Executive Summary: California Real Estate at a Glance

The California housing market in mid‑2025 is a mix of slight price growth, low inventory, and steady buyer demand—but with affordability concerns still front and center. Here’s a quick summary of where things stand:

Key themes you’ll see in this report:

• Affordability is stretched, especially in metro areas.

• Inventory is climbing slowly, but still short of historic norms.

• State housing policy reforms are finally gaining traction, especially CEQA reform and zoning adjustments.

• New development opportunities are opening in suburban and inland zones.

Current California Housing Market Report 2025

Median Prices and Home Values

In June 2025, the statewide median home price reached $865,800, rising slightly by 1% year-over-year. While price growth has slowed, many areas remain unaffordable for average buyers.

Los Angeles County: ~$898,000
Bay Area: Over $1.3 million in many cities
Inland Empire: Stronger growth driven by lower entry prices

Price Segments: Entry-Level vs. Luxury

• Luxury homes above $2M are still selling fast, often to cash buyers.

• Starter homes under $700K are rare, especially in coastal regions.

• Middle-income buyers face tough competition and limited options.

For developers, this makes feasibility studies and land-use consulting more important than ever—especially when targeting infill or mixed-use sites.

Affordability Challenges and Financing Conditions

Income Requirements vs. Reality

In 2025, a household needs roughly $234,000 annually to afford the median California home. That’s more than double the state’s average household income, which sits around $96,300.

Affordable housing remains out of reach in most high-demand zip codes, forcing:

• Buyers into suburban or inland markets

• Renters to delay purchasing decisions

• Developers to pivot toward missing-middle housing

Mortgage Rates and Lock-In Effect

Mortgage rates are between 6.7% and 7.2%, depending on credit profile and loan structure. While rates are not rising sharply anymore, they’re high enough to discourage movement.

Many existing homeowners are staying put due to lower-rate loans from past years. This “lock-in” effect reduces housing turnover and:

• Shrinks available resale inventory

• Creates upward pressure on prices

• Pushes developers to focus on new housing supply

At JDJ, we advise clients to evaluate alternative lending zones, entitlement fast tracks, and underused lots to work around these market limitations.

Regional Market Insights Across California

Housing activity varies dramatically depending on location. Some areas are cooling, while others remain highly competitive. Understanding regional differences is key for land-use planning, feasibility studies, and investment strategy.

Bay Area and Silicon Valley

Prices remain among the highest in the nation, but growth has slowed in 2025. Tech-sector layoffs and remote work have changed demand patterns. Many buyers now seek homes outside San Francisco and San Jose.

• Median prices in San Mateo and Santa Clara counties are still well above $1.3 million

• Condos are rebounding faster than single-family homes due to affordability

• CEQA and zoning delays continue to affect large-scale developments

Los Angeles and Southern California

Southern California markets like Los Angeles, Orange County, and San Diego have seen a mix of stability and stress. While demand remains strong, wildfire risk and insurance costs are major issues.

• Insurance rates have doubled in some hillside areas

• New construction is shifting to ADUs and small-lot subdivisions

• Transit-adjacent development is picking up, especially near light rail lines

Inland Empire and Central Valley

The most active growth is happening inland, where homes remain more affordable.

• Areas like Riverside, Fresno, and Bakersfield are gaining both homebuyers and investors

• Land is cheaper and zoning processes are faster in many cities

• JDJ clients have seen strong ROI by targeting underutilized parcels for duplexes and multifamily units

Coastal vs. Inland Markets – A Comparison

California lawmakers have taken bold steps this year to address the housing shortage. These new laws directly impact how developers plan, build, and entitle property—making land-use expertise more essential than ever.

CEQA Streamlining Under SB 130 and AB 131

The California Environmental Quality Act (CEQA) has long slowed housing approvals. But new 2025 legislation has made it easier to build on certain infill and urban sites.

