It’s no secret that California’s housing market has reached a breaking point.
With the state’s median home price expected to skyrocket to $909,400 by 2025 and more than half of residents unable to afford a home, Californians are starting to look elsewhere. And it’s not just to the suburbs. Increasingly, people are heading south—yes, across the border into Mexico, where they can actually buy a home without selling their soul. The question is, why does it have to be this way?
Let’s face it: the California dream of homeownership is slipping through our fingers, and developers can’t ignore the trends. People aren’t leaving because they want to; they’re leaving because the market here has made it impossible to stay. As the exodus grows, real estate developers, modular construction experts, and affordable housing advocates need to take a hard look at what it will take to keep Californians in California.
The Brutal Numbers on California’s Housing Crisis
Home prices in California are spiraling out of control, with projections showing a 4.6% increase in 2025 on top of the already inflated prices. The median home price in the state reached $869,500 in 2024 and is set to cross the $900,000 threshold in the coming year. For context, consider that the national average home price in 2023 was around $450,000—half of what Californians pay. This isn’t just a statistic; it’s a crisis that affects thousands of families who dream of owning a home but can’t afford the price tag.
The Housing Affordability Index for California tells an even starker story. With only 16% of California households able to afford the median-priced home, the state’s affordability is in free fall. Compare that with the 47% affordability rate at the national level, and it becomes painfully clear that the California housing market isn’t just competitive—it’s exclusionary.
With mortgage rates expected to decline slightly to 5.9% in 2025, there may be a bit of relief, but it’s not nearly enough to make a lasting impact. Even with a lower interest rate, the average monthly payment for a California home is far beyond reach for most residents. These numbers have created a perfect storm, forcing Californians to make tough choices and increasingly pushing them to look beyond state borders.
Californians are Packing Up and Moving South
For years, Californians fleeing high housing costs have looked to more affordable states like Texas, Arizona, and Nevada. But now, an unexpected new destination is emerging: Mexico. In 2023, Tijuana saw a 14% increase in the number of American residents—most of whom cited affordability as the primary reason for their relocation. They’re finding that in Mexico, their dollar stretches further, and they can afford homes with space, quality, and even a little luxury, all at a fraction of the cost of a California home.
And let’s not forget, these aren’t just retirees seeking a relaxed lifestyle. We’re talking about young professionals, middle-income families, and even remote workers who want a piece of the California dream but can’t get it within the state’s borders. For real estate developers in California, this trend signals a dire need for innovation. Without affordable, high-quality housing options, California risks losing even more residents, impacting everything from local economies to workforce availability.
Enter Modular Construction: The Solution California Desperately Needs
So, what’s the answer to California’s housing crisis? The solution lies in building faster, more efficiently, and at a lower cost. Enter modular construction—a method that’s gaining traction as a realistic, scalable solution to the state’s unaffordable housing market. With modular construction, homes are built in sections in a factory setting and then assembled on-site, slashing build times and reducing costs across the board.
Connest is at the forefront of this movement, bringing 100% steel-frame modular homes to the market. These aren’t the flimsy, cookie-cutter structures you might associate with prefab housing; these are solid, sustainable, and high-quality homes designed to stand the test of time.
Why Modular Construction Works for California’s 2025 Market:
- Speed: Connest’s modular homes are built 3x faster than traditional homes. In a state where demand is constantly outpacing supply, this efficiency is a game-changer.
- Affordability: By reducing labor hours, minimizing waste, and using durable materials like steel, modular homes offer a more affordable housing solution without compromising on quality.
- Durability and Resilience: With steel frames, Connest’s modular homes resist fire, pests, and the wear and tear that would send wooden structures into decay. Steel framing also adds a level of safety that Californians, especially in earthquake-prone regions, can’t ignore.
- Sustainability: Steel is fully recyclable, and modular construction generates less waste, making it a far more environmentally friendly option than traditional building methods.
Why Real Estate Developers Should Care
For real estate developers eyeing the 2025 market, modular construction isn’t just a trend; it’s a competitive advantage. With California’s housing prices expected to rise and the supply of affordable homes remaining limited, developers who embrace modular construction can deliver what the market so urgently needs.
Imagine the benefit of building faster without the constant threat of labor shortages, material delays, or budget overruns. According to a report by the Modular Building Institute, modular construction can reduce total construction costs by up to 20%, depending on the scope of the project. For developers, that’s a significant margin—and for buyers, it’s a potential home they can actually afford.
Connest’s pre-certified, modular homes come with a HCD certification and state pre-approval, which streamlines the regulatory process and helps developers sidestep the usual red tape. No delays, no back-and-forth over permits, just efficient, reliable construction.
Modular Construction: The Future of Affordable Housing in California
In an era when Californians are increasingly looking south of the border for affordable living options, modular construction offers a way to retain residents by creating housing solutions that meet demand head-on. Real estate developers who adapt to this method are tapping into a market primed for innovation, ready for speed, and desperate for affordability.
Imagine a future where California homes are built sustainably, efficiently, and affordably. Where developers can bring housing to market in a fraction of the time and at a fraction of the cost. With modular construction, that future is within reach, and it’s time for developers to take note.
Bottom Line
For California real estate developers, affordable housing advocates, and the entire construction industry, modular homes are more than just an alternative—they’re the solution California needs to keep residents in-state, prevent further exodus, and finally address the housing affordability crisis. The old ways of building are falling short. Modular is the answer for developers who want to keep pace with demand, cut down on costs, and offer housing that real people can actually afford.
Are you ready to build the future of California housing? Connest is.