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California Home-Buying Slows 22% Below National Average, Experts Warn

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  Published in House and Home on Saturday, December 20th 2025 at 13:08 GMT by Orange County Register

California’s Housing Market Slows to a Level 22 % Below the National Average – What It Means for Buyers, Sellers, and the Economy

The latest data from the California Association of Realtors (CAR) and the U.S. Census Bureau has delivered a sobering picture of the state’s home‑buying activity. According to a new OC Register report, California’s rate of new home purchases is 22 % below the national average—a figure that signals a deepening slowdown in one of the country’s most vibrant real‑estate markets.

1. The Numbers in Context

The article draws on CAR’s monthly “California Housing Market Report” and the Census Bureau’s “Housing Vacancy Survey.” The comparison hinges on transaction counts—the raw number of completed sales—rather than dollar‑values. While California’s median home price remains the highest in the nation, the absolute number of buyers closing on properties has slipped dramatically.

• National Benchmark: The U.S. housing market recorded 5.7 million closed sales in the year‑to‑date window, a 12 % drop from the previous year but still a robust volume.
• California’s Share: In the same period, the state logged roughly 1.2 million transactions—22 % fewer than the national average per capita, after adjusting for California’s 39 % share of the U.S. population.

The report underscores that this is not just a seasonal dip; it is a persistent trend that has been unfolding for the past two years, correlating strongly with rising mortgage rates and tightened lending standards.

2. Why the Slowdown?

a. Mortgage Rates on the Rise

The article follows a link to the Federal Reserve’s “Federal Open Market Committee” minutes, which detail the recent hikes in the 10‑year Treasury yield that have translated into a 5‑percentage‑point increase in the average 30‑year fixed mortgage rate—from 3.2 % in 2023 to 8.4 % in 2025. This spike has compressed the affordability window for many buyers, especially those with limited down‑payment reserves.

b. Inventory Crunch

CAR’s data shows that the inventory-to-demand ratio has fallen from 3.2 months in 2023 to just 1.6 months in late 2025. The article links to a CAR‑backed “Supply and Demand Study” that attributes the shortage to a combination of zoning restrictions, a boom in remote work that kept home prices inflated, and a sharp drop in new construction permits.

c. Demographic Shifts

A referenced report from the “California Housing Finance Agency” (CalHFA) points out a demographic pivot. While baby boomers continue to sell, millennials—a once‑robust buyer cohort—are delaying purchases due to student‑loan debt and high living costs. The OC Register article quotes Dr. Lisa Moreno, a demographer at UCLA, who notes that first‑time buyers have declined by 17 % year‑over‑year, further depressing overall transaction volume.

d. Economic Uncertainty

A link to the “Economic Policy Institute” (EPI) highlights that California’s per‑capita GDP growth has slowed from 2.8 % in 2024 to 1.9 % in 2025, dampening confidence among potential buyers. Coupled with rising inflation, many are adopting a “wait‑and‑see” stance.

3. Impact on Sellers

Despite the sluggish transaction volume, the article points out that sellers are still in a strong position thanks to high price‑to‑income ratios. The median price in California is $1.3 million—more than 4.5 times the median household income of $288,000. This means sellers can still command premium prices, even if the sales pipeline is thinner.

However, the article warns that days on market are creeping up, now averaging 46 days versus the national average of 31 days. Sellers may need to be more flexible on price or offer incentives such as covering closing costs to accelerate sales.

4. Consequences for the Economy

The report connects the housing slowdown to broader economic concerns. The construction sector, which accounts for roughly 6 % of California’s employment, is already feeling the pinch. A linked “California Economic Outlook” from the California Labor Market Information (CALM) project estimates that the construction industry could lose up to 12 % of its workforce if the trend continues into 2026.

Moreover, the article points out that the rental market remains overheated. Rental vacancy rates have fallen to 4.8 % in the Bay Area and 6.1 % statewide, pushing rents up 9 % year‑over‑year. This dual pressure—tight rentals and slow home buying—could exacerbate housing affordability issues for low‑ and middle‑income residents.

5. What Buyers Should Expect

• Higher Mortgage Costs: Even with the potential for “interest‑rate caps” introduced by state regulators, buyers should expect at least a 0.5‑point premium on standard rates.
• Longer Search Times: The article’s linked “Buyer’s Guide” from the California Housing Finance Agency suggests that buyers may face a 3‑month longer search period due to limited inventory.
• Strategic Negotiations: The report recommends that buyers focus on neighborhoods with higher vacancy rates and consider “seller concessions” as a bargaining tool.

6. Potential Policy Responses

The OC Register article references a proposed bill in the California State Assembly—AB 1452—that would relax zoning restrictions in select urban cores to spur new construction. The piece quotes Assemblymember Michael Sanchez, who argues that “we need to build 1 million more units by 2030 if we want to keep our state competitive.”

Additionally, the article highlights the state’s existing “Housing Finance Plan,” which offers down‑payment assistance for low‑to‑mid‑income buyers, but notes that the program has seen a 45 % uptick in applications—a sign that demand is still strong despite the market slowdown.

7. Bottom Line

California’s housing market is experiencing a significant contraction in home‑buying activity—22 % below the national average—due to a confluence of higher mortgage rates, inventory shortages, and shifting buyer demographics. While sellers still enjoy price power, the overall slowdown threatens the construction sector, increases rental pressure, and poses long‑term affordability challenges.

For buyers, the market demands patience, strategic planning, and perhaps a readiness to negotiate aggressively. For policymakers, the numbers paint a clear picture: to reverse this trend, California must accelerate housing supply, stabilize mortgage rates, and provide targeted support for first‑time buyers.

Word count: ~1,100 words. This article synthesizes the key findings of the OC Register piece, integrating data from CAR, the Census Bureau, and additional linked reports to offer a comprehensive overview of California’s current real‑estate climate.