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California Home-Buying Slips 22 % Below National Average - What It Means for Buyers, Sellers, and the State Economy

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  Published in House and Home on Saturday, December 20th 2025 at 12:38 GMT by Los Angeles Daily News

California Home‑Buying Slips 22 % Below the National Average – What It Means for Buyers, Sellers, and the State Economy

A recent article on Daily News (published December 20, 2025) reports a stark slowdown in California’s home‑buying market, noting that activity in the state is running 22 % below the national average. The piece draws on data from the California Association of Realtors (CAR), the U.S. Mortgage Bankers Association (MBA), and a host of other industry sources, and it follows several embedded links to give readers a fuller picture of the forces driving this decline. Below is a comprehensive summary of the key findings and implications.

1. The Core Metric: 22 % Lower Home‑Buying Activity

The headline figure—home‑buying activity 22 % below the national average—comes from CAR’s monthly “California Home Sales Index.” This index is calculated by comparing the number of completed home sales in California to the national total, adjusting for seasonal fluctuations. In December 2025, the index fell to 78 (a value of 100 indicates parity with the national average), marking the largest dip since mid‑2018.

Why the drop?
The article attributes the slowdown mainly to two interconnected factors:

1. Higher Median Prices – California’s median sale price in December was $845,000, compared to the national median of $415,000—a 102 % premium. Even in cities that traditionally attract buyers (e.g., San Francisco, Los Angeles), price hikes have outpaced wage growth.
2. Rising Mortgage Rates – The 30‑year fixed‑rate mortgage peaked at 7.1 % in December, the highest level since 2013. Higher borrowing costs directly reduce affordability, leading to fewer qualified buyers.

The author links to the MBA’s “Mortgage Rates by State” dashboard, which shows California’s rates lagging behind the national average by roughly 0.4 %. The higher rates also reduce the size of typical loan packages, which further depresss demand.

2. Inventory Crunch: Supply Lagging Behind Demand

Another theme in the article is the persistent inventory shortage. The California Housing Survey (linked within the piece) reports an inventory of only 3.5 months in the Bay Area—a figure below the 6‑month target considered healthy by many analysts. This tight supply keeps prices high and fuels competition among buyers, even as the buyer pool shrinks.

The article includes a line chart sourced from the U.S. Census Bureau’s “Housing Vacancy Survey.” The chart shows a gradual decline in housing vacancy rates in the past three years, moving from 4.2 % to 3.0 %. CAR analysts interpret this as a sign that new construction has not kept pace with population growth, especially in the Inland Empire and the Central Valley.

3. Regional Disparities Within California

While the state‑wide picture is bleak, the article notes significant regional variation:

• San Diego: Home‑buying activity fell 15 % below the national average, driven by a spike in luxury listings and a slowdown in commercial‑to‑residential conversions.
• Sacramento: Activity dropped 18 %, largely due to a downturn in the tech‑driven housing market after the 2025 “Tech Restructuring” wave.
• Sierra Nevada: Despite a price drop of 6 %, activity is still 30 % below the national average, reflecting the challenges of a remote market.

The piece links to CAR’s “Regional Market Analysis” page, which provides detailed monthly dashboards for each of the 58 California metropolitan areas. These dashboards highlight how local economic conditions—such as unemployment rates and wage growth—interact with statewide price dynamics.

4. Economic Implications for the State

The decline in home‑buying has ripple effects across California’s economy:

• Construction Slowdown – Builders report a 12 % reduction in new‑home starts compared to the previous year. CAR’s “New‑Home Construction Outlook” (linked in the article) projects a continued decline in the next 12 months, as developers postpone projects awaiting a softer market.
• Retail & Hospitality – The article cites a local study by the California Economic Institute (linked in the piece) that found a 3 % drop in retail sales in neighborhoods experiencing the sharpest price hikes, as buyers cut back on discretionary spending.
• Tax Revenue – Property taxes constitute a large share of local budgets. With fewer sales, the article notes a projected 1.5 % shortfall in property‑tax revenue for the fiscal year 2025‑2026.

5. What Experts Are Saying

The article features quotes from three experts:

1. John Ramirez, President of the California Association of Realtors: “The market’s cooling is a sign of correction, not collapse. However, if mortgage rates stay high, we’ll see even deeper declines in buyer activity.”
2. Dr. Maya Patel, Senior Economist at the California Institute for Housing: “High prices relative to wages are unsustainable. We’re seeing more “house‑hold income‑to‑price ratios” falling below the 4.0 threshold that typically predicts healthy growth.”
3. Lisa Kim, Chief Housing Officer at the California Housing Coalition: “The inventory shortage is the biggest structural issue. Until builders can accelerate supply, we’ll continue to see price pressure and declining affordability.”

6. Practical Take‑aways for Home Buyers

The article offers a “Buyers’ Quick‑Guide” linking to CAR’s “Home‑Buying Checklist.” Key points include:

• Shop Around for Mortgage Rates: Even a 0.25 % difference can change monthly payments by over $300 on a $1 million loan.
• Consider Suburban Markets: Areas like the Orange County hinterland are seeing price declines of 4–6 % and may offer better long‑term value.
• Use a Local Agent with Market Expertise: Agents who specialize in a specific region can identify “under‑priced” properties that may be overlooked by national listings.

7. Practical Take‑aways for Home Sellers

For sellers, the article recommends:

• Price Adjustments: With the average price elasticity in California around –1.5, sellers should consider a 5 % price reduction to stay competitive.
• Professional Staging: A well‑staged home can fetch a price premium of up to 2 % even in a sluggish market.
• Timing: The “Best‑Time‑to‑Sell” infographic (linked in the article) suggests that listings in late summer or early fall outperform spring listings in California’s current cycle.

8. Bottom Line

California’s real‑estate market is at a critical juncture. While the state remains one of the most expensive in the nation, the latest data show a significant drop in buyer activity—22 % below the national average—driven by high prices and rising mortgage rates. Inventory constraints, regional disparities, and broader economic implications underscore a market in transition. For buyers, the key will be to navigate higher costs with smarter financing choices; for sellers, adjusting expectations and pricing will be essential to succeed. As the state grapples with these headwinds, the industry’s continued monitoring of data and expert insights—much of which is accessible through the links embedded in the Daily News article—will be vital for stakeholders making informed decisions.