December 2024 - San Diego Real Estate Market Update

2024 marked the slowest year for home sales in over 30 years, even slower than 2023, which was highly unexpected. Interest rates held higher as Fed rate cuts came slowly in the face of stubbornly high inflation and strong economic conditions. Still, home prices rose (albeit modestly), and inventory of homes for sale increased. These are the building blocks for a real estate comeback, but until mortgage rates are sustainably below 6%, we will continue to see slower housing market activity.

Mortgage Interest Rates

While the Fed cut rates for the third month in a row in December, it issued guidance to expect only two more rate cuts in 2025. There will likely be a pause in January until economic data becomes clearer. The December rate cut was already priced into mortgage rates, so they will probably remain in the 6.5-7.15% range they’ve been hovering in in the short term.

Home Prices

San Diego home prices have fallen about 6% from their summer peak, a seasonal trend that is to be expected, but are closing the year out about 4-5% higher YoY. That’s on par with projections for how prices would perform this year and shows strength in the market despite 2024 marking the slowest year for home sales in over 30 years. Additionally, the average list price to sales price ratio has been trending down but turned upward in November. This is probably a signal that home sellers are pricing their homes more attractively rather than evidence that homebuyers are offering more for homes.

Real Estate Inventory, Sales Activity, and Demand for Homes

As is seasonally expected, home inventory and sales activity are on the decline. That said, inventory in November was higher than it has been at that time of year since 2019, so while inventory is still low by historical standards, buyers are beginning to have more options than they have in years. There has been a large uptick in expired listings that will likely hit the market again in the new year. 

The big question is whether there will be enough demand from homebuyers to absorb the increased inventory. The answer depends on the trajectory of mortgage rates and the strength of consumers (prices, wages) in the new year. Home prices will follow the demand.

Economic Outlook

The economy has shown surprising resilience in 2024, and the Fed made substantial progress in taming inflation without triggering a recession. Now, inflation has been slightly too hot again, and it looks like the Fed will halt its decreasing interest rate trajectory in the new year. With a new incoming administration and a party majority in the House and Congress, the economic outlook for 2025 and beyond is a question mark. There is concern that many of Trump’s proposed policies could be inflationary, which could usher in the return of higher prices and interest rates. How his commitments to bring prices and mortgage rates down might come to fruition is an unknown as of yet. 

Overall, the economy is facing many uncertainties and risks in 2025, so the outlook for the housing market remains unclear until some opacity fades.

Most importantly, if you have questions or concerns about your specific situation… CALL ME to help sort through them. That’s why we get up in the morning - not just to sell homes, but to serve our clients.

As always, we will be here to continue to provide you with updates about the housing market and answer any and all of your questions. Feel free to reach out to us anytime.

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