The Housing Market in Southern California is Shifting

The number of homes for sale has doubled since 2022, and the number of transactions is down by a third. There are many more sellers and fewer buyers. This shift is occurring nationwide and typically precedes a decline in home prices.

However, do not let the headlines fool you. What is happening across the country is not always the same as what is happening here locally. 

The Southern California housing market is shifting from a hot seller's market to be more balanced and slightly buyer-friendly.

At the beginning of 2022, the Months Supply of Inventory, which measures how many months it would take to sell all currently listed homes at the current sales pace, was remarkably low, standing at just 1.6 months in Los Angeles County and 0.8 months in Orange County. By May 2025, these figures have risen significantly to 4.4 months in Los Angeles County and 3.4 months in Orange County. For historical context, Los Angeles County hadn't experienced these inventory levels since October 2014. Meanwhile, Orange County hadn't seen similar numbers since 2019, when it reached 3.9 months, and previously in 2014, when it was at 4.2 months.

Key Takeaway for Buyers

The most beautiful properties are still selling quickly and are often competitive, meaning you could see a bidding war that takes away your leverage. Don't be afraid of properties that need a little TLC and have been on the market for a month or longer. These sellers will typically be more open to negotiation on terms such as price and concessions to buy down your rate and contribute to closing costs. 

Key Takeaway for Sellers

Don't wait. The housing market is expected to continue trending in favor of buyers. Be very realistic about the list price. If your property is not compelling, it's not selling. Homes that are beautiful and priced correctly are selling quickly. Homes that are less visually appealing and not positioned competitively tend to linger on the market, often forcing sellers to lower the price later. Also, make sure your Realtor has a rock-solid marketing plan. The days of "stick a sign in the yard and wait for offers" are long gone. 

Go deeper 👇

Why is this happening?

Nationally, Realtor.com reports over one million active homes listed for sale in the U.S., the highest number seen in six years. Similarly, Redfin noted the highest disparity between active listings and buyer activity ever recorded.

Locally, although active listings remain somewhat below pre-COVID levels observed between 2017 and 2019, the number of closed sales has dropped significantly. For example, in Orange County, the rolling 12-month average for closed sales hovered around 30,000 units annually between 2017 and 2019, while recent years have consistently seen around 20,000 units—a dramatic decline.

Here are a few key reasons behind this shift:

Buying a house is f#$%ing expensive.

In 2020, the average home price in both LA County and Orange County was about $900,000. With interest rates around 3%, your monthly mortgage (on a 20% down, 30-year fixed loan) would've been roughly $3,035.

Now? The average home is $1.3 million in LA County and $1.5 million in Orange County. With rates hovering around 7%, that same mortgage now costs about $6,900 in LA and $7,955 in OC. 

Homeowners are finally giving up their low-rate

Homeowners who bought during the pandemic have mortgage rates locked in at around 3%, which is half of today's rates that have remained between 6% and 7% for the past three years. This has deterred many potential sellers from putting their homes on the market, as they were reluctant to give up their favorable rates. As time goes on and rates remain high, more sellers are beginning to overcome this hesitance. Additionally, It's just not realistic to stay in place forever. Jobs change, families grow, divorces happen, and people are forced to move.

Demand has cooled

Buyers are becoming more selective and more cautious. Economic concerns, inflation, and job market uncertainty are causing widespread hesitation. Also, the buyers who are on the hunt are being much more selective. 

---

The Southern California market is no longer what it was just a few years ago. We're seeing more inventory, fewer sales, and a shift in leverage that's creating real opportunities and real risks, depending on how you look at it. Whether you are your first home, making a move, or thinking about selling, strategy matters more than ever.

If you're planning to make a move this year, let's connect and create a plan that aligns with today's market. Not yesterday's headlines.