California and the West Coast Enter a New Housing Phase

After years of rapid growth, California and the West Coast housing markets are shifting. The era of automatic gains is over. A slower, more selective market has arrived. According to Moody’s Analytics, U.S. home prices will remain mostly flat in the near term. However, California continues to follow a different path.

Slower Growth, Not a Crash

First, expect stability. Over the next two years, prices across California are projected to move sideways. Some markets may dip slightly. Others may rise modestly. Overall, sharp corrections remain unlikely. Later this decade, growth is expected to average 2 to 3 percent per year. While modest, that pace still outperforms many regions of the country.

Why California Holds Its Value

Next, supply remains the deciding factor. California faces chronic housing undersupply. Limited land, environmental regulations often restrict new construction. As a result, demand often exceeds inventory. Meanwhile, many other regions built aggressively during the pandemic. California largely did not.

Inland California Shows Strong Potential. Importantly, inland markets are emerging as long-term standouts. Cities such as Sacramento, Fresno, Stockton, Modesto, Bakersfield, and Chico are projected to see meaningful appreciation over the next decade. In several cases, prices could rise more than 40 percent, supported by relative affordability and limited new supply.

Coastal Markets Stay Resilient 

At the same time, coastal markets remain stable. In Los Angeles, the Bay Area, and San Diego, affordability remains a challenge. However, inventory stays tight. As a result, prices are more likely to level off than fall sharply.

Another powerful force is demographic. Boomers Are Aging in Place.

Many Baby Boomers are opting to age in place. They chose to remain in familiar environments and communities. Emotional ties, rising rents, and the cost of moving reinforce that decision.  Here, reverse mortgages play an important role. For many Boomers, a reverse mortgage provides access to home equity without selling. It helps fund daily expenses, healthcare, and home modifications. As a result, homeowners can stay longer, keeping resale inventory off the market.

Low Interest Rates Keep More Homes Off the Market

Millions of California homeowners, such as myself, are locked into very low interest rates from the pandemic. Selling would mean taking on a much higher monthly payment. Therefore, many stay put. Eventually, this will change. As Boomers move into their late 70s and 80s, more will transition to assisted living, downsizing, or living with family. Analysts expect this shift to accelerate sometime in the 2030s. Then, more homes should get listed for sale, especially in suburban California. However, the process may be more gradual rather than disruptive.

The Bottom Line

Ultimately, California’s housing market is resetting, not retreating. Price growth is slower. Speculation has cooled. Still, limited supply, low mortgage rates, and aging-in-place homeowners continue to support values. For buyers, local knowledge matters more than timing. For sellers, realistic pricing is critical. And for long-term homeowners, housing equity remains a sizeable asset.