Prediction 1: Home Prices Will Rise 4% in 2025

We expect the median U.S. home-sale price to rise steadily throughout 2025, ending the year 4% higher than it was in 2024. Prices will rise at a pace similar to that of the second half of 2024  because we don’t expect there to be enough new inventory to meet demand.  Rising prices are one factor that will keep homeownership out of reach for many Americans, leading some would-be homebuyers to rent instead.

Prediction 2: Mortgage Rates Will Remain Near 7%

Mortgage rates are likely to remain in the high-6% range throughout 2025, with the weekly average rate fluctuating throughout the year but averaging  around 6.8%. Investors are anticipating that if President-elect Donald Trump implements a significant portion of his proposed tax cuts and tariffs, and the economy stays strong, the Fed will only cut its policy rate twice in 2025, keeping mortgage rates high. Tariffs could be inflationary, and enacting more tax cuts would increase the U.S. deficit, both of which would push mortgage rates up. High mortgage rates are the second part of the equation that will keep homebuying unaffordable. 

Alternate scenario: Mortgage rates could drop to the low-6% range if the economy weakens and/or if plans for tariffs and tax cuts are dialed back. Any year in which the presidential administration changes is unpredictable, and this one may be especially unpredictable. 

Prediction 3: There Will Be More Home Sales in 2025 Than 2024

We expect existing home sales to tick up next year, ending 2025 at an annualized rate of between 4.1 million and 4.4 million. That represents a year-over-year increase of between 2% and 9%. We’re presenting an unusually wide sales range this year because while high housing costs may price out some would-be buyers, there’s also a fair amount of pent-up demand in the market. 

If sales post just a small increase, it will be because of high mortgage rates and low inventory, as homeowners continue to hang onto their homes. 

Sales may post a bigger increase if mortgage rates decline more than expected, and/or if the recent burst in homebuying demand continues. Homebuying demand jumped in the weeks after the November election despite mortgage rates sitting around 7%. That was partly because buyers were waiting for uncertainty to pass before making a big purchase, and partly because many people felt more financially confident with the promise of a Republican-led administration. Even before the election, our data showed that rising mortgage rates didn’t deter buyers as much as expected, likely in part because many Americans have grown accustomed to high mortgage rates. If the economy stays strong and enough people can afford next year’s high housing costs, that would push up sales. 

Prediction 4: 2025 Will Be a Renter’s Market

Many Americans will remain renters or become renters. While the cost of buying a home will increase, rental affordability will improve. We expect the median U.S. asking rent to remain flat year over year in 2025. That will make rent payments more affordable to the typical American because wages will rise. 

There will also be more new rentals coming on the market, with many of the units builders started working on during the pandemic apartment-building boom coming to fruition. This will create more supply than demand, motivating landlords to offer concessions like free parking, a free month of rent, more amenities or a hiatus on rent increases in order to retain residents. With rents flat or maybe even down next year, and home prices rising as rates are likely to stay high, the affordability gap between renting and buying may widen. 

Prediction 5: Fewer Construction Regulations Will Lead to More Homebuilding

We expect homebuilders to construct more single-family homes in 2025, though it will take a few years for the increase in homebuilding to make buying a house significantly more affordable. The Republican sweep of the White House, Senate and House has improved builder confidence by bringing renewed optimism that regulatory burdens may ease. Builders will also bank on the fact that the mortgage-rate lock-in effect will put a lid on the amount of existing inventory competing with new builds.

Easing regulations should also lead to a rebound in multifamily housing starts. That will be a reversal from 2024, when builders pulled back on apartment starts because of the glut of supply.

The caveat is that there are a few headwinds for builders. One, interest rates are likely to stay high. Two, the incoming administration has said it will cut back on immigration, which would likely lead to less residential construction, as immigrants make up about 30% of the country’s construction work force. 