• SB 130 removes CEQA review for projects near transit zones that meet affordability requirements

• AB 131 fast-tracks environmental reviews for pre-zoned parcels in cities with housing shortages

• These bills benefit small-lot developments and medium-density housing—two areas where JDJ specializes

Zoning Reform and Density Allowances

• SB 684 allows streamlined parcel splits for up to 10 homes on one lot

• SB 1123 enables faster approvals for “missing middle” housing types like townhomes and fourplexes

• More cities are removing parking minimums near transit corridors

For developers, these reforms create opportunities—but only if they can navigate the entitlement and permitting maze. That’s where JDJ’s agency liaison and outreach services come in.

New Affordable Housing Incentives

California is now offering:

• Density bonuses for projects that include 15–25% affordable units

• Fast-track permits for 100% affordable housing

• ADU grant programs for owner-builders

These programs are changing the cost-benefit equation for many builders.

Key Market Drivers and Risks to Watch in 2025

Understanding what’s moving the market—beyond prices—is crucial for long-term planning. From climate pressures to economic shifts, here are the top trends shaping real estate in California this year.

Mortgage Rates and Buyer Behavior

Interest rates remain between 6.7% and 7.2%, keeping monthly payments high. This reduces affordability and shrinks the buyer pool, especially in urban cores.

• Many sellers are choosing to stay put

• Adjustable-rate and creative financing are on the rise

• Developers must adjust pricing expectations and product type

JDJ helps clients evaluate feasibility scenarios under various rate conditions before pulling the trigger on a project.

Tech Sector Influence and Remote Work

• Bay Area job cuts have slowed luxury demand

• Remote workers are migrating to smaller cities like Chico, Clovis, and Palm Springs

• Co-living and build-to-rent products are gaining traction

For landowners and builders, this means rethinking location and highest-and-best-use potential.

Climate, Insurance, and Risk Exposure

Wildfires, floods, and drought continue to reshape development strategy.

• Insurance is more expensive and harder to get in risk zones

• Rebuilding rules vary city to city

• JDJ provides early-stage guidance on land constraints, rebuild feasibility, and stakeholder outreach

What Is Driving California’s Housing Market in 2025?

The California housing market is never static—and in 2025, we’re seeing key forces shape everything from pricing to inventory.

Population Shifts and Migration Trends

People are still moving—just not where they used to.

• Out-migration from urban cores like San Francisco and Los Angeles continues, driven by cost of living and remote work flexibility.

• Inland areas like Riverside, Sacramento, and Bakersfield are seeing demand surge for affordable housing and development opportunities.

This shift is creating new pressure points—and new possibilities—for developers and investors.

Economic Indicators Affecting Demand

Several economic factors are influencing buying and building patterns:

• Interest rates: Hovering near 6.8% (down slightly from 2024), which slows investor flips but stabilizes long-term holds.

• Employment: California’s job growth remains steady, especially in healthcare, logistics, and green energy.

• Inflation: Eased somewhat, but construction costs remain elevated—impacting project feasibility.

Housing Legislation and CEQA Reform

State laws continue to reshape development paths. Key bills passed in 2024 and early 2025 include:

• SB 4 and AB 2011 expansions, now enabling more affordable housing near transit corridors.

• Streamlined CEQA exemptions for infill and mixed-use projects under AB 130 and SB 131.

These shifts make permit streamlining and land use strategy more critical than ever—areas JDJ Consulting Group specializes in.

Home Prices Across California: A 2025 Snapshot

Pricing varies dramatically by region. Here’s a clear breakdown:

Table – Median Home Prices by Region (Q2 2025)

Developers and investors are now targeting secondary markets due to affordability and easier entitlements.

Rental Prices vs. Ownership Costs

Renting is becoming more competitive—but not everywhere.

Lower-tier metros show better ownership value, which affects where developers seek land and multifamily opportunities.

