California Real Estate Market: What to Expect in 2024 & 2025?

✏️ Editor’s Note: Realtor Associations, agents, and MLS’ have started implementing changes related to the NAR’s $418 million settlement. While home-sellers will likely save thousands in commission, compliance and litigation risks have significantly increased for sellers throughout the nation. Learn how NAR’s settlement affects home sellers.

The current median home sale price of $855,100 is stable and rising steadily at 7.4% YoY. Moreover, homes spend only 30 days on the market. This indicates that the California real estate market is pretty much competitive.

The average months of home supply are 3 months YoY. A market with fewer months of supply indicates a seller’s market. However, the number of homes sold dropped by 8.4% YoY in June. There were 24,244 homes sold in June 2024, down 26,459 homes sold in June 2023.

Such inactivity in the market is mainly due to the recent NAR settlement. People are anxious about the selling prices and agents’ compensation.

The NAR settlement has removed the buyers’ agent compensation, and many MLSs have followed the suit. It will probably reduce the home selling prices. As a result, buyers will have improved affordability and low mortgage rates. Here are some tips for you to sustain in the market:

• If You Are a Home Buyer: Homes for sale (95,663) are growing at 21.9%. Along with this, the expected drop in home prices can benefit you. The low interest rates at 5.20%-6.40% are now in buyers’ favor. Also, in case of low housing demand and prices, you can request for seller concessions.
• If You Are a Home Seller: You can lock in California’s current high home prices. The correction in the home prices is long overdue. In the wake of the NAR settlement, home prices may drop a little more. If you’re a seller, you can still make profits on home sale before prices potentially drop.

So, How Is the Real Estate Market in California?

Balanced!

The number of homes for sale increased by 21.9%  in June 2024 compared to the previous year. This is the 5th consecutive month the housing market has witnessed such growth. Other important facts are:

• Median Days on Market: The median days on the market for homes for sale are 30 days, up by 5 days YoY. This trend suggests a high demand in the California real estate market.
• Housing Inventory and Supply: There are 95,663 homes for sale in California, with an average supply of 3 months.
• Average Home Prices: The median home price in California is $855,100. But, it is expected to decrease due to a rise in inventory in the latter half of 2024. The sale-to-list price ratio is 101%, down by 0.29 pt YoY.
• Home Sales: As per June 2024 data, home sales decreased by 8.4% YoY! Only 24,244 homes were sold, compared to 26,459 last year.
• Average Rent Prices: Rental costs vary statewide. The median rent is $2,850, with a month-over-month change of -$100.

Why Is California a Seller’s Market Now?

California real estate market has balanced inventory of homes for sale. Besides this, a steady increase in median home prices, favors home sellers. Homes spend only 30 days on the market which depicts the competitive market.

Let’s look at some more facts:

• Fewer Days on the Market: Homes are spending only 30 days on the market before going under contract. This is visible in metro cities like Sunnyvale and Fremont where the average days on market is up to 10 days.
• Multiple Offers on Homes: Sunnyvale has got 94 and Fremont got 93 in Redfin’s Compete Score. It means the housing market in California is very competitive. It shows that many homes get multiple offers, some even sold without contingencies.
• High Sale-To-List Price: The average homes sell for about 5% above list price whereas hot homes sell for about 12% above list price. The average sale-to-list price ratio in Fremont is 104.6%.

• Homes Sell Above List Price: On average, 47.8% homes sell above list prices. However, in June, 24.2% of homes experienced price drops, compared to 21.2% last year. This trend indicates a gradual shift toward a buyer’s market.

California Housing Market Predictions 2024

Here are the predictions for California’s housing market in the remaining months of 2024 and 2025:

1. Number of Home Buyers Will Increase: As inventory grows and homes stay on the market, more home shoppers are expected to re-enter the market. The historically high interest rates averted buyers in 2023. But the easing inflation and stabilizing rates will bring back house hunters.
2. Home Prices Will Continue to Rise: Home prices rose steadily in the top metros across CA YoY, reaching $1.30M in June 2024. Cities like Tustin and Rancho Santa Margarita expect a surge in home prices by March 2025.
3. New Home Constructions Sales Will Increase: The state plans to build 2.5 million new homes by the end of 2030. California’s housing market’s high demand will be served with the new constructions.
4. iBuyers Will Continue to Make Lowball Offers: iBuyers like Opendoor and Offerpad, which once offered 104.1% of market value in 2021, now offer around 70%. Such lowball offers to sellers will increase opportunities for individual buyers.

Bonus Predictions: Buyer Broker Commissions Will Be Zero!

In a shocking turn of events, the NAR settlement has completely eliminated buyer agent fees from the MLS. Let’s understand its impact:

1. Buyer Agents Will Be Affected: With buyers now responsible for directly paying their agents, many may choose to find their homes on their own. This may very soon render buyer agents obsolete.
2. Seller Concession Will Increase: Without the obligation to pay buyer agent commissions, sellers might see increased requests for seller concessions and offline transactions. Additionally, builders are offering significant concessions to attract buyers, further influencing the market dynamics.
3. Builders Will Compete More: Home builders are persuading buyers to buy new construction homes with mortgage buydowns worth $30K!
4. Sellers May Offer Fees for Services: Sellers may offer at least 1%-2% fees to the buyer agents in order to sell their homes quickly. Increasing competition from builders may also cause sellers to pay extra fees to buyer agents.

Is the Housing Market in California Going to Crash?

A housing market crash in the Golden State is unlikely.

California boasts one of the nation’s most thriving economies. CA has 11th highest household income in U.S. which is $123,988. Some top cities in California are poised for home price growth.

In cities like Santa Ana and San Mateo, home prices grew at 18.1% YoY and 16.3% YoY. Los Angeles has the largest population and is the home to companies like Apple and eBay. With a population of around 3,820,914, it’s the fastest-growing city in California.

California’s job market is also vital. The unemployment rate is only at 5.2%, and its private sector added 197,400 jobs in the past 12 months. This affordability, combined with strong economy, makes a housing market crash in California unlikely.

2024: Is It a Buyers’ or Sellers’ Market Now?

California real estate market favors sellers in 2024. (And buyers, too!). The California real estate market is expected to lean more in favor of the buyers in the latter half of 2024.

Home prices are rising slowly, and the number of homes for sale has increased by 21.9% YoY. Buyers now have more choices. With mortgage rates around 6.40%, buyers also have more purchasing power.

Consequently, more homeowners are likely to list their homes on California MLS. The 6% increase in new active home listings in California has brought back home shoppers. So, whether you are looking for a condo in Fremont or a single-family primary home in Santa Ana, you will find your dream home in the coming months.

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Disclaimer: This article is for informational purposes only. It does not constitute an offer, solicitation of an offer, or any advice or recommendation. Houzeo doesn’t provide any legal or financial advice. The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Houzeo Corp., its affiliates, or its employees. However, the author does not make any representation or warranty, express or implied, as to the information’s accuracy or completeness, nor does the author recommend that the attached information serve as the basis of any investment decision.

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