California home sales remained mostly flat during the first half of 2025, signaling continued uncertainty in the state’s housing market. A modest month-over-month gain in June failed to offset the broader slowdown in buyer activity, largely influenced by rising mortgage rates and persistent affordability challenges.
Small Gain Fails to Shift Overall Trend
California home sales rose by 4% in June compared to May, according to newly released statewide figures. Despite the month-over-month improvement, year-over-year sales dropped by 0.3%. It marks the third consecutive annual decline and the first time since late 2023 that sales have fallen year-over-year for three months in a row.
So far in 2025, year-to-date home sales are slightly up by 0.2% compared to the same period in 2024. However, analysts warn that this marginal lead may not hold if demand continues to weaken through the summer.
Pending sales—a leading indicator of future closed transactions—paint a more concerning picture. June marked the seventh consecutive month of declining pending sales, with the steepest year-over-year drop seen since January.
Rising Rates Continue to Weigh on Demand
One of the biggest factors dampening buyer activity is the steady increase in mortgage interest rates. As borrowing costs climb, monthly mortgage payments rise, limiting affordability for many households and discouraging first-time buyers from entering the market.
The California Association of Realtors (CAR) has previously noted that even minor rate hikes can have an outsized impact in a high-priced market like California. With median home prices already above national levels, the pressure from rate volatility is being felt most acutely in regions where housing supply remains constrained and incomes have not kept pace.
This trend has been observed across Southern California, including areas like El Monte, South El Monte, Baldwin Park, and Rosemead, where residents are balancing stagnant wages with rising living costs. Softening demand could offer some temporary relief on pricing, but it also signals broader economic caution as buyers adopt a wait-and-see approach.
Local Implications for Buyers and Sellers
In the San Gabriel Valley, real estate professionals report fewer bidding wars and longer time-on-market for listings, particularly in mid-range and entry-level homes. “Buyers are more hesitant, and some are simply priced out,” said one agent serving the Mid Valley region. “Even with stable inventory, rate sensitivity is making it difficult to close deals.”
For sellers, the implications are equally significant. Properties that might have moved quickly in past years are now seeing extended listing periods or require price adjustments to attract offers. The balance has shifted toward a more neutral market, where neither buyers nor sellers hold a clear advantage.
Prospective homeowners considering a purchase this summer may want to track interest rates closely and evaluate whether current pricing offsets potential borrowing costs. Online mortgage rate calculators and home affordability tools, such as those available through California Housing Finance Agency and NerdWallet, can provide useful starting points for financial planning.
Outlook for the Rest of 2025
Unless interest rates stabilize or decline, July and August are expected to continue the cooling trend. Market activity could lag behind last year’s pace, reversing the modest lead seen in the first half of 2025. The outcome will depend on several variables: Federal Reserve rate decisions, regional economic performance, and any policy efforts to stimulate housing access.
State officials and economists will be watching closely as California enters the second half of the year. With affordability still a central issue, and demand likely to remain soft, stakeholders across the housing industry will need to adapt to a slower, more cautious market climate.
For residents and real estate watchers in the Mid Valley, the story remains one of watchful waiting. California home sales may not be falling off a cliff, but they are far from soaring.
