Southern California Home Prices Level Off as Sales Drop

Orange County Housing Market at a Glance (Mid-2025)

Orange County home values remain near all-time highs, but the explosive growth of 2020–2022 has given way to a steadier flatline. The median selling price in March 2025 was about $1.2 million – essentially matching the peak set in spring 2024. Year-over-year price appreciation has dwindled to low single digits; Zillow’s index shows OC home values up just ~3.2% from June 2024 to June 2025. In some high-end communities, prices are barely above last year – for instance, Laguna Beach saw only a +0.9% annual change – while more mid-range markets like Laguna Niguel still notched double-digit gains (~11% YoY). Overall, though, prices have essentially leveled off after years of double-digit jumps.

Mortgage rates (red line) vs. home sales volume index (blue line), 2020–2025.

At the same time, home sales have dropped sharply. Higher interest rates and buyer fatigue slammed the brakes on purchase activity. In fact, March 2025 saw only 2,157 home sales in Orange County – about 27% below the 20-year average for that month. Over the past three years, monthly sales volumes are running about 31% lower than the pre-2022 norm. Put simply, far fewer buyers are transacting. Realtors note that this spring’s homebuying season was especially soft, with Southern California sales at only ~75% of typical levels despite a healthy job market. The chart below shows how annual sales have fallen off since the 2021 frenzy:

Orange County annual home sales dropped from a 2021 peak to 2025 lows.

This one-two punch – flat prices but feeble sales – signals a market in transition. Inventory is slowly growing from record lows, giving buyers more choice and easing upward pressure on prices. Orange County’s active listings in mid-2025 are up significantly from a year prior (South OC inventory has surged roughly 75% year-over-year), and homes aren’t selling overnight like before. County-wide, the median days on market has crept up to ~21 days (vs ~18 days this time last summer). Many sellers are having to make price reductions to attract offers – a notable change from the bidding wars of 2021. All of these indicators point to a housing landscape that is shifting toward balance.

Why Are Prices Leveling Off (and Sales Slowing)?

High mortgage rates have poured cold water on demand. After the Federal Reserve’s rate hikes, 30-year mortgage rates hover around 6.5%–7% (about double the sub-3% rates buyers enjoyed in 2020-2021). These higher borrowing costs have dramatically reduced what buyers can afford each month, sidelining many would-be homeowners. In fact, Orange County homebuying has been “iced” ever since rates shot up – over the past 36 months, sales are only ~75% of their usual pace despite a growing population. Buyers are hesitant to commit when financing is so expensive, and this buyer pullback is the chief reason sales volume is way down.

Affordability is at record lows. Home prices skyrocketed ~70% in the past six years, far outpacing household incomes. Coupled with higher rates, the result is the worst affordability in decades. As of early 2025, only about 12% of Orange County households could afford the median-priced home – down from 24% just six years ago. For many families, ownership is simply out of reach, which further shrinks the buyer pool. This affordability crunch is a major factor behind the market’s stagnation (explored in depth in our Orange County housing affordability guide →).

Owners locked into ultra-low rates have been reluctant to sell – until now. Throughout 2022-2024, many homeowners sat tight rather than trade their 3% mortgage for a 7% one, which kept inventory painfully low. That lack of supply propped up prices even as demand fell. However, the tide is starting to turn: by mid-2025, more owners are deciding to list their homes, whether due to life changes or confidence that they can still cash out near peak prices. Southern California inventory is up ~35% from a year ago in many areas, and Orange County’s for-sale listings hit their highest level in about five years this summer. With more homes finally available, buyers have more negotiating power, and price growth has cooled. We’re essentially moving off of extreme seller’s market conditions toward a more balanced scenario.

Economic uncertainties are adding caution. Buyers and sellers alike are keeping an eye on broader economic signals – from inflation and interest rate policy to local job growth. Talk of a potential recession or other financial hiccups has made some buyers more conservative. Even though Southern California home prices have only dipped slightly (down ~0.9% year-over-year in June across the region), there’s a sense that we’re at an inflection point. In short, today’s market is driven by a tug-of-war between still-strong underlying demand and the new reality of higher costs. The result is fewer sales and flattening prices, rather than the boom or bust swings of past cycles.

What This Market Means for Buyers

For those looking to buy a home, the current climate offers a mix of challenges and opportunities. The good news is you face a lot less competition than a couple years ago. Bidding wars are no longer the norm on most properties. With inventory up and homes spending longer on the market, buyers can be choosier and even negotiate on price and repairs in many cases. In fact, economists note that now is a time when “there’s room to negotiate” – savvy buyers are often able to secure concessions such as closing cost credits or price reductions off list price. Use this leverage to your advantage: you may get a home under contract for below asking, which was virtually impossible at the height of the frenzy.

