As 2025 draws to a close, California’s economy is sending mixed signals—showcasing resilience in some sectors while facing headwinds in others. From stabilizing home prices to shifting consumer spending and a cooling labor market, here’s what the latest data tells us about the Golden State’s economic landscape heading into the new year.
1. Housing Market: Sales Climb, but Momentum Cools
California home sales reached their highest level since fall 2022 in November, rising 2.6% year-over-year. However, the pace of growth is slowing, and pending sales dropped sharply by 18% from October—reflecting both seasonal trends and buyer hesitation amid mortgage rate volatility.
While sales are improving, they’ve now remained below the 300,000-unit benchmark for 38 consecutive months, signaling that a full market recovery is still underway.
Home Prices Show Regional Divergence
Statewide, the median home price dipped to $852,680 in November, down 3.9% from October. Year-over-year, prices held essentially flat—continuing the stabilization trend observed in recent months.
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Price Gains: Far North (+2.7%), Southern California (+1.2%), Central Coast (+0.2%)
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Price Declines: San Francisco Bay Area (-3.2%), Central Valley (-1.0%)
This regional split highlights varying levels of demand and affordability across the state.
2. Retail & Consumer Spending: Cautious Holiday Season
October retail sales were flat month-over-month, with annual growth slowing to its weakest pace in five months. Auto sales fell 1.6%, and restaurant activity dipped—pointing to more careful consumer spending.
Still, there were bright spots:
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Online retailers grew 1.8%
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Department stores jumped 4.9%
Shoppers are being selective, but opportunities remain for certain retail categories.
3. Labor Market: Cooling Amid Volatility
November saw 64,000 jobs added, beating forecasts—but this followed a loss of 105,000 jobs in October. Combined, the two months showed a net decline.
The unemployment rate rose to 4.6%, the highest since September 2021, with underemployment climbing to 8.7%.
Sector snapshot:
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Growth: Healthcare (+46K), Construction (+28K), Social Assistance (+18K)
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Declines: Transportation/Warehousing (-18K), Leisure/Hospitality (-12K), Federal Government (-6K)
The labor market continues to soften, consistent with broader economic cooling.
4. Inflation Data: A Shutdown-Distorted Picture
October’s CPI rose 2.7% year-over-year—below expectations and the smallest gain since June. However, economists warn that data collection was disrupted by the federal government shutdown, reducing accuracy. A rebound in price growth is likely in coming reports.
Looking Ahead
California’s economy remains in a period of adjustment—balancing slower job growth, moderated inflation, and a housing market in search of stable footing. As we move into 2026, watching these trends will be key for businesses, homeowners, and policymakers alike.
From all of us, we wish you a peaceful close to the year and a hopeful start to the new one.
