According to housing analyst Nicholas Gerli from the Reventure Consulting YouTube channel, California’s real estate market has officially flipped. After years of soaring prices and tight inventory, the state is now seeing the opposite: home values are dropping, and inventory is surging. Gerli reports that month-over-month home values fell by 0.42% in May 2025, a pace that would annualize to nearly 5% if the trend continues. This is the fourth straight month of price deceleration, something not seen since 2022. For a state long considered immune to downturns, the shift is significant.
Buyer Demand Hits Historic Lows
Gerli points to a massive collapse in buyer activity as the root cause. According to Redfin data cited in the video, California’s home sales are down 20% from the state’s long-term average and 40% from the frenzied pandemic peak. Gerli calls this a “homebuyer strike,” suggesting that many potential buyers are simply opting out of the market due to high costs and poor affordability. “Most buyers in California cannot qualify for a mortgage,” he explained, highlighting a deep affordability crisis.
Inventory Is Exploding Across the State
While buyer demand craters, inventory is soaring. Gerli provides data showing year-over-year listings up by 75% in Oxnard, 72% in Napa and Stockton, 66% in San Diego, and 54% in Los Angeles. Statewide, active listings have ballooned to 73,000 homes, more than double the 35,000 homes listed in May 2023. California now has the third-highest housing inventory in the country, behind only Florida and Texas.
Homes That Don’t Make Financial Sense
Gerli showcases real-life examples that show just how distorted California’s home prices have become. A modest 4-bed, 2-bath home in Orange County, listed for $1.2 million, would require monthly mortgage payments in the range of $8,000 to $10,000. In Sunnyvale, a 2,000 square-foot, unrenovated home is listed at $2.2 million. The estimated monthly payment? Over $15,000. Meanwhile, the rental estimate for that home is just $5,400 – a glaring example of why many buyers are choosing to rent instead.
The Buy vs. Rent Gap Is Out of Control
One of the most telling statistics Gerli presents is the “buy vs. rent differential.” In San Francisco, it’s now 147% more expensive to buy than rent. In San Jose, that number hits 221%. In Los Angeles and San Diego, it’s over 100%. Before the pandemic, buying was only slightly more expensive than renting. But now, the cost gap is so wide that Gerli believes it’s keeping first-time buyers out of the market entirely.
Price Forecasts Point to Declines
Using Reventure’s data model, Gerli predicts that many parts of California are on track for further price declines. San Diego, for instance, is forecasted to see a 2.2% drop in home values over the next year. San Francisco is expected to fall by 4.7%. While some areas may hold steady or rise slightly, Gerli warns that specific neighborhoods could see drops as steep as 8–9%. These forecasts, available through the Reventure app, are based on inventory, days on market, and price cut trends.
California’s Economy Isn’t Helping
Adding to the pressure on the housing market is a cooling economy. Gerli points to data from Indeed showing that job postings in California have dropped 15% below pre-pandemic levels. This is especially concerning in the state’s core industries like tech, media, and marketing, where job openings are down by 35–37%. With layoffs and hiring freezes taking hold, the state’s economic slowdown is starting to drag down the housing market.
Affordability Is Worse Than the 2006 Bubble
Perhaps the most shocking insight in Gerli’s report is the level of unaffordability. The average California household earns $99,000 per year. Yet the typical annual mortgage payment is now around $62,000. That means a mortgage consumes about 62% of a buyer’s gross income. This exceeds the 2006 bubble level of 60%, and far surpasses the long-term average of 43%. Gerli warns this isn’t sustainable, and history shows that such high ratios tend to result in price corrections.
History Shows California Prices Can and Do Crash
Gerli reminds viewers that California’s housing market is notoriously volatile. Between 2007 and 2012, home prices in the state dropped by 40%. In the early 1990s, prices fell 10–25% depending on the region. While he doesn’t claim a repeat of the 2008 crash is guaranteed, he emphasizes that sharp declines have happened before – and could happen again, especially given today’s conditions.
Realtors and Media Still in Denial
What’s especially striking is how many in the real estate world are still in denial. “There’s a lot of people on social media saying prices are going to go up forever,” Gerli says. But the data, falling home prices, declining sales, rising inventory, tells a different story. It’s a clear warning for buyers, sellers, and investors alike: conditions are shifting fast, and ignoring the numbers could be costly.
Why This Matters So Much
This situation is more than just a market correction. It reveals a deeper tension in California’s economic model. The state has long relied on a booming real estate sector to drive growth. But when homes become too expensive for the average worker to afford, the entire system starts to crack. And that’s exactly what we’re watching happen now. Gerli’s data-driven analysis offers a wake-up call for anyone still assuming California real estate is a guaranteed win.
A Correction Was Inevitable
Honestly, what Gerli is showing makes sense, and it’s surprising this didn’t happen sooner. When the cost to buy a home is triple what it costs to rent, and most people can’t even qualify for a mortgage, something has to give. California’s sky-high housing prices were built on the idea that demand would always be there. But now, with job cuts, fewer buyers, and affordability at record lows, that illusion is breaking. What’s fascinating is how quickly things flipped – just nine months ago, Reventure still rated the California market as strong. That’s how fast this can change.
Watch Your Zip Code
In closing, Nicholas Gerli urges buyers, investors, and sellers to take a neighborhood-specific approach. His forecasts vary by zip code, with some areas expected to rise slightly while others face steep declines. Access to localized data is key to making smart decisions in this rapidly shifting market. For anyone in California real estate, this is no time to rely on old assumptions. As Gerli shows throughout his Reventure Consulting video, the correction isn’t just coming – it’s already underway.
Growing up in the Pacific Northwest, John developed a love for the great outdoors early on. With years of experience as a wilderness guide, he’s navigated rugged terrains and unpredictable weather patterns. John is also an avid hunter and fisherman who believes in sustainable living. His focus on practical survival skills, from building shelters to purifying water, reflects his passion for preparedness. When he’s not out in the wild, you can find him sharing his knowledge through writing, hoping to inspire others to embrace self-reliance.