Are We Finally Seeing a Balanced Market?
For years, sellers have held the upper hand in California’s housing market, with low inventory and high demand creating fierce competition among buyers. But as inventory levels rise, we’re seeing early signs of a market shift in many areas.
So, is the market finally balancing out? And does this mean buyers now have more leverage? Let’s take a closer look at what’s happening and what it means for buyers and sellers heading into 2025.
Inventory levels are improving but still below historical norms. The National Association of Realtors (NAR) reported a 3.5-month supply in January 2025—higher than previous years but short of the 5-6 months needed for a balanced market.
Meanwhile, home prices keep climbing, with NAR forecasting a 2% increase in median prices for both 2025 and 2026.
Buyer’s Market vs. Seller’s Market: Who Has the Advantage?
The balance of power in real estate depends on housing supply versus buyer demand:
Seller’s Market: When demand exceeds supply, sellers have the upper hand. Home prices rise, multiple offers are common, and properties sell quickly—often above asking price.
Buyer’s Market: When supply exceeds demand, buyers gain leverage. Sellers may need to offer concessions, negotiate more aggressively, or lower prices to close a deal.
With more homes hitting the market, buyers may soon see more options and negotiating power than they have in recent years.
Mortgage Rate Trends: How They’re Impacting Buyer Demand
“Despite volatility in the markets, the 30-year fixed-rate mortgage remained essentially flat from last week,” said Sam Khater, Chief Economist at Freddie Mac. “Mortgage rates continue to be relatively low versus the last few months, and homebuyers have responded. Purchase applications are up 5% compared to a year ago. The combination of modestly lower mortgage rates and improving inventory is a positive sign for homebuyers in this critical spring homebuying season.”
Current Mortgage Rates (as of March 13, 2025):
30-Year Fixed-Rate Mortgage (FRM): 6.65% (slightly up from 6.63% last week, but lower than 6.74% a year ago).
15-Year Fixed-Rate Mortgage (FRM): 5.80% (slightly up from 5.79% last week, but down from 6.16% a year ago).
With rates stabilizing and more homes becoming available, 2025 could bring fresh opportunities for buyers who’ve been waiting on the sidelines.
Where Buyers Have More Leverage in 2025
While many parts of California remain seller-friendly, certain areas are shifting toward a more balanced market.
As Lance Lambert, Co-Founder of ResiClub, explains:
“Among the nation’s 200 largest metro area housing markets, 41 markets ended January 2025 with more active homes for sale than they had in pre-pandemic January 2019. These are the places where homebuyers will be able to find the most leverage or market balance in 2025.”
California’s Hottest Housing Markets in 2025
San Francisco & San Jose: Still among the most competitive markets due to high demand and limited inventory.
Los Angeles, San Diego & Riverside: Strong seller’s markets, but with inventory slowly increasing.
Northeast & Southern California: ResiClub reports these areas are still tight, giving sellers an edge in negotiations.
2025 California Housing Market Forecast: What’s Ahead?
The California Association of REALTORS (C.A.R.) projects a 10.5% increase in single-family home sales next year, reaching 304,400 units in 2025—up from an estimated 275,400 in 2024.
Meanwhile, home prices are expected to keep rising:
2025 Median Home Price Projection: $909,400 (4.6% increase from 2024).
2024 Median Home Price Projection: $869,500 (6.8% increase from 2023).
2023 Median Home Price: $814,000.
A persistent housing shortage will keep prices climbing, despite more homes entering the market.
Will More Homes Hit the Market?
Housing supply is expected to increase moderately in 2025, but don’t expect a major surge. As interest rates decline over the next 18 months, the lock-in effect will ease, prompting more homeowners and investors to sell.
“Although inventory is expected to loosen as rates ease, demand will also increase with lower mortgage rates and limited housing supply, which will push home prices higher next year,” said C.A.R. Chief Economist Jordan Levine.
Assuming a healthy economy, he forecasts a 4.6% rise in California’s median home price, with market competition remaining strong unless a major economic shift occurs.
Signs the Housing Market Is Moving Toward A Balanced Market
While the market hasn’t fully balanced, several key indicators suggest a gradual shift:
Rising Inventory: The National Association of Realtors (NAR) reported a 3.5-month supply in January 2025—an improvement but still below the 5-6 months needed for balance.
Slower Price Growth: Home prices are still rising, but at a slower pace, with experts predicting 3% or less growth in 2025. Zillow notes 25% of listings had price cuts in June, the highest rate since 2018.
Homes Taking Longer to Sell: The median days on market has increased to 16 days, following seasonal trends.
More New Construction: New home inventory is at its highest level since 2008, easing supply constraints.
Declining Pending Sales: Fewer homes under contract signal a cooling market.
In the Los Angeles market, well-positioned homes are selling quickly, with some even receiving multiple offers. The recent fires have also increased demand for housing, keeping the market strong and robust.
If you’re considering buying, now is a good time to negotiate while interest rates remain elevated. A potential recession is on the horizon, and historically, interest rates tend to decrease during economic downturns. However, when that happens, buyers with capital will flood the market, leading to bidding wars once again.
If buying is in your plans, don’t overthink it—consult a knowledgeable agent who can streamline the process and help you secure the right property.
Why You Need a Skilled Agent in This Market
Do you know how to adjust your strategy based on who holds the negotiating power? A seasoned real estate agent does.
Navigating a seller’s or buyer’s market requires smart tactics, and that’s where working with a local real estate expert makes all the difference. I understand this market inside and out—where supply and demand stand, which strategies work, and how to help my clients win in any market.
With the right agent by your side, market shifts won’t hold you back—you’ll stay ahead.