What Will the Market Serve Up in 2025?
It is a mixed stew, to be sure. It includes, in equal parts, the economy, interest rates, inventory (projected), and home values. Throw it all in a blender until it’s fully mixed, and you approximate the state of the market in 2025. Of course, no one knows for sure what lies ahead, and that’s okay. I will let you in on a little secret nobody talks about: there will always be opportunities for buyers and sellers in an uncertain market.
Recent developments underscore this point. On December 18th, the Fed dropped its benchmark rate for the 3rd time since summer by another quarter percent but suggested only two further reductions in 2025—which was not what investors or bond markets wanted to hear. This caused stock markets to fall from recent highs and mortgage interest rates to spike, but so far, these are very short-term reactions and may quickly change course again. In early December readings, the U.S. jobs report rebounded, inflation ticked up slightly, and consumer confidence hit its highest point in seven months. And, as of the date of this report, a government shutdown looms once again due to the inability of Congress to agree on a spending bill.
Meanwhile, recent housing market data indicates that approximately 53% of sales went into contract in less than one month (vs. 62% in 11/23), 18% sold over list price, and 25% of buyers purchased all-cash. The median days-on-market to acceptance of offer was 32 days (vs. 25 days last year), and sold listings received an average of 2.1 offers. Approximately 30% of purchases were by first-time buyers and 4% by vacation home buyers.
As it stands, the market demands extra vigilance, persistence, and a thoughtful strategy. There are, actually, some positive signs on the horizon, as NAR’s Chief Economist, Lawrence Yu, says:
“Homebuyers will have more success next year. The worst of the affordability challenges are over as more inventory, stable mortgage rates, and continued job and income growth pave the way for more Americans to achieve homeownership.”
And that’s just a broad generalization. Location is still the biggest influencer. Within Greater Los Angeles, for instance, individual pockets and neighborhoods inside the city at large present more opportunities than others—at more optimal values. You have to know where to look. Above all, you should stay in touch with your Realtor and lender so you’ll be ready to act when the time is right.
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Some Juicy Morsels: Let’s Dig In!
Given the uncertainty of 2024 and the trepidation heading into 2025, I thought I’d throw in a few bite-size portions of information for your enjoyment that will hopefully be agreeable to your palate.
Homes Are Sitting Longer
Median days on market have steadily risen since 2021. This trend reflects a slower market—as buyers are taking their time, and homes are staying on the market longer, both buyers and sellers can expect a more plodding start to the year, with spurts of opportunity (e.g., favorable economic news, an increase in inventory, rate cuts, etc.) sprinkled in here and there.
Days on Market Have Risen Since 2021
Median Days on Market, October of Each Year
Source: Realtor.com
Inventory Is Inching Up
This has been a nice little trend many folks aren’t aware of. Active listings have increased steadily over the past few years. For buyers, that means more homes to choose from and less rapid-fire-sight-unseen-buying to beat the competition to the jump. However, for sellers, it means the opposite: more competition.
Inventory Has Risen Since 2021
Active Listing Count, October of Each Year
Source: Realtor.com
Mortgage Rates Should Dip
Many in the industry are predicting mortgage rates to trend downward in 2025. By the end of next year, rates are forecasted to dip to around 6.33%, potentially touching the high-5% range! While we’re unlikely to see dramatic drops, a more stable rate environment should provide relief to buyers sitting on the sidelines.
Mortgage Rate Projections
30-Year Fixed Rate, as of 12.04.24
Source: Fannie Mae, MBA, Wells Fargo
Normal Appreciation of Home Values
This bodes well for 2025. The majority of forecasts predict 3-4% appreciation nationally for the year. While some markets may see flat prices or small declines, others will continue to thrive. After years of rapid appreciation followed by volatility, stability is exactly what we need.
2025 Home Price Forecasts
Percent Appreciation, as of 12.04.24
Source: ResiClub
What Tasty Treats Can You Expect in 2025?
For Buyers
Could this be the year? 2025 could turn out to be a sweet spot with more inventory, stabilized rates, and slower appreciation. If you’ve been waiting for better conditions, now is the time to prepare.
For Sellers
Remain objective and flexible to market dictates. Buyers are more selective now. To stand out, ensure your home is priced right, shows well, and is positioned effectively in the market.