Prediction 6: The Real Estate Industry Will Consolidate

Under the new administration, the Federal Trade Commission will be more likely to approve mergers and acquisitions among large companies. Unlike other industries with a few dominant players, the U.S. real estate industry has long been fragmented with multiple real estate search sites and brokerages of all sizes and business models competing for agents and customers. While it’s not uncommon for larger brokerages to have affiliated mortgage or title services, we’re likely to see more roll-ups of brokerages, lenders and title companies looking to generate more business from every customer. 

Prediction 7: Mayors in Blue Cities Will Help Reverse the Flight From Urban Centers

San Francisco elected a pro-business Democrat as its new mayor this year, Portland, OR elected a mayor who pledged to end unsheltered homelessness, and several other big cities in blue states are enacting tough-on-crime policies to revive their downtowns and retain residents. Those political factors, along with many big companies–including tech firms–bringing their workers back into the office, may start a reversal of the flight from big coastal cities. 

We expect that to be especially true in California. Many Golden State residents will be motivated to stay because housing supply will continue to improve, curbing price growth; specifically, the ADU building boom in places like Los Angeles and the Bay Area should continue to provide more housing. Additionally, it no longer makes as much sense to chase housing affordability in the desert, as home prices in places like Phoenix and Las Vegas have gotten higher while climates have gotten hotter. Self-driving cars will start to become more common under the new administration, making more parts of California more livable. Urban areas like San Francisco and downtown Los Angeles will become more attractive as self-driving ride-hailing apps and buses are approved, and exurbs will be more appealing because personal autonomous cars will improve commutes.

Prediction 8: Gen Z Will Rewrite the American Dream, Cutting Homeownership From the Script

We expect lower-priced homes to boom in 2025 compared to higher-priced homes, but that won’t be because young Americans or working-class people are breaking into homeownership. Instead, affordable homes will be snapped up by older buyers who are priced out of higher price tiers. Gen Zers, meanwhile, will keep living with family or renting until well into their 30s, opting to build wealth in other ways. 

Through the third quarter, sales of existing homes were tracking below last year's levels. Forecasters were optimistic for a strong 2024, but higher-for-longer mortgage rates and affordability challenges have subdued transactions. However, new pending sales were strong this fall, so it is possible that 2024 will end with more sales than last year.

But how strong of a fourth quarter do we need?

The numbers

According to the most recent numbers available from the National Association of Realtors, there have been 3.42 million existing home sales on a seasonally unadjusted basis (reflecting the raw number of sales each month) through October. The pace of home sales year-to-date in 2024 is running about 2% below 2023 levels.

Over the past 10 years, sales during the first three quarters of the year accounted for about 70% of total annual sales, and fourth-quarter sales accounted for 30%. In order to achieve levels equivalent to 2023, we would need to see about 1.02 million home sales between October and December. Fourth-quarter sales of that magnitude would be a 9% bump over the same period in 2023.

The explanation

At this time last year, all signs pointed to a busy housing market in 2024. Mortgage rates were projected to fall, and buyers who had been waiting on the sidelines were going to be out in full force.

But 2024 has ended up a disappointment so far. What went wrong?

The Federal Reserve delayed interest rate cuts. While inflation had been easing, progress stalled in early 2024. By the summer, inflation was still at or above three percent, and the Fed had still not cut interest rates. The Fed did not cut interest rates until September, and by then it was too late to give much of a jolt to the housing market.

Strong economic conditions and political uncertainty led to rising mortgage rates. Following the Fed rate cut in September, mortgage rates actually rose instead of falling, due to the strong economy and uncertainty around the presidential election. Buyers who were waiting for rates to come down in the fall were disappointed, and many decided to wait longer.

Rate lock kept sellers out of the market. Record-low mortgage rates during the pandemic enticed millions of people to buy homes and refinance existing mortgages. But when mortgage rates rose, the gap between the rate a new borrower could get and the average rate held by a current mortgage holder widened. Homeowners who might have wanted to sell their home were "locked" in place by their much lower rate, keeping inventory and sales lower.

