California’s housing market remains strong despite recent inventory gains
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California housing market is seeing an increase in inventory while population growth is slowing, but strong demand stemming from prolonged shortages has kept the market strong.
An analysis by the Public Policy Institute of California (PPIC) found that the state added 677,000 houses in a six-year period in which California’s population grew by only 39,000 residents.
Despite a modest increase in the number of homes available, vacancy rates show the market remains strong, with PPIC finding that owner-occupier vacancy fell from 1.2% to 0.8% while the rental vacancy rate was 4.3% in 2024, well below the national average of 5.9%.
“Even though the state is adding more housing than people, it’s been such a deep hole that recent construction gains haven’t been enough to really move the needle,” said Joel Berner, chief economist at Realtor.com.
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California’s population growth has slowed, but a chronic housing shortage has kept the market strong. (Mario Tama/Getty Images)
Long reign housing shortage units will need to be built more to get inventory levels closer to market parity, as the state will need 2.5 million more homes, according to the state housing agency’s 2022 estimate.
The PPIC analysis also noted demographic trends affecting California’s housing market, with median home sizes declining in recent years.
It found that California lost 82,000 households with children and gained 722,000 households without them from 2019 to 2024.
“There are fewer people living under one roof, which means that more roofs are needed for the same number of people,” said Berner.
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California has eased regulations to promote the construction of accessory dwelling units (ADUs), such as the one in Concord, California. (Smith Collection/Gado/Getty Images)
California’s aging population is a key factor in this trend, as PPIC found that about 16.5% of the state’s population is 65 or older today and projects that number will rise to 24.9% by 2050.
The housing boom started in the state of California five years ago, including encouraging the construction of services for residential units (ADUs), which are secondary dwelling units that are located on the same lot as the primary home but are usually enclosed or self-contained.
“The state has made significant progress in policy direction in promoting ADU construction in recent years, which should be commended,” said Berner. “The state has made efforts to remove zoning restrictions on ADUs, which helps bring more of them where they are needed most.”
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California’s housing shortage has persisted despite an increase in construction activity. (Kevin Carter/Getty Images)
Both PPIC and Berner suggested that while California is making progress, it has not yet achieved success in solving its housing shortage as new homes are snapped up quickly and vacancy rates remain low.
Berner noted that while 11.5% of the US population lives in California, the state accounts for only 7.3% of the newly admitted. houses last year, he added that “the pace is not fast enough.”
PPIC noted that homebuilding rates among young adults in California have increased, suggesting that younger residents are building homes — even though the state will need more affordable housing. entry level prices so they can take those next steps in California.
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That pipeline could be a problem, as Realtor.com noted that of the more than 1.2 million homes planned statewide, only 712,000 are designated for low- or low-income families — about half of what California believes it needs.
