As business is a little bit slow in December I figured it would be a good time to make a forecast for the coming calendar year, 2025. I follow the industry news fairly closely and listen to quite a few podcasts on the economics of real estate, current market conditions, and trends. 

Some interesting trends that have developed recently include Boomers staying in their primary homes longer than in the past because inventory is too low to find a home to downsize into and their reluctance to dispose of their low mortgage rate. Millennials are delaying or skipping traditional milestones such as getting married and having children. Family creation by young people is a big driver in housing because that normally leads to finding a starter home. 

Housing affordability is at record lows, and small drops in mortgage rates may not be enough to cause a surge of first-time homebuyers into the market. 

Another trend, especially in California is the reducing of housing regulations making it easier (somewhat) to build ADU’s and apartment buildings. The volume of local purchases fueled be foreigners using foreign funds to purchase San Diego real estate continues to be elevated. San Diego continues to be a prime destination by people wanting to park funds in the United States which keeps local home prices higher. These trends are all affecting the San Diego housing market and will weigh on future trends. 

Sales continued to be steady through the last four months of the year and there are signs that sales could pick up in the new year. The Fannie Mae Home Purchase Sentiment index increased by 0.4 points in November to 75, marking the fourth consecutive month of an upward shift.

While home sales have yet to pick up, there are signs that could change in the new year as consumers show increasing hopefulness about the real estate market. This means potential home purchasers are more optimistic. Rates are lower lately with a slight downward trend. If rates continue to drop, it appears that buyers will emerge into the market ready to buy. There is quite a bit of demand waiting on the sidelines by renters with good incomes and who are ready to finally buy a property locally. 

Several national surveys show an increasing consumer sentiment since the election. 

People expect next year to have a strong economy and people feel good about their incomes and jobs. This usually leads to an uptick in purchasing. I expect home sales next year to exceed this year and I expect home prices to rise slightly, maybe by 3% to 5%. If mortgage rates drop into the 5’s, I think buyers will surge in from the sidelines and inventory will become tighter.

If you are thinking of buying or selling in 2025, give me a no obligation call to discuss your options. I would be happy to listen to your plans and offer my opinion.

MARKET REPORT (Single Family): College Area (92115): November median price up 2.7% year over year to $940,000 and with 27 homes for sale (a 35% increase) San Carlos (92119): median price up 15.6% to $1,120,000 with 20 homes for sale (a 5% decrease). Del Cerro/Allied Gardens (92120): median price up 9%, year over year to $1,141,000 with 19 homes for sale (a 21% decrease). 

– Sarah Ward is a REALTOR with Fine & Coastal. Reach her at: [email protected].