Affordability was a major constraint in 2024. Record-high home prices and rising mortgage rates increased affordability challenges, particularly among first-time and moderate-income buyers. Even with a dip in interest rates, many prospective buyers were still priced out, which kept home sales activity low.

It is still possible that overall home sales in 2024 will match — or even exceed — 2023 levels. The number of pending sales in September was up a robust 7.4% nationally. Local markets have seen an even bigger bump. Across the Mid-Atlantic, new pending sales were up almost 9% year-over-year in October.

When those new contracts convert to closed sales, we could end the year with strong sales activity. But a drop in mortgage rates in the last few weeks of the year may be what's needed to push 2024 totals over the threshold.

If you're thinking about making a move, feel free to contact us below. We're happy to look at your options with you.

Looking to buy a home in San Diego but feeling like almost everything is out of reach? Here’s the thing. There’s still a way to become a homeowner, even when affordability seems like a huge roadblock – and it might be with a fixer upper. Let’s dive into why buying a fixer upper could be your ticket to homeownership and how you can make it work.

What Is a Fixer Upper?

A fixer upper is a home that’s in livable condition but needs some work. The amount of work varies by home – some may need cosmetic updates like wallpaper removal and new flooring, while others might require more extensive repairs like replacing a roof or updating plumbing.

Because they need some elbow grease, these homes typically have a lower price point, based on local market value. In fact, a survey from StorageCafe explains that fixer uppers generally cost about 29% less than move-in-ready homes.

And that’s why, according to a recent survey, more buyers are considering homes that need a little extra work right now (see below):

If you’re looking for an option to get your foot in the door, and you’re willing to roll up your sleeves and do a bit of work, a house with untapped potential may be a good option.

Tips for Buying a Home That Needs Some Work

Before you buy a home that may need a makeover, here are a few things to keep in mind:

• Choose a Good Location: You can repair a house, but you can’t change where it is. Make sure the home is in a neighborhood you like or one with increasing property values and a growing number of local amenities. This way, even after you spend money fixing it up, the house will be worth more later.
• Budget for Surprises: Fixing up a house can take more time and money than you might think. Make sure you save room in your budget for unexpected repairs or other unknowns that might come up while you’re working on the house.
• Get a Home Inspection: Before you buy, hire an inspector to check out the house. They’ll help you determine the necessary repairs, so you don’t end up with expensive surprises later.
• Plan Your Priorities: When deciding what to tackle first, it helps to categorize your goals. Think of your home in three ways: the must-haves (essential repairs), the nice-to-haves (upgrades that would make life easier), and the dream-state features (luxuries you can add later). This will help you prioritize and stick to your budget.

Remember, the perfect home is the one you perfect after buying it. By starting with a fixer upper, you have the opportunity to customize a home to your liking while saving money on the initial purchase price. With careful planning, budgeting, and a little bit of vision, you can turn a house that needs some love into your perfect home. 

The DHC Group in San Diego is great at finding homes with potential. They know the local market and can guide you to homes where smart upgrades can add value. With their help, you’re more likely to find a house that fits your total budget and has room for worthwhile improvements.

Bottom Line

In today’s market, where the cost of homeownership can be intimidating, finding a move-in-ready home that fits your budget can feel like a real challenge. But if you’re open to putting in a little work, you can transform a fixer upper into your ideal home over time. The DHC Group and Hennin Foreman can help you explore what’s possible and find a place that’ll work for you.

Let us know how we can help...comment below and we'll be in touch

After years of frozen listings, there's finally hope for San Diego homebuyers.

There wont be dancing in the streets, but it would be a marked improvement from the past couple of years.

The Federal Reserve's jumbo interest-rate cut in mid-September was welcome news to prospective homebuyers, with the expectation that a lower federal funds rate would help push mortgage rates lower. 

