After a four-year gap, the Federal Reserve suddenly made a significant interest rate cut, causing uncertainty and volatility in the entire housing market. As we enter 2025, what will be the trajectory of the hot California real estate market?
On September 25th, the California Association of Realtors (CAR) held its annual conference at the Long Beach Convention Center. Jordan Levine, Vice President and Chief Economist of CAR, told Epoch Times reporters that with lower interest rates and attractive housing inventory, California’s housing sales in 2025 are expected to increase, prices will continue to rise, and interest rates will continue to fall.
“The supply and demand dynamics are gradually becoming more normalized, although we won’t see prices skyrocketing as strongly as before (during the pandemic). But we do see sales and prices continuing to rise,” he said. “This kind of price increase is very normal.”
On September 18th, the Federal Reserve (Fed) announced a significant two-percentage-point interest rate cut, the first cut since March 2020, bringing a glimmer of hope to many who are watching the housing market.
Freddie Mac data shows that in the week ending on September 19th, the average rate for 30-year fixed-rate mortgages was 6.09%, and for 15-year fixed-rate mortgages, it was 5.15%.
CAR indicates that low interest rates are attracting both buyers and sellers back into the market, with California’s total single-family home sales expected to reach over 300,000 units in 2025, a 10.5% increase from the expected scenario in 2024.
The median housing price in California in 2025 is also expected to increase, with the median price projected to rise from $869,500 in 2024 to $909,400, an increase of approximately 4.6%. In 2023, the median home price in California was $814,000. The rising prices are also limiting affordability for homebuyers.
Housing inventory is expected to remain in short supply. Over the next 18 months, CAR predicts that interest rates will continue to drop, loosening the “lock-in effect,” leading homeowners delaying relocation and investors waiting for the market rebound to put their properties on the market. Therefore, active listings in California in 2025 are expected to increase moderately.
With a trend of declining mortgage rates, the question of “buy now or wait to buy” has become a concern for many. Levine told reporters that for those with immediate housing needs, the best time to buy a home is “the sooner, the better.”
“In my view, now is a good time to buy,” he said. “The competitiveness of the housing market isn’t as intense as it was four or five months ago, so regardless of whether the Fed will continue to cut interest rates, now is a good time to make a purchase.”
He further explained that California already has limited housing supply, and as more people enter the market to buy, prices will only continue to rise. “Buyers need to understand a key point – you may wait for a significant interest rate drop before buying, but at the same time, prices are expected to rise. When you consider both price and interest rate, you won’t actually save much money. In fact, the longer you wait, the more you might end up spending.”
Reflecting on over four years of the California housing market, Levine noted that since the pandemic, people have been waiting on the sidelines, expecting prices to drop once all economic shocks and policy changes settle, “However, during that time, (in some areas) prices have already risen by 20% to 30%.”
In his view, buying a home is a long-term game. “Looking at the fundamentals of California, we have grown from a population of around 20 million decades ago to nearly 40 million now, and we have always had a shortage of new housing. This means that in the long run, prices will only go in one direction.”
Ultimately, he advises consumers to consider their own needs and affordability when determining the “best time to buy a home.” This article is for general information purposes only and does not constitute any recommendation or solicitation. Epoch Times does not provide investment, tax, legal, financial planning, real estate planning, or other personal finance advice.