California Home Prices Stay Elevated Amid Rising Rates

Categories: Business NewsFinanceNewsReal Estate & Properties

An aerial view of Californian homes, reflecting the state's unique housing market.

News Summary

Despite increasing mortgage rates and dwindling buyer demand, home prices in California remain high. A report shows that cities like San Francisco and Los Angeles continue to dominate as some of the most expensive markets, even as inventory levels rise and closed sales decline. This complex market situation points towards potential pricing corrections as more buyers think about purchasing amid changing dynamics. Experts suggest a cautious optimism for homebuyers navigating these challenges.

California – Home prices in California continue to remain elevated despite rising mortgage rates and decreasing buyer demand. As of June 18, 2025, the average rate for a 30-year fixed mortgage has climbed to 6.81%, substantially increasing the cost of monthly mortgage payments for potential buyers. This development comes as home prices across the U.S. remain inflated, revealing significant regional variations, especially within California’s housing market.

A recent analysis by Stacker, using data from Zillow, highlights the cities in California with the highest home prices as of May 2025. Notably, the San Francisco-Oakland-Berkeley area tops the list with 11 cities featured among the top 30 most expensive homes in the state. Following this, the Los Angeles-Long Beach-Anaheim area includes 7 cities, while San Jose-Sunnyvale-Santa Clara also has 7 cities on the list. Other notable areas include San Diego-Chula Vista-Carlsbad, which includes 2 cities, and Santa Maria-Santa Barbara with another 2 cities, as well as a single city from Salinas.

Analyzing typical home values reveals a stark situation for potential homebuyers. For instance, in Salinas, the typical home value stands at $2,765,501, reflecting a 1-year price increase of 5.2% and a 5-year change of 16.8%. In comparison, homes in the San Francisco-Oakland-Berkeley area have an average value of $2,817,172, showing a yearly decline of 1.6% but a substantial 5-year growth of 53.9%. In San Jose-Sunnyvale-Santa Clara, the typical home value is $2,856,850, with a 2.5% increase over the past year and a 22.2% increase over five years.

Other areas have also seen substantial prices, with Los Angeles-Long Beach-Anaheim reporting an average of $2,922,590 (down 3.3% year-over-year) and San Diego-Chula Vista-Carlsbad registered at $3,626,306 (up 4.1% over the last year). Santa Maria-Santa Barbara city reported a typical home value of $3,012,525 with minimal year-to-year change at 0.1% but a notable 30.8% rise over five years.

The market dynamics indicate a significant increase in unsold home inventory, raising upward pressure on prices. May 2025 marked a year-over-year decline in closed sales of 4.0% compared to May 2024. A total of about 254,190 homes were sold statewide in California for May 2025, down from 267,710 in April. Furthermore, the median home price in California for May sat at $900,170, reflecting a 1.1% decrease from April and a 0.9% decline compared to the previous year—the first decrease observed in 17 months—leading to concerns about potential downturns in the housing market.

Experts foresee pricing corrections due to the increased inventory levels and changing buyer demand as more individuals perceive this might be an opportune time to buy, given the growing inventory. This sentiment has been reflected in recent reports from the California Association of Realtors, indicating a cautious optimism in the market as homebuyers navigate the complexities of elevated prices and rising mortgage rates.