The Federal Reserve's 50-basis-point rate cut from September 18 has started to push mortgage interest rates down, bringing a glimmer of hope to potential buyers. With two more Fed meetings scheduled before the end of 2024, we could see rates continue to fall.

Experts are weighing in on how low mortgage rates might go, and their predictions might surprise you. Some see rates dropping to the mid-5% range, while others are even more optimistic. But factors such as inflation and government debt could impact these forecasts.

If you're eyeing a home, the question becomes: Should you buy now or wait for lower rates? It's a tricky balance. Lower rates mean smaller monthly payments, but they also could spark a surge in home prices. Here's what mortgage specialists predicted in terms of potential rate drops for the rest of this year.

Here's how far mortgage rates could drop before the end of 2024

Debbie Calixto, sales manager at loanDepot, offers a cautiously optimistic view of where mortgage rates could head before 2025. 

"While we'll likely see a modest improvement in mortgage rates following [the Fed's decision on the 18th], future movement will depend on economic data in the coming weeks," Calixto says. 

Calixto predicts the Fed might cut rates by another 50 to 75 basis points by year-end, potentially bringing mortgage rates down to the mid-5% range.

Josh Green, a mortgage loan officer at Barrett Financial Group, is bullish on rate cuts. 

"If we're talking about a conventional 30-year fixed with 25% down and a 740 credit score, I'd say we'll hit around 5.5% to 5.75% by the end of 2024," Green says. 

Green believes rates will continue to drop as we enter 2025, barring unexpected inflation spikes.

Looking further ahead, Dean Rathbun, a mortgage loan officer at United American Mortgage Corporation, paints an even brighter picture.

"We're looking at rates to possibly be in the high fours or low fives by 2025," Rathbun says. This could be a game-changer for new buyers and recent homebuyers looking to refinance.

Pros and cons of waiting for another rate drop

Even with rate drops on the horizon, waiting might not be the best move for homebuyers.

"Traditionally when rates drop, sales activity picks up and therefore prices become higher," Rathbun says. He tells his clients it's often better to buy with a slightly higher interest rate today because refinancing is possible later.

But your decision ultimately depends on your circumstances. To determine what makes the most sense, it may help to weigh these pros and cons:

Pros of waiting

• Possibility of lower monthly payments if rates fall
• Potential for lower finance costs

Cons of waiting

• Risk of higher home prices due to increased demand
• More competition from other buyers entering the market
• Missing out on building equity sooner
• Potential refinancing costs if you buy now and refinance later

Should you buy a home now or later?

When deciding, Calixto advises focusing on what's best for you and your family rather than market conditions you can't control. It may help to ask yourself:

• Is your family growing?
• Are you looking to put down roots in a new community?
• Do you want to be closer to family?

These factors often outweigh slight differences in interest rates.

Her own experience illustrates this point. In 2016, Calixto bought a home for her family. 

"I found [the perfect] house for us, but it needed work," Calixto says. "Despite the higher monthly payment, I saw its potential and made an offer, knowing I'd have to make some sacrifices to afford it."

Over the next five years, she renovated the home and refinanced it to lower her interest rate and payments. Today, she has nearly $400,000 in home equity.

Calixto's story highlights an important consideration: Waiting for lower rates can work against you. 

"Had I waited, I wouldn't have been able to buy this home — the lower rates led to higher property values, which would have pushed it out of my price range," she explains.

The bottom line

Mortgage rates may drop further, but waiting could cost you in other ways. "Inventory is tight and there are plenty of buyers out there, even [at] current prices," Green says. If you continue to sit on the sidelines, "you can almost count on prices going up as a result."

So if you've been thinking about buying a home or refinancing, it could benefit you to a respected San Diego mortgage professional who can help you prepare, understand your options and determine whether you can afford and sustain a home purchase.

It may have gotten a little easier to buy a home in the San Diego market, according to a new reports by numerous sources.

