Buyers buyer MarketTalk /On January 17, 2025

Winter 2025 Market Talk Report

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Screenshot 2025-01-15 143951 Welcome to Market Talk! I’m Liz Moore, President of Liz Moore & Associates, and today we’re going to talk about what’s happening in our local real estate markets as we round the corner into 2025.

2024 ended the year relatively flat, with home sales down slightly in each of the markets we serve (Virginia Beach, Peninsula, Richmond, Williamsburg, Northern Neck). There were a number of competing forces at work – a volatile interest rate environment, uncertainty around the election, and continuing low inventory…all causing many buyers to take a pause. As a brokerage, we were fortunate to outpace the market and finish the year up 5% over 2024!

Now that the election is in our rear-view mirror and interest rates have settled down to an acceptable 6ish %, we’re optimistic that 2025 is going to be a healthier real estate market.

My Crystal Ball

I’m predicting a solid real estate year in 2025 – nothing crazy, just slow and steady, positive growth. I believe that for lots of reasons, but here are the main 3:

Buyer Demand continues to remain strong. One reason for this is the huge number of people in the prime household formation phase of life – 72 million millennials, more than any other time in history. Household formation begins at 26, and the prime buying years for first timers is now 33 to 35.
There is still a strong pent-up desire for sellers to move. People love their low interest rates, but not necessarily their current houses. Many Americans put their moves on hold during the pandemic years, but life has moved on. During the past 2 years there have been almost 3 million marriages and 1.5 million divorces, 7 million babies born, and 7 million boomers turned 75, which translates to time to downsize. There were also 50 million job changes, and lots of flexibility because of new remote working opportunities.

A lot of those sellers have put moves on hold because they don’t want to give up their 3% interest rates for rates that were hovering around 8%, but as we see those rates inch down, 6% seems like a bargain.

Interest Rates are finally headed down! We had a few false starts in 2024, and the Fed was a bit of a grinch last month with their messaging, but most predictions are that rates will continue to drop, very slowly, but consistently over the next 12 months.

The combination of those 3 things means better days are ahead; I think it’s safe to say that we are at the bottom of the trough.

Let’s dig in and examine some of the underlying benchmarks and clarify exactly what is happening!

What About Inventory?

Inventory is finally beginning to build. As more and more sellers recognize that they may have missed the peak in home values (2021), we are seeing more and more new listings hit the market. I expect that to continue through the Spring, which will be a welcome respite for market-weary buyers.

Will Home Prices Drop?

There has been much discussion about what will happen with home prices, now that the market is cooling off after the roller coaster of the pandemic years.

My educated guess is that home prices will not drop, but neither will they escalate at frantic levels. I expect to see a return to “normal” appreciation in our local markets, which would be between 3 and 4% in 2025.

Most industry experts agree that prices have stabilized, and we will see much lower appreciation rates in the next few years. This of course is neighborhood specific, and we monitor over/under asking reports carefully to keep our finger on the pulse of what’s happening hyper-locally.

Many sellers have made the decision to move as a result, and are tapping into record high levels of equity to accomplish their housing goals in the new year.

Interest Rates

Mortgage interest rates have been the story for the past 3 years. With a 5% swing upward since the end of 2021 causing many buyers to hit the pause button on their home search, we finally can see some relief in sight.

Compared to rates approaching 8% in the Fall of 2023, we are now enjoying low to mid 6’s, which relative to the 2-year climb, feels relatively doable. It seems that what buyers have been waiting for is stability, even more than really low rates.

Most industry experts predict that rates will continue to fall over the next 12 months:

As interest rates become palatable again for buyers, we will see them continue to return to the market. At the same time, those sellers who have been holding tight on the sidelines have already begun to dip their toes in the market.

Sellers are finally recognizing that their homes may never be worth more than they were in 2021, and we’re seeing them choosing to enter the market to be able to cash out on their peak equity.

This record high equity creates an opportunity for sellers to trade up and use their additional cash to either put down a larger down payment to offset interest rates, or to pay off other consumer debt that is carrying a higher interest rate. Either way, overall monthly expenses can actually drop, despite the fact that mortgage rates will be higher on the new house.

That additional inventory is making a significant difference as months supply of inventory has climbed to nearly 3 months in each of our markets – that is an indicator of a robust Spring market.

My advice to sellers is to beat the market – I would recommend listing in February or early March, to get ahead of the Spring rush which will undoubtedly bring lots of additional competition. By capitalizing on continuing low inventory, you’ll be able to maximize your home price and having a favorable negotiating position.

For buyers, the same is true. Get pre-approved early, and begin shopping before the traditional Spring rush begins, where there will be less competition for the property you want.

Now is the time to shop for a lender carefully. Many local lenders are offering incentives to borrowers where they will offer a “free” refinance when the inevitable rate drop begins. This creates a win-win situation.

We would love to meet with you to discuss what’s happening in the local market, and how it may affect your real estate plans for the new year. If you’re just curious about what your home may be worth in the current market, we would be happy to share our insights!

Happy New Year!

Lynnette Tully

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Liz Moore & Associates is a boutique real estate agency renowned for having the region's top agents, with extensive market knowledge and local expertise that is only achieved through relentless training coupled with Liz's extremely high standards for professionalism. When you're buying or selling a home, experience matters.