California’s Housing Market Isn’t Moving—and the L.A. Wildfires Are Adding to a Growing Problem

California real estate has seen unprecedented losses because of the Los Angeles wildfires—but even before the fires, the Golden State’s housing market had taken hit after hit.

Homes are staying on the market an average 46 days in California in 2024, the same as in 2023, according to Realtor.com®.

Now, the fires have exacerbated the existing problem.

“In the short term, home prices in Los Angeles may climb as limited housing supply is met with increased demand,” says Realtor.com® senior economic research analyst Hannah Jones.

“Households impacted by the wildfires, looking at housing options that allow them to stay local while rebuilding could increase demand. Home listings that were damaged by the fire will likely be taken off market while others that may have been listed for sale will remain off market until any necessary repairs or rebuilding are complete.”

The bad news keeps coming

Sales continue to remain flat throughout the state thanks to the combination of sky-high home prices and stubbornly high mortgage rates, according to the latest figures from the California Association of Realtors (CAR).

Sales of single-family homes, below 400,000 homes per month for 31 months in a row, increased by 4.3% year over year for 2023 and 2024. It’s the first annual increase in three years but still well below the historical norm.

In San Francisco, the cost of living is 70% higher than the national average.

It’s seen its median list prices drop 10.87% to $889,499.

“Sales are still pretty weak,” says CAR’s senior research analyst Guillermo Flores.

What is keeping California sales in a slump

High interest rates and high home prices are a perfect storm of market-depressing factors. As of Monday, the average 30-year fixed-rate mortgage was 7%—three times higher than the record lows seen during the COVID-19 pandemic, according to CAR.

In addition to that, the median single-family home in California was $861,020 in December 2024—more than double the national median.

“This is a challenging time for the real estate market—and California in particular,” says agent Cara Ameer, who is licensed in California and Florida. “In a state with higher-than-average sales prices compared to many areas of the country, high interest rates coupled with the higher prices have continued to make things more difficult for buyers to get a foothold.

“In many cases, high interest rates have knocked buyers out of particular price ranges,” she adds. “So if they were trying to buy a single-family home, they now have to consider a townhome or condominium, for example. Psychologically, buyers started to get discouraged when rates first hit 6%; but at 7% plus, it is even more mind-numbing. Many buyers feel like they’ve missed the window.”

Similarly, San Francisco-based agent Brian Davis, manager of a passive real estate investment club at SparkRental, says: “In much of California, home prices have grown distorted relative to local rents and economic fundamentals. For example, people complain about the rents here in the Bay Area, but they’re downright cheap compared to home prices. The median rent is $3,250, but the median home price is a staggering $1,256,316. That puts the monthly cost of homeownership in the ballpark of $8,750.”

Besides the one-two punch of high interest rates and home prices, other factors may be at play, according to the boots on the ground. Davis points out that California’s population had been steadily decreasing for the past few years, when COVID-19 pandemic migration patterns and low birth rates saw the state’s population drop from drop from 39.53 million in 2020 to 38.97 million in 2023, based on the most recent Census Bureau data.

Once the smoke has cleared from the Los Angeles fires (literally and figuratively), the population may see an even steeper decline.

California real estate investor and developer Jameson Tyler Drew, of Anubis Properties, says that in the wake of the Palisades and Eaton fires, “buyers are few and far between.”

He adds: “One would think that with the loss of supply, prices would skyrocket and sales would rise, but that’s not been the case. Prices have certainly plateaued.”

Drew notes that the lock-in effect is having a freezing effect on the market as well. While homeowners not wanting to trade in their low rates for today’s high ones are present in every state, it is even more pronounced in an expensive state like California.

In addition, the traditional hub of the Los Angeles economy—the film and television industry—continues to move to states where it is cheaper to produce.

“While it used to be the case that you could make a good living in the film industry and own your own home, prices and rates have made that nearly impossible for anyone under 40,” Drew says.

Nor can one ignore the chilling effect that the future of procuring home insurance and keeping the state-run insurer of last resort, FAIR, funded will have on the state.

“The ramifications could be widespread,” warns Drew.

Hope on the horizon

But there may be some hope on the horizon: CAR says price growth is beginning to stall.

“The price gain recorded last month was smaller than the six-month moving average between May 2024 and October 2024,” says Oscar Wei, the association’s deputy chief economist. “The deceleration … is an indication that further softening in home prices could be forthcoming.”

Here are the median sales price changes by region from December 2023 to December 2024, according to CAR.

• California single family homes
  • Median sold price in December 2024: $861,020
  • Price YTY Change: 5.0%
• CA Condo/Townhomes
  • Median sold price in December 2024: $664,550
  • Price YTY Change: 4.7%
• Los Angeles Metropolitan Area
  • Median sold price in December 2024: $815,500
  • Price YTY Change: 7.3%
• Central Coast
  • Median sold price in December 2024: $995,000
  • Price YTY Change: 1.6%
• Central Valley
  • Median sold price in December 2024: $492,000
  • Price YTY Change: 6.5%
• Far North
  • Median sold price in December 2024: $369,500
  • Price YTY Change: 1.4%
• Inland Empire
  • Median sold price in December 2024: $594,950
  • Price YTY Change: 4.4%
• San Francisco Bay Area
  • Median sold price in December 2024: $1,200,000
  • Price YTY Change: 1.5%
• Southern California
  • Median sold price in December 2024: $850,000
  • Price YTY Change: 7.6%