouraged by the recent moderation in mortgage rates. This uptick in supply is expected to moderate price growth, as the statewide median home price in March rose only 3.5% year-over-year to $884,350, and 6.7% from February. While price increases persist, the pace has slowed, and some regions are seeing slight declines or stabilization.
Despite these shifts, affordability remains a significant challenge. California’s median home price is more than double the national median, and the affordability index remains low, with only about 16% of households able to afford a median-priced home. Elevated mortgage rates—expected to stay between 6% and 7% through 2025—continue to strain buyers, though a projected decline in rates later this year could provide some relief and stimulate demand.
On the construction front, single-family housing starts fell to an eight-month low in March, down 14.2% from February, particularly impacting the West region. Builders remain cautious due to high interest rates, rising material costs (exacerbated by tariffs), and ongoing labor shortages, which could further constrain new housing supply in the coming months.
Looking ahead, experts anticipate that improved inventory and a potential easing of mortgage rates may support a gradual rebound in sales and continued, though slower, price growth. However, persistent economic and policy uncertainties and affordability constraints are likely to keep the market competitive and prevent a rapid return to pre-pandemic activity levels.
Source: California Association of REALTORS®