Why California Homeowners Stay Put and What It Means for Investors

California’s housing market isn’t just cooling off. It’s in a deep freeze.

Across the state, both buyers and sellers are holding their ground. Sellers are hesitant to list, knowing they would have to give up their ultra-low interest rates for today’s much steeper borrowing costs. Buyers have hit pause too, priced out by a combination of high rates and even higher home values.

The result? Fewer listings, fewer closings, and more deals falling through late in the game. This pattern is playing out across the country, but in California, the impact is even more extreme.

What’s Driving the Slowdown

According to Redfin, five of the ten U.S. metros with the biggest drops in new listings are right here in California. San Francisco, San Diego, Riverside, and Anaheim are just a few areas seeing double-digit declines in homes hitting the market.

At the heart of this slowdown is what economists are calling the “lock-in effect.” During the pandemic, the Fed dropped interest rates to historic lows. Homeowners quickly refinanced or bought at rates under four percent. Now, rates have climbed to over six and a half percent, meaning anyone who sells and buys again could end up paying hundreds or even thousands more each month. In a state where the median home price is nearly $900,000, that difference adds up fast.

Then there is Proposition 13, which limits how much property taxes can increase based on the original purchase price. That creates another reason to stay put. In many California cities, new buyers pay twice the property tax of long-time owners in identical homes.

So it’s no surprise homeowners are staying right where they are.

What This Means for Private Investors and Borrowers

While this slow-moving market presents challenges, it also opens the door to opportunity, especially for those involved in private lending.

With limited inventory and tighter traditional lending, hard money is filling a growing gap. Buyers still want homes. Investors still want deals. Sellers who decide to move often need to move quickly.

Whether it is funding a bridge loan, providing capital for a fix-and-flip, or helping a buyer compete with cash, private money is becoming a key solution in today’s market.

At Pacific Direct Mortgage, we are seeing more demand from both borrowers and investors. Buyers are looking for speed and flexibility. Brokers need certainty. And investors are seeking strong returns backed by California real estate. In many cases, those returns can reach upwards of twelve percent.

Looking Ahead

Unless interest rates drop or major changes happen to property tax laws, California’s market is likely to remain tight. Prices will stay high. Sales will stay low. And many would-be buyers and sellers will continue to wait it out.

But for those with capital or equity, opportunity still exists. The key is having a lending partner that can move quickly and creatively when timing matters most.

Need help navigating real estate financing? Whether you’re looking to purchase, explore trust deed investing, or want guidance on your next home move, we’re here and ready to help!

Pacific Direct Mortgage is a Santa Rosa, California private money direct lender, offering Hard Money loans for single family, multi family, and investment real estate throughout California and Sonoma County.

Ken & Ari Walker

Husband & Wife Team Phone: 707‑708‑0797 / Office: 1400 N. Dutton Ave #22 Santa Rosa, CA 95401 Ken: CA DRE Broker #01858042 / NMLS #1221130 Ari: CA DRE #01858152 / NMLS #2170867 Ken & Ari are a husband & wife team with combined 3+ decades in real estate and private money industries. They own Pacific Direct Mortgage & Real Estate, specializing in Private Money loans (also known as Hard Money home loans). Having helped thousands of Borrowers & working directly with Brokers, Agents and Lenders to help when needed with fast, flexible, alternative financing for real estate purchases and refinances throughout California. No issues with DTI ratios, credit issues, property condition, difficult to prove income ‑ we want to help!