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California Real Estate Market Struggles, Sales at 21-Year Low

  //house-home.news-articles.net/content/2026/01/2 .. state-market-struggles-sales-at-21-year-low.html
  Published in House and Home on Saturday, January 24th 2026 at 11:56 GMT by Orange County Register
      Locale: UNITED STATES

Sacramento, CA - January 24, 2026 - California's real estate market continues to struggle, marking 2025 as the state's second-lowest year for home sales in over two decades. Data released today by the California Association of Realtors (CAR) paints a stark picture of a market grappling with persistently high mortgage rates, elevated home prices, and a cautious buyer sentiment.

Sales Plummet, Echoing Past Challenges

According to CAR's report, a total of 244,520 homes were sold in California during 2025. This figure represents a significant 23.5% decrease compared to the 318,430 homes sold in 2024. This downturn places 2025 alongside 2005 as one of the most challenging periods for California's real estate sector in the past 21 years.

"The impact of high mortgage rates and stubbornly high home prices continues to hold back the market," explains Jennifer Silver, President of the CAR. The challenges are multifaceted, stemming from a combination of economic factors impacting both affordability and buyer confidence.

Price Correction, But Still Prohibitively Expensive

While there's a glimmer of positive news regarding pricing, it's tempered by the overall market conditions. The median home price in California for 2025 stood at $863,910, a 2.5% decrease from the $885,700 recorded in 2024. While a price decrease is welcome, the median remains significantly above what many potential buyers can reasonably afford.

The primary culprit behind this continued struggle is the enduringly high mortgage rate environment. The average 30-year fixed mortgage rate remains above 7%, a substantial barrier for many aspiring homeowners. This elevated rate dramatically increases the overall cost of homeownership, pushing affordability out of reach for a large segment of the population.

Limited Inventory Compounds the Issue

The challenging rate environment is further exacerbated by a persistent shortage of available housing inventory. Although the number of homes on the market has seen some increase in recent months, it still lags considerably behind pre-pandemic levels. This scarcity fuels competition among buyers and contributes to the sustained high prices.

"We're observing a significant number of potential buyers who are choosing to remain on the sidelines, patiently waiting for mortgage rates to decline and for prices to soften further," Silver noted. This 'wait-and-see' approach is contributing to a prolonged market slowdown.

Expert Predictions: A 6% Threshold for Recovery

Economists remain cautious about predicting a swift turnaround for California's real estate market. Richard Carroll, Chief Economist at Zonda, believes a critical threshold for a meaningful recovery lies in mortgage rates dropping to at least 6%. "Until we see rates move significantly lower, a substantial rebound in sales is unlikely," Carroll stated.

Looking Ahead to 2026: Hope with Uncertainty

The CAR anticipates a gradual improvement in the California real estate market during 2026. Expectations are that declining mortgage rates and increasing inventory will eventually stimulate demand and boost sales volume. However, the timeline and pace of this recovery remain uncertain. The global economic climate, inflation trends, and the Federal Reserve's monetary policy will all play a crucial role in shaping the market's trajectory.

Impact on the Wider Economy

The ongoing slowdown in California's housing market has broader economic implications. The housing sector is a significant driver of economic activity, influencing industries such as construction, mortgage lending, and home furnishings. A protracted period of depressed sales could dampen overall economic growth and impact job creation within these related sectors. The situation highlights the interconnectedness of the housing market with the wider economy, and underscores the need for proactive measures to stimulate affordability and encourage homeownership across the state.