California’s housing market is expected to show modest growth over the next two years as lower mortgage rates and an improving affordability outlook bring stability to the state’s real estate sector.
According to the latest projections, statewide sales of existing single-family homes will remain nearly unchanged in 2025, dipping just 0.1 percent to reach 269,020. In 2026, sales are expected to rise to 274,430, an annual increase of 2 percent.
Lower Rates to Support Buyers
The 30-year fixed-rate mortgage, which has remained a major factor in affordability, is forecasted to ease slightly in 2025 to 6.6 percent and decline more noticeably to 6 percent in 2026. Industry analysts point to this shift as a key factor in opening the market to more buyers.
With interest rates softening and overall affordability showing small improvements, demand is expected to gain traction. Economists note that while the pace of growth will be slow, a healthier lending environment will help stabilize the market for both buyers and sellers.
Prices Expected to Edge Up
Despite recent declines in home prices, the statewide median is projected to rise modestly. California’s median price is expected to increase by 1 percent to $873,880 in 2025, reaching a new high of $905,000 in 2026.
The gains come as the state’s economy is anticipated to remain resilient. Projections assume no recession or only a very mild downturn in 2026, conditions that would allow for gradual appreciation in home values across most regions.
Housing Supply to Improve
A brighter outlook also extends to housing supply. By 2026, active listings are expected to improve by nearly 10 percent compared to recent years, reaching levels close to those seen before the pandemic. This increase in available homes should provide buyers with more options and ease some of the competition seen in past cycles.
Local Implications
For families in the San Gabriel Valley, including El Monte, Rosemead, and surrounding communities, these trends may offer cautious optimism. More stable pricing and increased inventory could provide opportunities for first-time buyers who have struggled with affordability in recent years. At the same time, sellers may benefit from modest price appreciation and steady demand.
The housing market remains closely tied to interest rate movements and the overall health of the economy. But with indicators pointing toward gradual improvement, California’s real estate sector is poised for a slow but steady recovery.
More information on the forecast is available through the California Association of Realtors.
