In observance of the holidays, we will pause our Weekly Market Minute and resume regular updates on January 12.

December 22, 2025 – California’s economy continued to show mixed signals as 2025 drew to a close. Home sales climbed to their highest level since fall 2022, though growth slowed and pending sales reflected seasonal and economic headwinds. Median home prices stabilized, with some areas seeing modest gains, while others experiencing declines. Retail activity softened in October, driven by cautious consumer spending and a slowdown in auto and restaurant sales, though online and department stores posted growth. The labor market remained subdued, with job gains in November offset by losses in October, and unemployment rising to its highest level in four years. Inflation surprised on the upside, but data accuracy was compromised by the government shutdown. As California navigates through these evolving trends, we wish you and your loved ones a joyful and restful holiday season.

California home sales climb and reach the highest since fall 2022: California home sales improved again in November, rising from both the prior month and the same month last year to reach their highest level since September 2022. While the pace of year-over-year growth in existing single-family home sales slowed from October, November sales still increased 2.6% from the revised 280,530 units recorded a year earlier. Total home sales through the first 11 months of 2025 moved further above last year’s level for the same period. Despite the improvement, statewide sales in November continued to trail behind the 300,000-unit benchmark for the 38th consecutive month. Statewide pending home sales declined 4.6% year-over-year in November, marking the first annual drop in four months. Compared to October, pending sales fell sharply by 18%, reflecting both typical seasonal patterns and heightened mortgage rate volatility amid growing economic concerns. As the market moves through its seasonal slowdown, statewide sales are expected to close out 2025 with a modest gain and kick off 2026 with a slow start.

Home prices continue to stabilize in California: California’s median home price was essentially flat on a year-over-year basis in November but declined month to month to $852,680, as market competition cooled—a pattern typical for this time of year. The statewide median fell 3.9% from October, a steeper decline than the long-run average drop of 0.3% observed between October and November. Compared to a year earlier, prices were virtually unchanged, continuing a trend that the market has been observing in the past few months. Three of California’s five major regions recorded year-over-year increases in their median home prices. The Far North posted a moderate gain of 2.7% from November 2024, followed by Southern California with a 1.2% increase and the Central Coast region with a slight 0.2% uptick. In contrast, the San Francisco Bay Area experienced the largest annual price decline (-3.2%), followed by the Central Valley (-1.0%).

Retail sales stay soft in October as anticipated: Sales at the U.S. retailers and restaurants continued to slow after a solid summer. The headline retail sales figure was unchanged month-over-month in October, as September sales were revised down to 0.1% from 0.2%. On a year-over-year basis, the non-inflation adjusted retail sales figure was 3.5% higher than a year ago, but the annual growth rate was the smallest in the last five months. The primary factor that dragged on overall sales was the auto sector, as sales of motor vehicles and auto parts dropped 1.6% from the prior month. Restaurants/bars also dipped 0.4% month-over-month, an indication that consumers could be dining out less as the jobs market slowed in recent months. Despite shoppers spending cautiously, sales excluding autos still rose 0.4% from the prior month, with online retailers posting 1.8% growth and department stores seeing an increase of 4.9%. Despite a decent start for the holiday shopping season, consumer spending could remain soft in November due to the government shutdown but will bounce back slightly in December.

Job growth improved last month but had a net negative for October/November combined: Weak retail sales in October were partly due to a lackluster jobs market in recent months. In November, employers added 64k jobs, exceeding forecasts but remaining well below historical averages. Last month’s gain followed a significant loss of 105k jobs in October, primarily due to federal government layoffs after deferred resignation programs. As such, nonfarm employment growth for the two months combined shows a 41k decline from September. The unemployment rate also rose to 4.6%, the highest since September 2021, while broader underemployment — including discouraged and involuntary part-time workers — climbed to 8.7%. On a sector-to-sector basis, health care remained the dominant growth driver (+46k jobs), followed by construction (+28k) and social assistance (+18k), while transportation and warehousing (–18k), leisure and hospitality (–12k), and federal government (–6k) declined last month. Overall, the labor market continues to cool, with downward revisions to previous months and a Federal Reserve rate cut reflecting ongoing weakness in the current employment situation in the U.S.

Distorted inflation report surprises on the upside: Inflation on consumer goods/services came in much softer than economists expected, as the October headlined Consumer Price Index (CPI) registered an increase of 0.2% on a monthly basis and a jump of 2.7% when compared to 12 months ago. The year-over-year gain in the overall price level was the smallest since June, and it was well below consensus expectations of 3.1% polled by Dow Jones. Economists, however, cautioned on the validity of the data as the latest report encompasses the period when the U.S. government was shut down. The data collection process was disrupted as a result, and the Bureau of Labor Statistics (BLS) did not even start the November collection process until the middle of the month. The BLS was unable to retroactively collect some of the data and had to use some “nonsurvey data sources” to make the index calculations. The reading could be less accurate than the usual monthly data, as such, and a bounce back in the overall price growth in the December CPI report is likely. 

Note: This summary report gets updated every Monday by 6:00 pm PST. Feel free to email us at [email protected] if you have any questions and/or feedback.

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