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Will California Be More of a Buyer’s or Seller’s Market in 2025?
After several years of major change within the housing market, a lot of buyers are now wondering what things will be like in 2025. One of the most common questions: Will California be more of a buyer’s market or seller’s market in 2025?
The short answer: Most cities across the state will probably continue to favor sellers over buyers for the foreseeable future. That’s mainly due to an ongoing shortage of inventory within the real estate market.
Even so, inventory growth has made the market a bit more buyer-friendly in recent months, and that trend could continue into 2025 as well.
But we have to remember that California is a big state, with real estate conditions that vary from one city and region to the next. So a home buyer should do plenty of localized research before shopping for a house.
Definition of a Buyer’s and Seller’s Market
In 2025, California will probably continue to be a seller’s market, for the most part. But what does that mean, exactly?
What are the key differences between a buyer’s and seller’s market, and how do those conditions affect you when shopping for a home? Here’s what you need to know.
Buyer’s Market: When Supply Exceeds Demand
A buyer’s market occurs when there are plenty of homes available to purchase, but not enough qualified buyers to “absorb” them all. In other words, it’s when supply exceeds the demand.
Common features of a buyer’s market include:
- There are more homes for sale than there are buyers.
- Properties stay on the market longer before going under contract.
- Home prices in the area might flatline or drop due to weak demand.
- Sellers are more inclined to reduce their asking prices to make a deal.
- Sellers might offer concessions, such as paying the buyer’s closing costs.
- Sellers are more likely to accept buyer contingencies within the agreement.
- Buyers have more negotiating power regarding the price and other terms.
- Buyers can take more time for home inspections, price research, etc.
This type of real estate market allows buyers to slow down and catch their breath. It reduces the sense of urgency when house hunting, while increasing the chance of finding a suitable home.
Seller’s Market: When Demand Exceeds Supply
A seller’s market is basically the opposite of everything stated above. This scenario occurs when there are fewer properties listed for sale, but plenty of buyers ready to make a purchase. In other words, it’s when demand exceeds supply.
Common features of a seller’s market include:
- There are more buyers in the market than there are homes for sale.
- Properties go under contract quickly, often within a few days of being listed.
- Home prices in the area may rise due to strong demand.
- Sellers are less likely to lower their asking prices, due to multiple offers.
- They’re also less likely to accept contingencies, so buyers often waive them.
- Sellers have more negotiating power regarding the price and terms.
- Buyers need to act quickly, often skipping thorough inspections or research.
This type of real estate market increases the urgency among buyers. It accelerates the market and increases the competition level among buyers. It could also make it harder to find a home.
Neutral Territory: When Supply and Demand Are Balanced
The two descriptions above represent the polar opposites and extremes. There’s also a wide swath of middle ground and neutral territory in between.
In some cases, real estate supply and demand levels become more balanced. So the market doesn’t really favor one party over the other. There tends to be more negotiating room in this scenario, since the buyer and seller have equal leverage.
Which Direction Will California Lean in 2025?
Getting back to the question we started with: Will California be a buyer’s or seller’s market in 2025?
Most economists and housing analysts expect the real estate market to favor sellers over buyers next year, as it has for some time. The main reason for this? Tight supply conditions.
The good news for buyers is that inventory levels have risen over the past year. So in many cities across California, house hunters could have more properties to choose from in 2025.
But despite this growth trend, housing market inventory remains tight from a historical standpoint.
According to a 2025 housing market forecast from the California Association of REALTORS:
While supply in 2025 will remain below the norm by historical standards, active listings will increase slightly above 10% as market conditions and lending environment continue to improve.
Buyers might have an easier time finding a suitable property within their budgets next year, due to inventory gains. But overall, low supply levels will perpetuate the seller’s market conditions we’ve become accustomed to.
The bottom line: In 2025, the California real estate market could resemble what we’ve seen in 2024. But the competition among buyers could start to ease next year, especially if inventory growth continues.
How to Research Local Housing Conditions
The state of California covers more than 150,000 square miles and includes nearly 500 cities and towns. That’s a lot of individual real estate markets, and conditions can vary significantly from one to the next.
This underscores the importance of localized market research.
Before entering the market, California home buyers should research market trends in the area where they plan to buy. This will help you determine whether it’s more of a buyer’s or seller’s market.
Here are some of the metrics you can use to assess your local real estate scene:
1. Days on market
This is the average number of days homes spend on the market before going under contract, sometimes referred to as the “median DOM.” A higher number (slower sales) suggests a buyer’s market. A lower number of days indicates a faster market that favors the seller. You can find this information on various websites.
How it helps: Knowing the average days on market helps you assess the overall pace or speed of the market. You’ll then know how quickly you need to make an offer, when you find a home that you wish to buy.
2. Active real estate listings
This is the number of homes currently available for sale in a particular area. When the number of active listings rises steadily, it can lead to buyer’s market conditions. In contrast, when active listings drop significantly, it creates a more competitive market that favors sellers.
How it helps: Researching inventory levels will make you better prepared for the house hunting process. You’ll know if there’s a shortage of homes for sale in your area, or a surplus. You can then plan accordingly.
3. Sale-to-list price ratio
This refers to the ratio of the final sale price compared to the original asking price. It’s measured market-wide, across an entire city or metro area. A ratio close to 1 indicates a balanced market. A ratio significantly higher than 1 suggests a seller’s market, where people often pay more than the list price. A number well below 1 reflects buyer’s market conditions.
How it helps: This metric tells you if a lot of home buyers are offering more than the asking price (indicative of a seller’s market) or below it (indicative of a buyer’s market). Or maybe it’s more neutral.
Need a mortgage loan? Bridgepoint Funding has been helping California home buyers with their financing needs for nearly 20 years. Please contact us if you have mortgage-related questions or want to apply for a loan.