Where Development Is Booming: High-Growth Cities in 2025

Some cities are poised for smart, long-term growth. These are the locations to watch—and build in.

Top Cities with Increased Building Permits

Based on permit approvals, here are 2025’s fast-moving cities:

• Riverside – Strong demand for single-family and ADUs.

• Stockton – Infill opportunities backed by SB 6 incentives.

• Elk Grove – Attracting new subdivisions due to infrastructure investments.

• Palmdale/Lancaster – Large-scale zoning flexibility and available land.

Infrastructure and Transit-Oriented Growth

High-speed rail and BRT corridors are becoming magnets for TOD (transit-oriented development):

• Bakersfield and Merced stations are already reshaping land value.

• Metro LA’s new East Valley BRT is increasing density and feasibility.

These trends make pre-construction, due diligence and highest-and-best-use studies essential for developers to capitalize on momentum.

What Development Challenges Are Slowing the Market in 2025?

While some markets are booming, others are hitting barriers. Developers and investors need to know where the red tape is tightening—and where it’s loosening.

CEQA Delays and Environmental Reviews

Even with CEQA reform under AB 130 and SB 131, many projects are still delayed by:

• Inconsistent local interpretations of CEQA triggers.

• Appeals and litigation from NIMBY groups.

• Staffing shortages at planning departments, especially in Los Angeles, San Diego, and San Jose.

These delays are particularly hard on infill and affordable housing developers.

Tip: Pre-screening projects for CEQA exemptions during the site selection phase can save months. JDJ Consulting specializes in early-phase entitlement analysis.

Local Opposition and Ballot Measures

More cities are facing resistance to upzoning and density increases:

• In Santa Monica, voters are pushing back against builder’s remedy projects.

• Redondo Beach has introduced new local height restrictions.

• Pasadena is facing calls to reverse ministerial ADU approvals.

Understanding the local political climate is now as critical as zoning itself.

Permit Processing Bottlenecks

Many cities still rely on outdated permit systems or have hybrid staffing, causing:

• Delays in plan check (up to 8–12 weeks).

• Slow responses from Public Works and Fire departments.

• Lost time coordinating multiple agency reviews.

Smart teams now outsource this work to permit expediters and agency liaisons to avoid costly wait times.

What Property Types Are Performing in 2025?

Let’s break down what’s hot—and what’s not—by product type.

Multifamily Housing: Demand Stays High

California’s housing shortage continues to support rental demand:

• Luxury units are softening in LA and SF due to oversupply and rent control tightening.

• Workforce and affordable multifamily remain strong, especially near transit.

• Developers are prioritizing smaller buildings (4–20 units) to avoid costly CEQA and discretionary reviews.

Single-Family Homes: Build-to-Rent Is Rising

With ownership costs high, build-to-rent (BTR) models are expanding:

• Inland Empire and Central Valley have large tracts of land with lower barriers.

• Investors are building HOA-style neighborhoods with rental-only models.

• Cities like Victorville, Madera, and Tracy are seeing interest from national builders.

Accessory Dwelling Units (ADUs): Still a Solid Bet

ADUs remain a key growth market due to favorable laws:

• AB 1033 (effective Jan 2025) now allows condo-mapping of ADUs, boosting value.

• Most cities offer ministerial ADU approvals, bypassing planning hearings.

• However, utility connections and site grading can still make ADUs cost-prohibitive without solid feasibility studies.

California Housing Forecast: What to Expect in 2025–2026

Here’s where we think the market is headed—and what that means for developers.

Price and Inventory Forecast

Expect slow but steady price growth, especially in inland and suburban cities with good infrastructure.

What Developers Should Prioritize

• Entitlement strategy: Work with a consultant early to find CEQA-exempt paths and fast-tracked zoning options.

• Feasibility planning: Rising costs mean you need clear ROI studies before land acquisition.

• Public engagement: Cities want housing—but they want it “done right.” Early outreach builds community support.