At the end of 2025, California’s housing market started to stabilize. This happened after years of volatility, sharp price swings, and unpredictable mortgage rates. Modest gains in sales, slowing price growth, and growing inventory now suggest a path toward a healthier, sustainable market in 2026.
Year-end data from the California Association of Realtors showed home sales strengthened toward the close of the year, marking four consecutive months of gains on both a monthly and annual basis. Although the overall pace of growth remained muted, the trend pointed to a market that has regained some footing after a prolonged slowdown.
In December 2025, closed escrow sales of existing single-family homes reached a seasonally adjusted annualized rate of 288,200 units statewide. That figure edged up 0.3% from November and stood 2% higher than December 2024. When averaged across the year, California recorded 271,590 home sales, representing a 0.9% increase from 2024.
Pending sales, however, told a more cautious story. Reflecting seasonal patterns and continued sensitivity to mortgage rate fluctuations, pending transactions declined more than 21% from November and slipped slightly compared with the same period a year earlier. The divergence between closed and pending sales underscored a market still adjusting to affordability constraints and economic uncertainty.
“California wrapped up 2025 in a stronger position than many expected, with improvements in both sales activity and housing supply compared to the prior year,” said Tamara Suminski, the association’s 2026 president. “As mortgage rates ease and price growth moderates, buyers should find more opportunities in 2026, while sellers benefit from a market that remains fundamentally sound.”
Prices Cool as Inventory Builds
One of the most notable shifts in late 2025 was the softening of home prices. The statewide median price fell to $850,680 in December, the lowest level in 10 months and a modest decline from November. On an annual basis, prices posted their second year-over-year drop in three months, marking the steepest annual decrease since mid-2023.
Economists attribute the cooling prices to a combination of slower demand and elevated inventory, which has reduced bidding wars and eased upward pressure on values upward. While prices remain high by historical standards, the recent pullback has improved affordability at the margins, particularly for buyers who had been priced out during the peak years of the pandemic-era boom.
“Housing affordability showed incremental improvement toward the end of the year,” said Jordan Levine, senior vice president and chief economist for the trade group. “Lower borrowing costs and a broader selection of homes should help bring more buyers back into the market in 2026, supporting steady but sustainable growth rather than rapid acceleration.”
Uneven Performance Across Regions
As in previous years, housing conditions varied widely across California’s regions, reflecting differences in local economies, population trends, and housing supply.
The Far North region posted the strongest annual sales growth, with activity surging more than 23% compared with 2024. The Central Coast also recorded double-digit gains, with sales climbing nearly 13%. More moderate increases were seen in the Central Valley, the San Francisco Bay Area, and Southern California, where growth ranged from roughly 2% to 6%.
County-level data revealed even sharper contrasts. Of the 53 counties tracked, 39 reported year-over-year sales increases. Smaller, less-populated counties led the gains, including Plumas County, where sales more than doubled, as well as Mono and Lassen counties, which also posted significant increases. At the other end of the spectrum, Del Norte and Mariposa counties experienced the steepest declines, reflecting localized market challenges.
Price trends followed a similarly uneven pattern. Median prices rose in the Far North, Southern California, and the Central Coast, while the Central Valley experienced modest declines and the Bay Area remained essentially flat. On a county basis, Mono, Imperial, and Lassen counties recorded the strongest price appreciation, while Trinity, Glenn, and Siskiyou counties saw notable price drops.
Supply Continues to Expand
Housing supply remained a defining factor in California’s market dynamics. Active listings increased on a year-over-year basis for the 23rd consecutive month, though the pace of growth slowed toward the end of 2025. Analysts view this deceleration as a sign that inventory may be approaching a more stable level after a prolonged period of expansion.
The Unsold Inventory Index, which measures how long it would take to sell all available homes at the current sales pace, stood at 2.7 months in December. That figure was unchanged from a year earlier but represented a sharp improvement from November, when inventory levels were significantly higher. While still below the threshold typically associated with a balanced market, the index suggests conditions are no longer as tight as they were during the peak seller’s market.
Homes also took longer to sell. The median number of days on market increased to 36 in December, up from 31 days a year earlier. Meanwhile, the statewide sales-price-to-list-price ratio slipped to 97.9%, indicating that buyers have gained more negotiating power compared with recent years when homes routinely sold above asking price.
Mortgage Rates Offer Relief
Mortgage rates played a critical role in shaping buyer behavior throughout 2025, and their gradual decline late in the year provided a measure of relief. The average 30-year fixed-rate mortgage fell to 6.19% in December, down from 6.72% a year earlier. While still well above the ultra-low levels seen earlier in the decade, the decline helped ease monthly payments and improve purchasing power.
Industry observers note that even modest reductions in borrowing costs can have an outsized impact in high-priced markets like California, where small changes in interest rates significantly affect affordability.
Looking Ahead to 2026
Looking ahead to 2026, California’s housing market is set for steady, stable growth. A combination of softer prices, improved affordability, and stabilizing inventory is expected to support consistent sales, while easing mortgage rates could bring more buyers to the market.
At the same time, persistent challenges remain. Housing supply continues to lag long-term demand, affordability pressures remain acute in many regions, and economic uncertainty could temper buyer confidence. Still, the combination of improving fundamentals and more predictable market conditions has fueled cautious optimism among industry leaders.
Analysts anticipate a market that better aligns buyers’ and sellers’ expectations. It would be one defined by slower price growth, healthier inventory levels, and a more sustainable trajectory for California housing in the year ahead.
