2025 Loosens the "LOCK-INs"
Danielle Davenport
Davenport Group | RE Portfolio Management Entitlement, Development, and Investment. Offering Land Acquisition & Use Consulting, Disposition. Site(s) Selection to Build Out to Asset Management.
Nationwide and California Housing Outlook
A more favorable interest rate environment that will loosen up the “lock-in” effect and improve housing inventory will encourage buyers and sellers to return to the market to boost both home sales and prices next year, according to a housing and economic forecast released today by the?CALIFORNIA ASSOCIATION OF REALTORS??(C.A.R.).?
Projected Growth in Home Sales California’s single-family home sales are forecasted to rise by 10.5% in 2025, reaching 304,400 units, up from 2024’s estimated sales of 275,400 homes. This growth follows a 6.8% increase in 2024 compared to 2023’s total of 257,900 units sold.
Median Home Prices to Increase Moderately
The median home price in California is projected to grow by 4.6% in 2025, reaching $909,400. This comes after a 6.8% price increase in 2024, bringing the median to $869,500 from $814,000 in 2023. While a persistent housing shortage continues to exert upward pressure, the price growth is expected to moderate.
Lower Interest Rates to Boost Activity Interest rates are predicted to decline further in 2025, creating favorable conditions for both buyers and sellers:
This decrease will alleviate the "lock-in effect," allowing more sellers to list their homes and enabling buyers to enter the market with more affordable borrowing options.
Economic Outlook for 2025
Inventory Improvements and Competitive Conditions
A moderate increase in housing supply is expected, with active listings growing by just over 10%. This increase, while positive, will not match historical norms. However, declining interest rates will encourage both homeowners and investors to list properties, taking advantage of favorable market conditions.
Outlook Nationwide
Lawrence Yun, chief economist for the National Association of Realtors (NAR), whose latest forecast calls for a 9% increase in home sales in 2025 and a further boost of 13% in 2026. Underpinning these numbers are Yun’s belief that broader macroeconomic trends will boost the housing market.
The past two years have posed challenges for buyers, sellers, and real estate professionals, but better days lie ahead. According to Lawrence Yun, Chief Economist at the National Association of REALTORS? (NAR), the housing market is set to recover in 2025 and 2026 with increased sales and stabilizing mortgage rates.
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Key Predictions for 2025–2026:
Home Sales Set to Rebound
Improving job numbers and steady stock market performance will drive more Americans to enter the housing market. Yun notes that inventory is on the rise, and pent-up demand from the U.S.’s growing population signals more activity ahead.
Mortgage Rates to Stabilize
Rates are expected to remain at the lower end of the current range ?through 2025 and 2026. Although the Federal Reserve has initiated rate cuts, mortgage rates won’t decline significantly due to a large federal budget deficit.
Factors like reduced budget deficits or streamlined housing regulations could push rates lower, but the locked-in effect from previous low mortgage rates will ease as life events—marriages, divorces, job changes—motivate housing moves.
Changing Buyer and Seller Trends
Growth in all-cash buyers, multigenerational purchases, and single buyers. ?Sellers are motivated by higher home equity and improving economic conditions, leading to more listings.
The Post-Election Boost
Historically, home sales see a slight uptick following presidential elections due to reduced uncertainty. Yun anticipates this trend to continue, creating additional momentum in 2025.
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