2024 brought with it a variety of changes to the Los Angeles real estate market, most notably including the NAR settlement and a change in buyer representation agreements. With 2024 behind us, we look forward to providing accurate, data-based guidance to our clients in the 2025 real estate market. In this article, we discuss what we learned from 2024, and how we expect the 2025 real estate market to change the way we do business.
Los Angeles Real Estate Continues To Promise Stable Growth
In our prior year-end recap, we predicted 2024 would be a year of stable growth and increases in property value. That prediction proved to be true, with the overall market seeing a modest but respectable average gain of 7% throughout the year.
The red line in the graph below depicts the monthly median sale price of existing single family homes in Los Angeles in 2024. As shown in the graph below, the market quickly recovered from the slump in early 2023, and 2024 saw record highs in every month of the year.
Data courtesy of California Association of Realtors.
We expect this trend to continue in the 2025 real estate market. With numerous residents displaced by the recent wildfires, there has already been a surge in demand in 2025. We expect this influx of demand to be relatively temporary, meaning prices will likely be above-normal in the months of January and February. However, as displaced residents find new homes, we expect the market to return to “normal”, with another year of relatively modest growth.
Mortgage Interest Rates Remain Stubbornly High Despite Rate Cuts
The Federal Reserve cut the target interest rate three times in 2024. Nevertheless, mortgage interest rates remained stubbornly high, at an average of 6.73% in 2024. Many experts, including ourselves, anticipated that rates would reduce into the mid 5% range by the end of 2024. However, with the Fed taking a more cautious approach than anticipated at the end of 2024, rates remained relatively high.
The graph below depicts the average weekly interest rate on a 30-year fixed rate loan over the past four years.
Interest rate data courtesy of Freddie Mac.
High interest rates often present an opportunity for qualified buyers. Increased cost of borrowing is typically a temporary problem, with the immediate side-effect of reduced competition in the market. As a result, many of our buyer clients have been able to secure desirable properties without significant competition. The problem of increased cost of borrowing can later be alleviated through refinancing when rates inevitably drop. This strategy will likely continue in the 2025 real estate market.
The Fed is currently anticipating two rate cuts in 2025, although it has also commented that it will take a cautious and patient approach. We anticipate those anticipated rate cuts are already “baked in” to current mortgage rates. Absent a significant departure from the Fed’s current plan, we expect rates to remain relatively stable through the 2025 real estate market.
Predictions For 2025
We expect the 2025 real estate market to be another relatively uneventful year. The years of 2% interest rates and 20% year-over-year gains appear to be behind us. This means more stability and predictability in a healthy market. It also allows buyers to act more strategically and sellers to sell with more predictability. Importantly, it means that securing experienced and knowledgeable advice is more important than ever for sellers looking to accurately price their homes, and buyers looking to beat out the competition.
Please call or email us at 213-973-9439 or info@esquirereb.com to further discuss our 2025 Real Estate Forecast, or how Esquire Real Estate Brokerage can help you in the Southern California real estate market.
