are home prices going down?
January 10, 2025
As we begin 2025, a common question being asked is: When will home prices finally go down?
While each local market is more nuanced, you may not be surprised that prices are still rising on average across the U.S., California, and the Bay Area.
National Housing Trends
Despite hopes for significant price drops, the national housing market is showing resilience and continued growth, although at a slower pace. CoreLogic predicts home prices across the United States will rise by an average of 2% in 2025, compared to 4.5% in 2024.
The National Association of Realtors (NAR) provides a specific outlook:
2025 median home price: $410,700 (up 2% from 2024)
2026 median home price: $420,000 (up 2% from 2025)
Several factors contribute to the continued upward pressure on home prices:
Persistent housing shortage
Mortgage rates expected to linger around the 6%+ range
Projected job growth of nearly 2 million in both 2025 and 2026
Pent-up demand due to population growth outpacing home sales
California Housing Outlook
Our California housing market presents a mixed picture, with overall growth expected but at a more moderate pace. The California Association of Realtors (C.A.R.) forecasts that the median home price in California will rise by 4.6% to $909,400 in 2025, following a 6.8% increase to $869,500 in 2024. C.A.R. predicts a significant uptick in home sales for 2025:
10.5% increase in existing single-family home sales
Projected 304,400 units to be sold, up from 275,400 in 2024
The California market is showing signs of stabilization with increasing inventory and a shift towards a more balanced market. However, affordability remains a significant challenge, with the median home price well above the national average.
The Bay Area's Housing Market
The Bay Area housing market continues to be one of the most expensive in the nation. It is showing signs of a slight cool down compared to recent years. While 2025 Bay Area prices will be influenced by many factors, we can extrapolate from California trends and historical patterns that:
Prices are likely to continue rising, but at a slower rate than the statewide average of 4.6%
Silicon Valley homes continue to be in high-demand, while inventory levels remain low
Many unique factors shape the Bay Area's housing landscape including:
Tech industry dynamics
Remote work trends
Supply constraints due to building regulations and limited land availability
International demand
San Francisco may see more moderate growth as buyers seek more space in suburban areas. Areas in Silicon Valley are likely to maintain strong price growth. The East Bay may see increased demand as buyers seek relatively more affordable options.
To illustrate ranges of recent Bay Area home prices, here are average sales prices of single family homes by city from MLS Listings' statistics over the last 12 months:
Palo Alto: $4,258,851
Los Gatos: $2,897,906
Campbell: $2,168,891
San Francisco: $2,137,059
San Jose: $1,773,125
Walnut Creek: $1,666,602
Livermore: $1,397,808
Oakland: $1,058,064
The rental market remains a critical factor in the Bay Area housing ecosystem, with rents likely to increase in tandem with home prices. Although California and local city regulations (such as SB9) improve housing availability, adoption and construction remains low. Affordability around the Bay remains a critical issue, with the median home price significantly higher than both the California and national averages.
The Bottom Line
So, are home prices going down? The short answer is: generally, NO. While some areas across the nation may go down, we're seeing a moderation in price growth on average rather than outright declines. California, including the Bay Area, is likely to see continued price increases.
As always in real estate, local conditions can vary significantly from broader trends.
If you're looking to buy or sell in 2025, message or call me to have a conversation about your real estate goals. With a data-driven approach to selling and buying homes, I can help you find opportunities and make informed decisions about real estate.
Email: tim.chong@kw.com
Call: 408.459.9777
DRE# 02244508
Data source credit to CoreLogic; California Association of Realtors; National Association of Realtors; and MLS Listings. Image credit to https://unsplash.com/@brendan_stephens.
