Virtually everyone is reluctant to predict the future of the real estate market. Even most realtors will throw their hands up and declare, “Who knows?”.
But around here, one fact has been clear and it tells us what we need to know about the rest of the year. The number of NSDCC listings in January ends up being 8% to 9% of the total for the year:
NSDCC Listings and Sales Data (La Jolla, Del Mar, Solana Beach, RSF, Cardiff, Encinitas, and Carlsbad)
It means that by mid-February we will be able to predict how many listings there will be in 2025, and thus, give us the likely direction of the market for the rest of the year.
I’ve been saying for three months that there is going to be a surge of listings, and it could be 15% to 20% more than there were in 2024. We’ve been doing the contest for Padres tickets to help put a spotlight on the January listings, and it has never been more interesting to see how many will hit the market this year!
Tomorrow, I’ll do a summary of the guesses so far and give everyone the rest of the week to enter or revise their guess so come back Monday morning.
The chart above gives more data for the analytical folks to craft their guess.
My Thoughts:
The last frenzy before Covid was in 2013. Pricing was stuck in a fairly tight range for the previous five years, but listings dropped and sales took off in 2012 and pricing followed in 2013 with a little more inventory. The variables weren’t all the same as today, but you may want to apply a similar effect from the animal spirits to today’s market. Or maybe not?
With another 9% increase in the median sales price and cost-per-sf in 2024, it shows that there really hasn’t been any limits on pricing. Will 2025 be the year that it changes? If so, will it be caused by another surge in listings? Or is there enough money floating around that more listings will cause more sales at higher prices like it did in 2024? It could go either way.
What about the political climate? Pro-Trump supporters are elated and will gladly join the buyer pool. Anti-Trump people are fearing the worst, but like we saw during the pandemic, fear is a fantastic motivator and it causes people to want to hunker down…at any price.
I had more people attend my open house yesterday on La Costa Avenue than I’ve had at the previous seven OHs. Most were just getting started, and the basic need for housing will keep them looking around. Will they buy? We’ll see.
We round-tripped four of our 17 listings in 2024 – and three of those were since the commission debacle on August 17th. Successfully working with buyers had already been a major challenge for agents, and now it’s worse. The affluent buyers will probably always want professional help, but will there be many, if any agents left who are willing to devote months of effort just to have their commission rate dangled in front of the seller for their approval?
Will the market survive it all? Yes, because there isn’t anything that price won’t fix!
In 2024, we had more drama than usual. The Big Three:
Hotly-contested election.
Commission debacle.
Mortgage rates that were supposed to come down, but didn’t.
Any one of those could have derailed the real estate market, but instead we survived just fine:
NSDCC Annual Counts, 2023 vs. 2024
With the drastic drop in inventory since covid, it seemed to make sense that the market could handle an extra 15% to 20% homes for sale.
Indeed – there were 14% more homes for sale, and sales AND pricing increased 9%!
The number of active listings at the start of 2024 was about the same as it was to begin 2023. However, we’re starting 2025 with 16% more actives already, and I expect an early surge. We could easily have 400+ NSDCC homes for sale by the end of January.
Can our local market handle 15% to 20% MORE homes for sale on top of what we had in 2024?
We’re going to start the new year with about 17% more houses for sale than we did in 2024. They will be joined by other failed listings from the past, and the inventory will most likely be rising faster than normal.
The first inventory count of 2024 was 255 homes for sale on January 2nd, and that number was 22% higher by the first week of February.
If the 2025 inventory grows about the same or a little faster, it means there will be 375-400 homes for sale by the end of February. It will be VERY EARLY in the season to have that many homes for sale already! We didn’t get to 400 until mid-May of this year!
Personally, though we are expecting a fast start in 2025, we aren’t going to publish our first home for sale until January 9th. It will begin a six-week stretch where we will be rolling out a new listing every Thursday!
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My Reasons Why NSDCC Inventory Will Surge in 2025:
1. Been trending that way – there has been 15% more NSDCC homes for sale this year than in 2023.
2. More listings have been cancelling this year than in Q423. They’ll be back!
3. Prop 19 was fun while it lasted – more of those who inherited a home will want to cash out.
4. Credit card debt is over $1 trillion for the first time. More current homeowners will lighten the load by paying off all their bills and downsize to cheaper home (probably out of state).
5. The affluent fleeing the country – if you have nothing tying you down here, then there are other choices.
6. The 5th anniversary of Covid is a few months away. Those who put off moving can go ahead now!
7. California politics drives people away. Gav’s $25 million to fight Trump? Might be the last straw for some.
8. I don’t have the statistics but more baby boomers should be shuffling off this mortal coil.
9. We’re all older – if you’re going to move, do it while you still can, physically!
10. Covid buyers with life changes – Flush with equity, they can sell and buy a better house.
In spite of the most controversial election in the history of America – one that could have been much more distracting – the NSDCC sales in the second half of 2024 were phenomenal.
