When will rates come down?
When Will Rates Come Down? California Real Estate in 2025
If you’re asking “When will mortgage rates come down in California?”—you’re not alone. With interest rates hovering at multi-year highs, many prospective buyers and sellers across the state are watching the market closely and waiting for signs of change.
So, what’s the real outlook for mortgage rates in California, and how will it impact the housing market in 2025?
Current State of Mortgage Rates in California
As of mid-2025, California mortgage rates remain elevated compared to the record lows of 2020–2021. Most 30-year fixed mortgage rates are averaging between 6.5% and 7%, depending on borrower credit and loan type. While this is lower than the 2023–2024 peak, it's still historically high and continues to affect both buyer demand and affordability.
What’s Driving Rates Right Now?
Several key factors influence mortgage rates in California and nationwide:
Federal Reserve Policy: The Fed has maintained higher interest rates to combat inflation, though it's signaled possible cuts later in 2025 if inflation slows.
Inflation Trends: Persistent inflation pressures have kept rates higher than many economists predicted.
Bond Market Volatility: Mortgage rates track the yield on 10-year Treasury bonds, which fluctuate based on economic outlook and global events.
When Will Mortgage Rates Come Down in California?
Forecast for Late 2025 and 2026
Most housing analysts predict gradual rate declines starting in late 2025. Here’s what the experts are saying:
The Mortgage Bankers Association expects the average 30-year rate to dip below 6% by the end of 2025.
Fannie Mae has forecasted a return to mid-5% range sometime in early 2026 if inflation stabilizes and the Fed begins rate cuts.
Local California lenders are cautiously optimistic, with some predicting refinancing opportunities in the second half of 2025.
That said, nobody can predict exact timing. Rates may fluctuate before stabilizing, and economic surprises (such as new inflationary pressures or global disruptions) could delay declines.
What Does This Mean for California Homebuyers?
If you’re waiting for lower rates to buy a home in California, here are a few things to consider:
1. Buy Now, Refinance Later
Many lenders are offering “buy now, refi later” programs, anticipating that rates will fall. This strategy allows you to start building equity and refinance when rates drop.
2. Less Competition in 2025
Buyer demand in California has cooled in high-cost areas like the Bay Area, Los Angeles, and Orange County. This gives current buyers more room to negotiate—something that may disappear once rates fall and demand surges again.
3. Rents Are Still Rising
If you're renting, consider the long-term cost of waiting. California rental prices continue to increase in many metros like San Diego, Sacramento, and San Jose, putting added pressure on would-be buyers.
What About Home Prices?
Many California markets have stabilized or experienced modest corrections in 2024–2025. However, inventory remains tight, and pent-up demand is likely to push prices upward again once rates fall.
In other words: Don’t expect a buyer’s market forever.
Should You Wait or Buy Now?
That depends on your financial goals, timeline, and local market. Here's a quick breakdown:
ScenarioSuggestionLong-term homeownership goalConsider buying nowNeed lowest monthly paymentWait for potential rate dropsCompetitive market areaAct before demand returnsLooking to investTarget undervalued suburbs
Final Thoughts: Timing the Market vs. Time in the Market
In California real estate, timing the market is tough—even for professionals. Rather than trying to predict exactly when mortgage rates will come down, focus on your readiness to buy, your long-term plans, and how a home fits into your financial picture.
If you're financially prepared and find the right home, it may make sense to buy now and refinance later when rates drop—just as many experts expect them to do.