California’s housing market remains uneven but shows cautious improvement signs, even as economic uncertainties and erratic federal policies cloud the road back to pre-pandemic norms, according to California Association of Realtors data.
The Fannie Mae Home Purchase Sentiment Index rose for the second consecutive month in May, reaching a six-month high of 73.5 — the highest confidence level since late 2023. Only one in four U.S. consumers believe it’s a good time to buy a home, still the highest figure since February 2022.
The optimism is tempered by sobering figures: more than 37% of all active single-family listings in California saw price reductions last month, levels not seen since 2016. With elevated mortgage rates and rising inventory, sellers increasingly adjust pricing to attract buyers.
“Price cuts are back in a big way,” the report noted, with reductions affecting 19.1% of all for-sale homes nationally — the highest rate for any May in nearly a decade. In California, inventory surge continued for a 15th consecutive month, reaching the highest level in more than five years.
Mortgage demand dipped slightly in late May despite temporarily declining interest rates. While new purchase applications fell 4% from the previous week, they remained 18% higher year-over-year, indicating resilience beneath current sluggishness.
Job growth provided mixed signals. U.S. nonfarm payrolls rose by 139,000 in May, exceeding expectations. However, downward revisions and unemployment rising to 4.24% suggest cooling momentum.
Federal employment shrank with 22,000 jobs lost in May and more than 59,000 cut since January due to Department of Government Efficiency downsizing.
Many potential homebuyers wait as Washington policy shifts without clear direction. The Federal Reserve is expected to hold rates steady, but inconsistent borrowing costs may keep home prices in flux through summer.
Bank of America data shows more Americans relocating in 2025 than in four years. While total moves remain below pre-COVID levels, intra-city relocations rose 11% year-over-year and cross-metro moves increased 7%.
Most telling: 52% of surveyed homebuyers believe 2025 is better for buying than 2024 — a shift that could fuel modest second-half recovery.
Despite inconsistent federal signals and inflation concerns, California’s real estate market may be finding its footing.
