As the Los Angeles housing market enters the second half of 2025, realtors are adjusting to a new landscape. After years of intense competition, skyrocketing prices, and rapid property turnover, the market is cooling, creating both challenges and opportunities for buyers, sellers, and real estate agents alike.
The State of the Los Angeles Housing Market
As of June 2025, the Los Angeles housing market has seen a marked shift. The median home price in Los Angeles County reached $850,000 in April 2025, reflecting a modest 2.9% year-over-year increase. This is a significant slowdown from the double-digit increases that dominated the market in 2021 and 2022. The slowdown is partly due to rising mortgage rates, which have hit their highest levels in over a decade.
The Role of Mortgage Rates
The Federal Reserve’s interest rate hikes, designed to combat inflation, have raised mortgage rates significantly. In June 2025, the average 30-year fixed mortgage rate stands at approximately 7.1%. For many buyers, this represents a steep increase from just a year ago, when rates hovered around 3.5%. Higher mortgage rates are pushing up monthly payments, causing many would-be buyers to rethink their purchasing power and adjust their expectations.
“The market has definitely slowed down compared to last year,” said Amy Williams, a realtor with Keller Williams. “While demand remains strong in some parts of Los Angeles, we’re seeing less urgency from buyers due to the higher financing costs. For many, their budget simply doesn’t stretch as far as it did before, and that’s changing the way we approach pricing.”
With less purchasing power, buyers are often opting for smaller homes or moving further out to areas like the San Fernando Valley or Inland Empire, where prices are lower. The desire to stay close to Los Angeles remains strong, but affordability is driving many to reconsider their options.
Buyer Behavior and Expectations
As the market stabilizes, buyers are becoming more cautious. Previously, homes in desirable areas were often snapped up in days or even hours, but now properties are taking longer to sell, and bidding wars are less frequent. Many buyers are opting for more conservative offers, and sellers are having to adjust their pricing expectations.
“Last year, we saw homes in areas like West Hollywood or Santa Monica getting multiple offers above asking price,” said Sean Parker, a realtor with Coldwell Banker. “Now, we’re seeing homes stay on the market for a longer period of time, and many sellers are having to lower their asking prices or make concessions.”
For many buyers, the increase in interest rates has led them to shift their priorities. Previously, they may have been willing to stretch their budget to secure a dream home. Now, the focus has shifted to securing a home that fits within their financial comfort zone, taking interest rates and monthly payments into account.
Inventory Challenges
While the market has cooled in terms of price increases, Los Angeles is still facing a significant inventory shortage. Despite the slowdown, the supply of homes remains tight, particularly in desirable neighborhoods such as Beverly Hills, Santa Monica, and Culver City. These areas are still seeing strong demand due to their proximity to work centers, high-quality schools, and desirable amenities.
The lack of supply, combined with rising interest rates, is creating a somewhat unique scenario in which there are fewer homes available, but less intense competition for those homes that do hit the market. This dynamic has led to a more balanced market, where buyers can afford to take their time, but sellers are still holding out for offers that meet their price expectations.
“While inventory is still low, it’s not as scarce as it was a year ago,” said Julia Tran, a realtor in Culver City. “The supply and demand imbalance has lessened a bit, but we still have a lot of people wanting to buy homes in the most desirable neighborhoods. There’s still competition, but it’s just not as heated.”
Strategies for Realtors in the New Market
In the face of these market changes, realtors are shifting their strategies. With fewer bidding wars and less urgency from buyers, agents are focusing on providing value in new ways. For example, agents are offering more comprehensive property tours, providing virtual tours for remote buyers, and emphasizing the potential of properties in ways that can make them more appealing in a slower market.
Real estate professionals are also relying on strong market knowledge and client education to help navigate a more cautious environment. Educating buyers and sellers about current market trends, mortgage rates, and financing options is a key component of maintaining success in today’s market.
“Buyers are more discerning now,” said Parker. “They’re looking for value, and that means we, as agents, have to be proactive in helping them understand the true potential of the properties they’re looking at. We also have to make sure sellers are pricing their homes correctly in line with the market, or else they risk their properties sitting on the market too long.”
The Future of the Los Angeles Housing Market
Looking forward, the Los Angeles housing market is expected to remain relatively stable, with gradual price increases, particularly in the suburbs and outer neighborhoods. The cooling market provides an opportunity for long-term buyers to enter the market without facing the extreme competition seen in previous years. However, the ongoing affordability challenges will continue to pose difficulties for first-time buyers.
“There’s still a lot of demand for homes in LA, but affordability remains the key issue,” said Williams. “The market may continue to stabilize, but prices are unlikely to dip drastically. For those who can afford to buy, there are still great opportunities, but it’s important to be realistic about your budget and your long-term goals.”
As interest rates remain high and inventory stays limited, buyers and sellers in Los Angeles must adjust their expectations and understand that the pace of the market will continue to reflect economic realities. For realtors, navigating this new market will require a mix of strategic pricing, client education, and adaptability to ensure continued success.