In a housing overview of the nation’s largest metros last month, the median sales price for a home in the San Diego-Chula Vista-Carlsbad area was $999,000 — a 9% decrease from the same time last year, according to the Realtor.com stats.

In addition, San Diego was among the top three metros that saw the largest growth in newly listed homes compared to last year. Cincinnati reported a 31% growth while Seattle saw 30% and San Diego had a nearly 23% increase, the report showed.

The inventory of homes for sale increased in all 50 of the nation’s largest metros compared with last year, but San Diego was also among the top three that saw the most growth as of last month.

San Diego saw an 80% increase in inventory while Tampa topped the list at 90% and Orlando reported nearly 77%, the report said.

However, although the median listing price for homes in the region fell compared to last year, the price per square foot has increased by just over one percent.

The housing market is also nowhere near its pre-pandemic condition. The median listing price in August for a home in the San Diego-Chula Vista-Carlsbad market was almost 41% higher than the same time in 2019, according to SDAR.

The other 49 metros on the list had a similar story last month. The median price in Milwaukee, Wis., Philadelphia, Penn. and Cleveland, Ohio saw the biggest increases from 2019’s numbers.

Meanwhile, home sales nationwide remain sluggish. The typical home spent a week longer on the market in August compared to the same time last year.

If you need our help navigating, or just have a few questions about buying a San Diego home or selling your San Diego home, send us a message of give us a call. We are always available to help!

If you’re wondering what’s going on with San Diego home prices lately, you’re definitely not the only one. With so much information out there, it can be hard to figure out your next move.

As a buyer, you might be worried about paying more than you should. And if you’re thinking of selling in San Diego, you might be concerned about not getting the price you’re aiming for. 

So, here’s a quick breakdown to help clear things up and show you what’s really happening with San Diego home prices—whether you’re thinking about buying or selling. 

Home Price Growth Is Slowing, but Prices Aren’t Falling Nationally

Throughout the country, home price appreciation is moderating. What that means is, prices are still going up, but they’re not rising as quickly as they were in recent years. The graph below uses data from Case-Shiller to make the shift from 2023 to 2024 clear:

But rest assured, this doesn’t mean home prices are falling. In fact, all the bars in this graph show price growth. So, while you might hear talk of prices cooling, what that really means is they’re not climbing as fast as they were when they skyrocketed just a few years ago.

What’s Next for San Diego Home Prices? It’s All About Supply and Demand 

You might be curious where San Diego home prices will go from here. The answer depends on supply and demand, and it’s going to vary by local market.

Nationally, the number of homes for sale is going up, but there still aren’t enough of them to meet today’s buyer demand. That’s keeping upward pressure on prices – even though recent inventory growth has caused that home price appreciation to slow. Danielle Hale, Chief Economist at Realtor.com, said:

“. . . today’s low but quickly improving for-sale inventory has ushered in more market balance than would otherwise be expected . . . This should help home prices maintain a slower pace of growth.” 

And here’s one other thing you may not have considered that could play a role in where prices go from here. Since experts say mortgage rates should continue to decline, it’s likely more buyers will re-enter the market in the months ahead. If demand picks back up, that could make prices climb a bit further.

Why You Should Work with a Local Real Estate Agent 

While national trends give a big-picture view, real estate is always local – especially when it comes to prices. What’s happening in your San Diego neighborhood might be different from the national average based on what supply and demand looks like in your market. That’s why it’s crucial to get local insights from a knowledgeable San Diego real estate agent.

As your go-to source for everything related to San Diego home prices, my team of professionals can provide the most current San Diego data and trends specific to your neighborhood.

So, if you’re planning to sell, we can help you price your house accurately. And when you’re ready to buy, we can find the right home that fits your budget and your needs.

Bottom Line

San Diego home prices are still rising, just not as quickly as before. Whether you’re thinking about buying, selling, or just curious about what your house is worth, DM or Email Us today to get the personalized guidance you need.