However, affordability remains a hurdle. You’ll need to budget for higher monthly payments due to today’s ~6.5–7% mortgage rates. Be sure to get pre-approved with a trusted lender so you know exactly what price range you can comfortably afford. If the payment on your dream home is too steep, consider strategies like a temporary buydown, adjustable-rate mortgage, or asking the seller to buy down your rate – in this cooler market, sellers are often willing to help make the deal work. Also, keep an eye on your credit score and debt-to-income ratio (see our First-Time Homebuying Guide → for tips) to ensure you qualify for the best rates available.

One thing to remember: don’t expect massive price drops. Industry forecasts call for only modest overall price declines – Redfin, for example, predicts U.S. home prices may end 2025 around 1% lower than end of 2024. In Orange County, we may see minor dips or just flat prices. If you’re holding out hoping that home values will plunge, you might be waiting a long time. Instead, focus on finding a home that fits your needs and budget, and negotiate the best deal you can now. As one expert put it, “the sooner you buy, the sooner you start to build equity.” If rates fall in the future, you can refinance – but if prices resume climbing or competition returns, you’ll be glad you bought during the lull.

That said, quality properties still move fast. Well-priced, move-in-ready homes in great locations can still attract multiple offers (even in this market). Just recently, a turnkey Dana Point listing fetched 5 offers in 48 hours – proof that the most desirable homes are never short on suitors. So as a buyer, maintain your vigilance. When a home checks all your boxes, be prepared to act quickly and submit a strong, clean offer (with your pre-approval letter in hand). Our writing a great buyer cover letter tips might even help in a competitive situation. By staying patient but ready, you can make the most of today’s more balanced market.

What This Market Means for Sellers

If you’re looking to sell a home in Orange County, 2025 is still a favorable time – but success now requires more strategy and realistic expectations. The key point is that prices are holding near historic highs. We haven’t seen a crash in values; in fact, median prices are on par with last year’s peak. That means you likely have substantial equity to leverage. Many sellers this year are still getting excellent prices for their homes, especially compared to pre-pandemic values. So you haven’t “missed the top” in terms of pricing – the window remains open to sell at a strong price point (indeed, in our January market outlook we noted 2025 could be an ideal year to list, given high home values and buyer demand at the time).

However, the tactics that worked in 2021 need updating. You can’t just stick a high price on your home and expect dozens of offers on day one. With sales slowing, buyers have become more discerning. Overpricing is risky – an aim-too-high price will likely lead to your home sitting on the market and eventually a price cut. On average, Orange County homes are now selling for about 1–2% below list price, and nearly half of listings require a reduction before they sell. To avoid leaving money on the table, it’s crucial to price your property competitively from the start. Look closely at recent comparable sales and consider pricing at or slightly below the last comp to spark interest. Remember, a well-priced home can still draw multiple bidders today, whereas an overpriced one will just languish.

Also, prepare and present your home meticulously. In a market where buyers have more options, listings that shine are the ones that sell fastest. Before hitting the MLS, take care of deferred maintenance, touch up paint, declutter, and deep clean. Investing in professional staging is often well worth it – staged homes tend to photograph better and help buyers emotionally connect, which can lead to higher offers. (Our own staging team has countless success stories of transforming homes for maximum appeal; see our blog on why staging can put more money in your pocket →.) Even in a cooler market, the best-presented homes can sell quickly – as noted, one impeccably prepped home in Dana Point still drew 5 offers in two days. The bottom line: prep and pricing are paramount for sellers right now.

Finally, be ready to negotiate and be flexible with terms. You may receive offers with contingencies or below your asking price – that’s normal in a balanced market. Rather than rejecting an imperfect offer outright, see if there’s a way to make it work (perhaps via a small credit for repairs, or a slight price adjustment). It’s often better to compromise with a qualified buyer now than to hold out indefinitely in uncertainty. That said, don’t be afraid to highlight your home’s strengths and stick to your reasonable price if you’ve priced appropriately. Buyers are cautious but serious ones will pay fair market value for a home they love. Work with an experienced local agent (we can help there!) who can position your property effectively and negotiate on your behalf. With the right approach, you can absolutely achieve a successful sale even as the market normalizes.

In summary, Orange County’s real estate market is moving from an extreme boom toward a healthier equilibrium. Home prices remain very high, offering sellers a great opportunity, but homes are taking longer to sell, offering buyers a chance to breathe. Whether you’re planning to buy or sell, staying informed about these trends is essential. Timing, strategy, and preparation can make all the difference. If you’re a buyer, get your finances in order and be ready to act when the right home comes along. If you’re a seller, put in the work upfront – price smartly and present your home in its best light. And whichever side of the transaction you’re on, consider enlisting the help of a local real estate expert to guide you through the shifting landscape (we at Verso Homes are always here to help!).

*Data current as of July 2025. All statistics are for single-family homes (detached and attached) in Orange County unless otherwise noted. Sources include California Association of Realtors, Zillow, and MLS data. This information is deemed reliable but not guaranteed.*

Natalie Boyle
REALTOR®, Founder of Verso Homes (DRE #01329012)
Over 15 years helping South OC homeowners discover their perfect community.
Learn more about Natalie →