According to housing analyst Nicholas Gerli of Reventure Consulting, California’s housing market is undergoing a significant correction in 2025. Home prices are falling, inventory is surging, and buyer demand has plummeted to near-historic lows. In his recent analysis, Gerli warned that although the market hasn’t fully “crashed,” all the early warning signs are flashing red. For buyers waiting on the sidelines, this may be the first clear sign that California’s decade-long housing boom is losing altitude.
In March 2025, California home prices fell by 0.44%, the second-largest decline among U.S. states, only Colorado experienced a steeper drop. While that number may seem modest, Gerli stressed that it marks a critical turning point. For years, California’s housing market defied gravity, but the combination of unaffordability and rising inventory is now pulling it back down.
Inventory Skyrockets Across the State
One of the most striking data points Gerli highlights is the explosion in inventory. In major metros like San Diego, Los Angeles, and San Jose, the number of homes for sale has surged by more than 50% year-over-year. San Jose and Santa Clara County saw a staggering 68% increase in available homes. That supply-side spike has completely shifted the market dynamic.
In San Jose, for instance, home values dropped 0.73% in March alone—the largest month-over-month decline among all California metro areas. Gerli attributes this fall directly to the inventory glut. When listings pile up but buyers are few, prices naturally begin to slip.
From Bakersfield (inventory up 55%) to Thousand Oaks (up 62%), the trend is clear: Sellers are entering the market in droves, but buyers are not showing up.
Demand Hits Record Lows
So why are buyers pulling back? According to Gerli, the answer is simple: affordability has collapsed. California’s median household income is around $99,000, but the average cost of homeownership now consumes over 60% of that income. Between mortgage payments and property taxes, a typical household would spend $5,000 per month just to own a median-priced home – an unsustainable financial burden for most.
In March 2025, California recorded just 22,700 home sales, according to Redfin data cited by Gerli. That’s a 40% drop from the 2021 pandemic boom and the lowest number of March sales in 13 years. Gerli called the demand side of the equation “one of the weakest” in California history.
The result? A lopsided market where listings grow but buyers disappear, setting the stage for further price reductions.
Homebuilders Are Feeling the Pressure Too
Even large homebuilders like Lennar are beginning to report slowing sales in California. This trend signals that the market weakness isn’t just limited to older resale properties – it’s impacting the entire housing ecosystem.
Developers are seeing longer times on market and increased buyer hesitation. And with construction costs still elevated, there’s less financial incentive for builders to offer steep price cuts, which only deepens the affordability crisis.
Gerli notes that this hesitation among builders adds another layer of uncertainty to an already fragile market.
Historical Parallels: Lessons from the Last Crash
To put things in perspective, Gerli points back to the 2008 crash. Between 2007 and 2012, California home prices fell by 41% statewide. In some areas, the decline exceeded 60%. Riverside and San Bernardino, for example, saw prices drop from $390,000 to just $185,000 during that period.
This historical context is critical. Many Californians believe real estate in the state only goes up, but Gerli flatly rejects that myth. California, he argues, is actually one of the most volatile housing markets in America, along with Florida.
And while a full-blown crash like 2008 may not be guaranteed, the current pattern – sky-high prices, declining sales, surging inventory – closely mirrors the conditions leading up to that crash.
Not All Markets Are Equal – Yet
Despite the broader downturn, Gerli is quick to point out that price declines vary significantly by region. In March 2025, home values fell 1.7% month-over-month in parts of Central Los Angeles, including Culver City and Hollywood. That pace, if sustained, would equate to an annualized drop of over 20%.
Meanwhile, Orange County, which had shown resilience throughout the last year with 7.8% annual growth, is now seeing a slowdown. Month-over-month growth has all but stalled, and early signs of price dips are appearing.
Significant Correction in Northern California
Northern California is also experiencing significant corrections. Sacramento, San Francisco, Stockton, and Oakland all saw home values fall in March. In Big Bear, a popular tourist area, prices were down 1% in just one month.
However, Gerli stresses that not every zip code is seeing price declines yet. Irvine, for instance, still experienced price growth last month. Some suburbs east of Sacramento also held firm. But as inventory continues to climb, even these areas may soon follow the broader trend.
The Economic Backdrop: A Weak Job Market
Gerli argues that housing markets don’t crash in a vacuum – they crash alongside the economy. And in California, the economic headwinds are growing stronger. Job postings in the state have plummeted, down 13% from pre-pandemic levels, according to data from Indeed.
This is especially evident in the Bay Area, where San Francisco’s job postings index is down 36% and San Jose’s is down 30%. For a region that relies heavily on tech and media, two industries now mired in recession, the decline in hiring is a serious warning sign.
The supposed AI boom, Gerli argues, hasn’t translated into job creation. In fact, it may be displacing more workers than it’s hiring. When people don’t feel secure in their jobs or can’t land a new one, the appetite for buying a million-dollar home disappears fast.
Reventure’s Forecast: More Declines Likely
So where does the market go from here? According to the Reventure App’s proprietary Home Price Forecast Score, the outlook remains negative. California currently scores a 44 out of 100 – anything below 50 signals downward price pressure. That score implies a projected 0.8% drop in home values over the next year.
Gerli notes that this number could be revised even lower in coming months, especially if inventory keeps rising and job postings continue falling.
The Reventure model uses key data points like price cuts, days on market, mortgage rates, and sales volume to predict future price movement – and it has a strong historical track record. From 2023 to 2024, the score had a 74% correlation with actual price changes in major U.S. metros.
Could a Full-Blown Crash Still Be Avoided?
While Gerli stops short of declaring a full-on crash, his analysis leaves little doubt that the state is in the early stages of a prolonged correction. If prices continue to fall month-over-month, as they are in cities like San Jose, LA, and Sacramento, 2025 could end with some local markets down double digits.
The wild card remains affordability. Even a 10-15% price drop might not be enough to lure buyers back in, especially with mortgage rates still hovering near 7%. As Gerli bluntly puts it, California is simply too expensive for most people to buy homes, and that won’t change overnight.
A Buyer’s Market in the Making
From my perspective, what’s happening in California should be a wake-up call to both buyers and sellers. Sellers clinging to 2022 price expectations may soon face tough choices. Buyers, on the other hand, are finally gaining leverage after years of being priced out or outbid.
That said, patience is key. This isn’t a short-term correction. Gerli predicts it will take years, not months, for the market to normalize. For anyone thinking of buying, now may be the time to watch closely, negotiate hard, and wait for further softening.
California’s market is flipping – and this time, it may not bounce back as quickly as before.
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.