Santa Monica's housing market underwent significant shifts in 2025, with both rental and sales markets cooling substantially as higher interest rates and increased inventory gave buyers and renters more negotiating power than they've had in years.
Rents in the city fell 1.2% in November alone, bringing the year-over-year decline to 0.1%, according to Apartment List's December 2025 report. The median rent now stands at $2,316 for a one-bedroom unit and $2,776 for a two-bedroom, while the citywide apartment vacancy rate climbed to 5.2%, up 0.7 percentage points from a year ago.
The rental decline mirrors a nationwide trend, as November marked the slowest month for rentals across the country. Nationwide rents fell one full percentage point last month, with median rents now 5.2% lower than the 2022 peak. Vacancies remain at their highest levels since at least 2017.
In the sales market, median home prices dropped 5% to 10% year-over-year, with October 2025's median of approximately $1.75 million representing a 10.5% decline from October 2024. The downturn marked a reversal from the flat-to-rising prices of late 2023 and reflected the impact of mortgage rates averaging 6.5% to 7% throughout the year.
Sales volume decreased as well, with 48 homes sold in October compared to 58 a year prior, indicating buyers and sellers sitting out the market in the high-rate environment.
The shifting dynamics have transformed Santa Monica from a highly competitive seller's market into what real estate analysts describe as balanced to mildly seller-leaning. Homes now take longer to sell, with the typical listing going pending in about 34 days compared to roughly 30 days a year earlier.
Perhaps most telling, only 37% of Santa Monica sales closed above list price in fall 2025, while 54% sold under asking. The median sale-to-list ratio reached approximately 0.99, just under 100%, a stark contrast to the bidding wars of 2021-2022 that often pushed prices well over list.
"Buyers had more room for inspections and contingencies, and were often able to negotiate repairs or price reductions, especially on overpriced listings," the report noted.
Inventory increased modestly throughout 2025, with active listings up about 10% from mid-2024, giving buyers slightly more choice. By late 2025, approximately 275 homes were on the market, equating to roughly 5 to 6 months of supply.
However, inventory trends varied by property type. Listings of one-bedroom homes fell 14% from the prior year, while three-bedroom listings rose 28% and five-bedroom listings increased 25%, meaning first-time buyers faced intense competition for entry-level properties.
Despite the cooling market, Santa Monica advanced several major housing developments in 2025. The city's Architectural Review Board unanimously approved an 8-story, 260-unit mixed-use complex at 1907-1933 Wilshire Boulevard in September, including 26 affordable units. Construction also commenced on the Pico Bowl redevelopment, a mixed-use complex featuring 186 apartments including 19 affordable units.
The City Council approved a development agreement for a 122-unit, 100% affordable project at 1318 4th Street downtown, and plans were filed for a 257-apartment development at 1238 Lincoln Boulevard.
These developments reflect Santa Monica's response to its state-mandated housing targets, which call for 6,168 affordable units by 2029.
New California legislation also reshaped local housing policy in 2025. Senate Bills 684 and 1123, effective July 1, require cities to ministerially approve subdivisions of up to 10 residential units on certain parcels, even in single-family zones. Santa Monica's City Council initially adopted standards exceeding state minimums, but the Planning Commission unanimously delayed permanent adoption in December, citing insufficient public input.
The city maintained its rent control policies, with the Rent Control Board approving a 2.3% general adjustment for controlled apartments effective September 1.
Local employment conditions provided a generally supportive backdrop, with unemployment in Los Angeles County in the mid-5% range and Santa Monica's white-collar workforce remaining largely employed. The city continued attracting high-earning professionals from expensive cities like San Francisco, Houston and Washington, D.C., helping sustain demand despite economic headwinds.