How much will California home sellers cut their prices as competition grows?<\/p>\n
My trusty spreadsheet analyzed Realtor.com statistics on the number of existing houses and condos<\/a> on the market and their asking prices. The average results for the three months ending in May were compared with two years earlier \u2013 a time when the pandemic homebuying frenzy was cooling \u2013 and with 2019, just before coronavirus upended the real estate scene.<\/p>\n The top line is that California list prices are down 1% this spring compared with two years ago following a 50% increase in active listings from 2023.<\/p>\n We know that affordability challenges have deterred numerous house hunters<\/a>, as prices and mortgage rates remain stubbornly high. But at least as summer starts in 2025, the folks who dare shop for housing have far more options.<\/p>\n And pricing habits of California homeowners suggest that new inventory is being noticed.<\/p>\n Cost pressures<\/p>\n Is the uptick in homes for sale some dramatic exit strategy by owners?<\/p>\n Historically speaking, California\u2019s supply of residences for sale has yet to surpass 2019 levels.\u00a0California listings remain 13% below what\u2019s seen as \u201cnormal\u201d times of six years ago.<\/p>\n And nationally, California\u2019s two-year inventory jump ranked only No. 30 among the states. Florida\u2019s 125% increase was No. 1.<\/p>\n California bargains still seem impossible to find<\/a>. California\u2019s $764,000 listing price for the three months ending in May was the third-highest asking price in the nation, behind Massachusetts at $805,900 and Hawaii at $776,700.<\/p>\n Still, the 1% dip in asking price since the spring of 2023 is a sharp contrast to the previous four years.<\/p>\n California\u2019s was one of 21 states with price cuts during the past two years. Hawaii\u2019s 9% drop was the largest, followed by Iowa, down 8%, and Florida, down 7%.<\/p>\n Let\u2019s not forget the pandemic era\u2019s demand for larger living spaces, plus historically cheap mortgages fueled by the Federal Reserve.<\/p>\n The result was a 33% surge in California asking prices between 2019 and 2023. The only good news is that 39 states had bigger increases.<\/p>\n Bad mix<\/p>\n Elevated prices have persisted despite the Fed\u2019s reversal from low-rate policies<\/a> \u2013 a move aimed at cooling an overheated economy with the worst inflation in four decades.<\/p>\n Ponder the 30-year mortgage rate at 6.8% in May 2025. It\u2019s gone from 4.1% in May 2019 to an all-time low of 2.7% at the end of 2020 to 6.4% two years ago.<\/p>\n Housing affordability plummeted<\/a>. Consider one estimate of a California buyer\u2019s house payments, which shows that the monthly financial burden has tripled in 10 years.<\/p>\n No matter the math, it\u2019s too much for California house hunters.<\/p>\n California homebuying in the past year ran 27% slower than its 20-year average pace dating to 2005, according to data from Attom. Nationally, sales are 11% below normal<\/a>.<\/p>\n So the grand question: Will California home sellers in mid-2025 have to significantly lower prices further if they want to cinch a deal?<\/p>\n Or will potential drops in mortgage rates \u2013 not guaranteed despite pressure on the Fed to cut the rates they control \u2013 get house hunters in a buying mood?<\/p>\n