The number of second-half sales rose 13% year-over-year, and the median sales price was 8% higher!
Now if mortgage rates settle down a little and there isn’t any economic or political chaos over the next few months, the prospects for a fantastic 2025 look good!
Oh geez, did Jim say something about prices going down?
Yes, and isn’t it inevitable in areas where there is more supply than demand?
Sure, we can always reflect on Rancho Santa Fe where having your home languish on the market every year is a rite of passage. Somebody will come along some day, won’t they?
Bill is one of the OGs from 2005 and he is more analytical than me. He is giving us a formula; when the months’ supply gets over 5, prices might decline:
The NSDCC is safely around a 3-month supply currently. We’ll see where it is in February and March!
If there is a surge of inventory in early 2025, what will happen?
Here are the choices:
Frenzy – With rates stubbornly high, the best case is a mini-frenzy where buyers engage in bidding wars for only the top-quality listings. Some of the insanity bleeds over to the not-so-great homes and a few get picked up. About 33% to 50% of listings sell, and the more sane, rational buyers are left shaking their heads.
Not Frenzy – There aren’t enough buyers left who are willing to pay whatever it takes, and instead the wait-and-seers get even more picky and only 1 out of 10 listings are selling.
Middle Muddle – This is the most likely scenario. Great agents list the spruced-up homes for attractive prices and there is a good, solid flow of sales happening….while most listings are languishing on the market. Those sellers want to believe that if they just wait longer, they will be rewarded. By summertime, there are unsold listings stacking up everywhere – and being ignored.
I heard about one seller who has already moved, and intends to list their home for sale in early 2025. They paid $1,800,000 for it two years ago, and when you look at the listing photos, you wonder what they were thinking. But now their zestimate is $2,475,000, so they are going to list for $2,500,000 – even though they didn’t do any work.
There will be hundreds of listings that try to pull off a miracle like that one. Pricing will seem insane.
In the first quarter of 2024 there were 763 NSDCC homes listed for sale.
If there is the 20% surge on top of last year’s inventory, it would make for 916 listings in 1Q25.
Let’s predict 1,000 first-quarter listings to account for the many re-lists coming from late-2024.
I’m going to guess only 25% to 33% of those are salable.
We know that usually there are 2/3s of the listings that sell, so it will be a weird mix that nobody sees coming. There will be a steady flow of sales but only a minority of the total homes for sale are getting lucky.
It’s the swipe-left generation, where the junkers, bad-locations, and terribly-presented homes get ignored immediately. Buyers will forget them forever unless there are major price reductions – which won’t happen because “hey, I’ve only been on the market a couple of months and I’m not going to give it away”.
What will happen as we get into March-May? The unsolds will be stacking up to the sky, causing buyers to get even more picky, while sellers are digging in on price.
Mortgage rates are too high, and I think Powell is going to finally get what he wanted – peak pricing.
The main reason? If sellers have to take 5% to 10% less, they can.
Last time, they were maxed out on ez-qual financing and had no equity. But it’s the total opposite now, and we’re going to see how bad the sellers want and need to sell. If they had to take 10% to 20% less, they could, and they would still come out with a load of cash.
Think of my last Over-List report.
In November, HALF of the NSDCC sales closed for at least $100,000 UNDER the list price!
Because the creampuffs selling for top-dollar will be a smaller minority, our lousy pricing metrics will get dragged down by the sellers who dump on price. They could have spruced up their home and/or hired a better agent in the beginning, but nobody told them it was going to be this tough to sell. Instead, they dump.
A larger price gap between the creampuffs and fixers will develop, causing more appreciation for how critical it is to have an excellent presentation AND an attractive price.
Last week there were 386 NSDCC active listings, and today there are 343 – a difference of 57.
Impressively, there were 25 listings that were marked as ‘pending’ in the last week! But it also means that a load of the unsuccessful sellers of 2024 will be back early next year, with most relisting in January.
This year we began with 255 NSDCC active listings.
In 2025, there will be 300+ and dozens of others flooding back into the market.
Who are they?
We are a community dominated by empty-nesters. From last January:
Around 80% of the local homeowners have been here for more than eight years!
Those are the folks who have received $1,000,000+ in home equity since the pandemic.
It’s not hard to imagine that 10% to 20% of them will want to cash out in 2025!
An additional 15% to 20% of inventory next year (on top of the 14% surge in 2024) is in the bag.
Kayla is in town so we were trying to do the more-professional looking videos, which for me means doing a more-formal introduction of myself for those new to our Instagram channel.
