SACRAMENTO, CA — The California housing market continues to grapple with rising home prices and an ongoing affordability crisis in 2025. After years of housing shortages and high demand, the market is now experiencing some recovery, but the road to affordable housing remains a significant challenge for residents, especially in cities like Los Angeles, San Francisco, and San Diego.
A Price Surge Amid Limited Inventory
As of April 2025, the median home price in California reached $725,000, representing a 5.4% increase from the previous year. In Los Angeles County, the price was slightly higher, reaching $850,270—an increase of 2.5% from the previous month .
The ongoing inventory shortage is one of the primary factors driving up home prices. With fewer homes listed for sale and demand remaining high, competition among buyers has led to bidding wars, further escalating prices. Many homeowners, particularly those who purchased properties during the pandemic with low mortgage rates, are unwilling to sell, contributing to the tight supply in the market.
California’s housing inventory is at its lowest point in over two decades, and prospective buyers are increasingly being priced out of the market, particularly in urban centers. According to California Association of Realtors (CAR), homes are staying on the market for shorter periods, and properties in high-demand neighborhoods often receive multiple offers within days of being listed.
The Rental Market and its Pressures
While homeownership remains out of reach for many, the rental market has also become strained. As more people turn to renting due to high home prices, rents have risen sharply. According to Apartment List, average rents for a one-bedroom apartment in Los Angeles increased by 4.3% in the past year, making it even harder for residents to secure affordable housing.
Renters are now facing additional challenges. As property values rise, many landlords are increasing rents to align with market conditions, pricing out lower-income renters. For families, the situation is particularly dire, as rental prices for two-bedroom apartments are pushing above $3,000 per month in many parts of the city.
In response, local governments and housing advocates are calling for more affordable housing projects and rent control policies to protect tenants. In 2025, Los Angeles approved a series of zoning changes to encourage the construction of affordable housing units, although the demand far exceeds supply.
State Government’s Efforts to Address the Crisis
California lawmakers are focusing on several initiatives to combat the affordability crisis. One of the primary measures is Senate Bill 60 (SB 60), which aims to increase the state’s housing supply by making it easier for developers to build multi-family housing units in urban areas. The bill streamlines zoning regulations, offering incentives for developers to build affordable units near transit hubs and job centers.
In addition to legislative efforts, California is investing in programs designed to help first-time homebuyers. The California Housing Finance Agency (CalHFA) offers down payment assistance programs and affordable mortgage options, which have helped thousands of buyers in the past year. However, these programs remain insufficient to address the broader housing gap, as home prices continue to outpace wage growth.
The Impact of Natural Disasters on the Housing Market
Natural disasters, including wildfires, flooding, and earthquakes, have further complicated California’s housing situation. In 2025, the state faced one of the worst wildfire seasons on record, with more than 17,000 structures destroyed, displacing thousands of residents. The reconstruction efforts are expected to take several years, further straining housing availability in the affected regions, particularly in areas like Malibu, Santa Barbara, and parts of Northern California.
As homeowners return to fire-damaged properties or opt for relocation, the demand for housing in unaffected areas is expected to rise. This will likely exacerbate the already strained housing market.
The Outlook for California’s Housing Market
Despite the current challenges, there are some optimistic signs for the future. According to the California Department of Housing and Community Development (HCD), more affordable housing units are being planned in exurban areas and the Inland Empire, where land is more affordable. Additionally, California’s ongoing investments in transit infrastructure and green building initiatives could help make housing more affordable in the long term.
However, the state’s housing affordability crisis remains one of the most pressing issues for policymakers, developers, and residents alike. For the time being, high prices and a competitive market will likely persist, making it difficult for many to find stable, affordable housing.
