What’s the 2025 Housing Market Forecast for Northern California?

By Frank Valente

Associate Broker at eXp realty of California. Active agent and broker since 2003 in the Sacramento Region. Retired from the Navy in 2002 after 24 years as a Commander. Former Surface Warfare Officer.

The Northern California housing market is showing signs of stabilization as we move into 2025. With home prices experiencing modest growth, inventory levels balancing, and new construction playing a significant role, the market offers opportunities for both buyers and sellers. Here’s a closer look at current trends, what’s driving them, and what to expect in the coming months.

Current market conditions

Looking at Sacramento, El Dorado, and Placer Counties over the last seven months, home prices have remained stable, with only a slight increase of about 1.5% compared to a year ago. While this doesn’t match the double-digit appreciation seen in recent years, it reflects a market that’s finding its balance.

Inventory levels also provide some insights. Currently, there are just under 4,000 homes for sale in these areas. Over the last 30 days, approximately 1,400 homes sold, which equates to about 2.7 months of inventory—still technically a seller’s market. However, this is a far cry from the frenzied market we’ve experienced in the past.

What’s driving the market?

Key factors influencing the market include:

Interest rates. While recent reductions in the federal rate are encouraging, it’s important to remember that mortgage rates are tied to the 10-year bond market, not directly to the Fed’s rate. Future rate movements remain uncertain, but any decreases could benefit buyers.

Employment. Beyond job numbers, wage growth is crucial. Buyers need incomes that keep pace with housing costs to sustain the market.

New construction. Northern California has seen significant new home construction, from Sacramento to Marysville and beyond. Builders are navigating market changes wisely by minimizing standing inventory, which helps stabilize pricing.

What’s next?

Over the next 12 months, I anticipate the current trends to continue. Prices are likely to remain flat, and the market will feel similar to what we’ve seen over the past seven to eight months.

For sellers, this means homes are still selling relatively quickly, often within 90 days. For buyers, the good news is that the market has cooled from its previous feeding frenzy. While some well-priced homes may still attract multiple offers, the hysteria of the past has subsided. This gives buyers a better chance to explore their options thoughtfully.

Investors looking to flip properties may face stiff competition for homes in need of renovation, but those seeking buy-and-hold rentals could find more options available. Unfortunately, renters in California continue to face challenges, with rising costs and limited availability.

Whether you’re considering buying, selling, or investing, understanding your local market is crucial. If you want a personalized home or neighborhood evaluation, I’d be happy to help. Just contact me at +1 (916) 257-0893 or email me at frank@frankvalente.com. I look forward to hearing from you!