On the same day, Robert Reffkin appeared on CNBC and said that research shows that inventory will climb another 15% in 2025 – which is what I said! Many observers will shrug it off and declare that we’re just normalizing back to pre-pandemic levels, but pricing has increased over 60% since then:
Will prices drop to adjust for more inventory?
There probably won’t be much movement on price early in the year, because sellers will be thinking about the spring selling season blah blah and they will be much more comfortable waiting until summer before looking for the panic button. They’re not in a hurry, and they’re not going to give it away!
The one thing we know for sure: Home sellers will want to get what the last guy got. Nobody is going to be listing with a low price in the first 3-6 months of 2025.
The results will all be up to the buyers – are you willing to pay the same prices for homes when active listings are piling up unsold? Everyone will expect you to!
I think we are in for several monumental changes in the market conditions next year.
Some will be quick to label it a simple change from a seller’s market to a buyer’s market and leave you hanging. But it is a description that needs more definition – specifically, what does that mean for the participants? Do buyers get a better price? Do sellers have to take less?
You better rely on a great agent to help you with those questions!
One change that will be more evident will be doom from the casual observers. The commentary from the cheap seats is already ramping up, and buyers and sellers need to decipher whether it has any relevance to their own situation.
This may be an accurate assessment….but it’s about Nashville, not here:
My prediction? The doomers will be back with a vengance in 2025, especially on social media.
They were vicious in the 2008-2012 era, and I’m sure it delayed home purchases for many potential buyers. Much of it was due to the unprecedented market conditions – foreclosures and short-sales everywhere, and the ez-qual/no-doc financing had been eliminated.
Because it’s been such a strong seller’s market since the pandemic, the basic inexperience with a surge in inventory will tempt buyers (and agents) to pause. The stronger the surge, the more likely the pause.
Last Friday I had my nine reasons why inventory is going to surge in 2025, and it’s going to start up in January just like it did this year. It wasn’t a bad thing in 2024 because NSDCC sales have increased +6% year-over-year as the demand picked up some of the extra supply.
But as we saw in August, the demand has its limits, so any surge in supply in 2025 needs to be muted, and hopefully we’ll end up with about the same number of listings as we had in 2024 – and they just come earlier.
My nine categories are full of potential home sellers, and here’s #10 – covid buyers:
Younger Americans who bought homes during the COVID-19 pandemic could account for a surprisingly large share of home sellers in the coming year, as boomers who have owned their homes for decades mostly refuse to sell, a new survey finds.
Among current homeowners, nearly 1 in 5 say they plan to sell their home next year, according to the results released on Wednesday by Bright MLS. Although people who purchased their home in the past five years accounted for just 24% of all homeowners, they made up 32% of those who plan to sell their home in 2025.
Homeowners in their 30s and 40s will be the most active group of sellers in 2025, with 27% of homeowners aged 30 to 39 and 28% of homeowners aged 40 to 49 indicating they expect to sell in the coming year. By comparison, just 10% of older homeowners plan to sell.
“Record-low mortgage rates during the pandemic were a huge incentive for individuals and families to buy a home. Many of these buyers also have been able to quickly accumulate significant equity in their homes as home prices have escalated,” says Lisa Sturtevant, Bright MLS chief economist.
In November, national median list prices were up 37% from the same month five years ago, according to Realtor.com® economic research data.
“This wealth gain has created financial security for this group of homeowners, and is also allowing them to be move-up buyers even in today’s relatively high interest rate environment,” says Sturtevant.
The Realtor.com 2025 Housing Forecast notes that the market is shifting from a strong seller’s market to one in which buyers and sellers have more balanced market power.
“As a result, sellers will need to price carefully to attract buyers, especially in markets where affordability is an issue,” says Realtor.com Chief Economist Danielle Hale.
Hale adds that while there’s potential for a favorable market for sellers, “the overall landscape will depend largely on how economic conditions, interest rates, and housing supply evolve over the first few months of the year.”
The survey found that of homeowners in their 30s and 40s who are planning to move, 30% have a mortgage with an interest rate below 4% and more than two-thirds have a rate below 5%.
Mortgage rates are currently averaging 6.69%, and the Realtor.com economic research team forecasts they will continue to average above 6% through the end of 2025.
It means that many families who plan to move will do so regardless of the higher rates. The survey found that the traditional reasons of family and career were the main impetus for moving among younger homeowners who plan to sell.
Among homeowners in their 30s who plan to sell, 37% said it would be for job reasons and 34% cited family reasons, including marriage, children, divorce, and being closer to family.
For homeowners in their 40s, the priorities were reversed, with family changes cited as the most common reason for moving, at 44%, and career changes, at 26%.
Only about 6% of homeowners aged 60-plus said they were planning to sell their home in 2025, according to the survey.
