Nobody’s Buying Homes”: Why California’s Real Estate Market Is at a Breaking Point

The California housing market makes up a staggering 19% of the national real estate industry. With a market value of $10,18 trillion, the Golden State is the most impactful state when it comes to the US real estate industry. That is why many experts are concerned about the real estate slowdown currently being experienced in California.

The once-blazing housing market in California, and analysts say that it’s more than just a seasonal cooldown. After four straight months of year-over-year inventory increases, California has become a buyer’s market. For the first time in years, the housing inventory has outpaced the number of buyers.

Unlike some smaller states, California’s real estate industry has an impact on the entire nation. With that in mind, it’s important to know what this change means for you, whether you’re buying on the East Coast or selling in the Midwest.

Why It’s Important

The pandemic brought changes to every market, but due to the size of California’s real estate industry, it was more pronounced there than in many other places. The rise of remote work made it possible for people to move away from major metropolises, like Los Angeles and San Francisco, to smaller towns. Some left the state completely, citing ongoing issues with high tax rates.

Numbers Never Lie

Ultimately, the real estate slowdown in California isn’t just based on high prices. While home sales have plummeted to levels that they haven’t seen in more than 10 years. According to data collected from Redfin, just over 284,000 homes were sold in 2023. That figure is the lowest number of homes sold since the housing crisis of 2007. To make matters worse, things aren’t looking any better today.

The slowdown isn’t due to a lack of interest in homeownership. Rather, it’s the product of multiple forces, including soaring interest rates, high home prices, and a stagnant inventory. With a median home price hovering near $840,000, California’s real estate market is still out of the budget for many would-be homeowners.

The increase in mortgage rates has only made a difficult market even more problematic. With 30-year fixed loans regularly exceeding 7%, many potential buyers remain priced out of the market. If they already own a home, they’re simply unwilling to exchange their low interest rates from only a few years ago to take on a more expensive mortgage.

Another figure paints a bleak picture for California’s real estate market. According to Realtor.com, there were 73,160 houses for sale in the state in May 2025. That is the highest number since October 2019, before the COVID-19 pandemic reshaped the nation’s economy. During the pandemic, interest rates bottomed out, and a home-buying frenzy took over the nation. However, the frenzy has slowed to a complete halt, which makes the 73,160 homes for sale today a significant issue.

A recent Redfin study shows that several California cities are among the 50 most populous metropolises with the largest imbalance of buyers and sellers. On the surface, this should be great news for buyers who have been dealing with a housing crisis that revolved heavily around a lack of inventory. However, astronomical interest rates continue to muddy the waters.

For the first time in several years, there are plenty of homes on the market. However, mortgage rates and asking prices continue to leave some would-be buyers in the cold. This has created a virtual standstill in the most important real estate market in the country as the housing crisis 2025 continues.

What to Watch For

No matter where you live, the real estate market in California impacts you. When it comes to real estate, it’s been said that, “As California goes, so goes the nation.” In a recent article, Wolf Richter, one of the most respected real estate analysts, said, “The problem is demand in California. It has essentially collapsed. New listings aren't that high. But because the inventory of homes for sale doesn't sell, and new listings are added to it, the total piled up.”

Zillow reports that it expects home prices in California to drop in 31 cities by the end of the year. This could be a momentous change in a market that has been frozen for the better part of the last two years. With buyers taking control of the market, sellers must be willing to negotiate, or they run the risk of their homes sitting on the market even longer.

With April through August being the busiest time of year in the real estate industry, it will be interesting to see how things play out in California. Many of the homes that are on the market today have been there for months with little to no viable interest. If mortgage rates come down at all, which is a remote possibility, things could pick up for the first time in years.

While we will never again see the sub-2% interest rates of 2021, there’s a distinct possibility that the market may be turning away from a seller’s market to one that makes it possible for buyers to make the moves that they’ve been putting off for years. In addition to monitoring your local market, keep an eye on California. The rest of the nation will follow suit.