Home prices also will increase, with the median at more than $900,000, C.A.R. predicts. But the recent drop in mortgage rates may help would-be buyers. With the real estate industry ready to turn the page on what's been a difficult 2024, one of the first state housing market forecasts is predicting a sunnier 2025.

In its annual lookahead, the California Association of Realtors expects home sales in The Golden State will be 10.5% higher than the projected 2024 total and 6.8% higher than 2023.

While the projected national total for 2024 is currently around 3.86 million, California is expected to tally around 275,400 in home sales. The forecast for 2025 is 304,400 sales.

This year's projected home sale total is well below three years ago, when it posted 444,500 sales.

Prices continue their upward climb: With rising home sales, the association believes home prices will keep rising in California. The forecast for 2025 is a 4.6% increase to a median price of $909,400. The median price is projected to be $869,500 in 2024 and was $814,000 in 2023. 

California remains out of step with the rest of the country as a persistent housing shortage continues to push up prices well above the national average of $416,700 in August.

Housing supply is expected to improve by around 10% as interest rates trend downward, but the pent-up demand will push up prices, said C.A.R. Chief Economist Jordan Levine.

"Price growth is expected to be slower, but the housing shortage will keep the market competitive outside of big economic shocks, so prices will still rise," Levine said.

The impact of interest rates: Since Californians have to pay so much for a home, any change in the mortgage rate impacts the monthly payment and can help affordability even with elevated prices.

A new report from Redfin found that the typical monthly housing payment in San Jose has fallen more than $2,000 from its springtime peak, but the average payment is still a whopping $9,398 a month. Rates have fallen from around 7.2% in April to 6.1% in mid September.

San Francisco (down $1,372 from its April peak) and Oakland (down $1,338) were second and third on the Redfin list of biggest drops dollar-wise in monthly payments.