Homebuyers and sellers across Southern California are feeling the effects of a shifting economic landscape, as the region’s once-blistering pace of home price appreciation cools. Data from the California Association of Realtors (CAR) indicates that while home values in Los Angeles, Orange, San Diego, and Riverside counties are still climbing year-over-year, the rate of increase has slowed markedly compared to the post-pandemic boom.
According to CAR’s March 2025 report, median single-family home prices in Southern California rose by an average of 3.4% from the same period last year—a noticeable decline from the 8.1% annual growth recorded in March 2024. This deceleration signals a potential turning point for a housing market that has been one of the nation’s most expensive and competitive for the past several years.
Interest Rates and Affordability Take Center Stage
A major contributor to the cooldown is the Federal Reserve’s prolonged high-interest rate policy. Despite a slight dip in mortgage rates earlier this year, average 30-year fixed-rate loans are still hovering around 6.7%, dampening affordability and sidelining many prospective buyers. In high-cost markets like Southern California, even a minor increase in interest rates can translate into hundreds of dollars in monthly mortgage payments.
“Affordability is the key pressure point right now,” said Oscar Wei, deputy chief economist at CAR. “We’ve reached a level where many would-be buyers are priced out unless rates drop or prices adjust.”
The National Association of Realtors’ Housing Affordability Index shows that California remains one of the least affordable states in the country, with only 15% of households able to purchase a median-priced home under current conditions. This has caused some sellers to pull listings, leading to a stagnant supply pipeline even as demand fluctuates.
Inventory Constraints Persist
Inventory remains tight across the region. The number of active listings in March was down 9.2% compared to the same month last year, despite higher prices and slower sales. Homeowners with low locked-in mortgage rates have little incentive to move, reducing the number of fresh listings hitting the market.
In Los Angeles County, the median home price rose just 2.8% year-over-year to $840,000. Orange County, traditionally one of the most expensive counties in the state, saw a 3.6% increase to a median price of $1.05 million. Meanwhile, more suburban and inland areas such as Riverside County saw slower gains of just 1.9%, reflecting broader affordability pressures.
“The market is in a state of tension,” said Selma Hepp, chief economist at CoreLogic. “Sellers don’t want to give up low rates, and buyers are waiting for a break—either in prices or interest rates. This standstill contributes to less price growth.”
Luxury Segment and Migration Trends
While the broader market shows signs of softening, the luxury segment in Southern California continues to post selective gains. Malibu, Beverly Hills, and coastal Orange County neighborhoods have seen high-end properties trading with fewer days on market and multiple bids—albeit at a slightly more restrained pace.
Migration patterns are also playing a role in reshaping demand. A continued outflow of residents to more affordable states like Texas, Arizona, and Nevada is being offset by inbound migration from international buyers and remote workers seeking lifestyle-focused housing. However, the net population loss continues to put downward pressure on demand for mid-tier homes.
Looking Ahead: Stabilization or Correction?
Analysts are divided on what lies ahead. Some foresee a gradual return to balanced conditions as the market absorbs the effects of monetary policy and consumer fatigue. Others warn of potential price corrections if economic uncertainty deepens or if unemployment rises.
For now, the market remains resilient but subdued. Transaction volume is down, but pricing has yet to retreat significantly, indicating that the region is in a period of recalibration rather than contraction.
“We’re not in a crash scenario,” said Wei. “What we’re seeing is a normalization—a step back from the unsustainable growth of 2021 and 2022.”
Sources: California Association of Realtors, CoreLogic, National Association of Realtors, CNBC, Los Angeles Times
