California Home Prices Show Signs of Decline Amid Rising Inventory and Affordability Challenges

California's housing market is exhibiting signs of a potential slowdown, with increasing inventory levels and affordability concerns prompting adjustments in home prices across the state.

According to Realtor.com, the number of homes listed for sale in California surged by 44% in February compared to the previous year, outpacing the national increase of 28%. This significant rise in inventory suggests that supply is beginning to outstrip demand, leading to softer price growth in several markets. 

Nick Gerli, CEO of Reventure App, noted that while the housing supply is expanding from a severe shortage, a dramatic price correction is unlikely. However, he predicts that home price growth will decelerate, and prices may trend flat or slightly negative in the near term. In cities like

San Diego, the surge in inventory is particularly pronounced, indicating that the market is beginning to reset. While some markets remain unaffordable for median-income families, the overall increase in housing supply is expected to gradually ease price pressures. 

Despite these developments, inventory levels are still below pre-pandemic figures, suggesting that significant price drops are improbable. The market is expected to stabilize, with low unemployment and mortgage default rates providing support. 

As the housing market continues to evolve, prospective buyers and sellers should monitor these trends closely, considering the implications of rising inventory and shifting affordability dynamics on home prices in California.

Sources:

• “California Home Prices May Drop Soon, Real Estate CEO Says.” Realtor.com, March 28, 2025.