Experts Predict San Diego Home Values Will Increase in 2025.
Top housing experts and economists give 2025 market predictions of what mortgage rates will do, and where home values in the San Diego and national markets are headed.
Key Takeaways
- Mortgages are forecasted to remain higher for longer; but there are things you can do to lower your rate.
- Home values are predicted to increase incrementally in San Diego County and across the nation.
- The national market will slightly favor sellers in negotiations. The San Diego market is expected to remain a seller’s market; however, it will not be the strong seller’s market we saw in early 2024.
Note: real estate is a dynamic market and forecasts made in this article will change as the year unfolds.
Market Prediction #1: Mortgage Rates Will Average 6.4% in 2025
In 2023, the average 30-year mortgage peaked at 7.79% following the pandemic. Rates came down from that peak in 2024. What will mortgage rates do in the next year?
The Federal Reserve is now predicted to lower the federal funds fewer times than previously expected in 2025. But mortgage rates are not set by the Federal Reserve, and the Fed’s cut in December did not help bring down mortgage rates.
Fannie Mae predicts mortgage rates to average 6.4% in 2025. Mortgage Bankers Association also predicts mortgage rates to average 6.4%, but with slightly higher rates compared to Fannie’s forecast.
Mortgage Bankers Association Mortgage Finance Forecast November 2024
When Will Mortgage Rates Drop Back to 3%?
Historically, rates have never been as low as the pandemic era interest rates. 30-Year mortgage rates averaged between 4% and 6% during and after the housing crisis and Great Recession. A return to a 3% range is very unlikely.
Tips to Get a Better Mortgage Rate
While we can’t affect the average 30-year mortgage rate, you can improve your credit and get the best possible rate. Here’s an example of recent mortgage rates by credit score:
Rates will vary. This is only an example.
If you’re thinking of making a move, the earlier you talk to a mortgage finance professional, the more time you have to work on improving your credit to get a better rate.
Need a recommendation to a trusted lender? Send me a message.
Market Prediction #2: Home Values Will Increase by 1.5% to 3.6%
Since 2020, the average sales price of a home has gone up by $97,000 or 29.7% (Federal Reserve of St. Louis). Which indicates homeownership to be a great investment. But, what will home values do in the next year?
On a national level, home price growth is predicted to slow down from 2024. However, home prices are predicted to increase in 2025. Fannie Mae predicts home prices to increase on average by 3.6%. MBA is predicting an average increase of 1.5%.
Mortgage Bankers Association Mortgage Finance Forecast November 2024
The California market remains a hotbed of activity, with a projected 10.5% increase in home sales and a 4.6% rise in the median home price, according to the California Association of Realtors (C.A.R.). While coastal cities like Los Angeles and San Diego will see modest price growth, the Bay Area could experience slight declines due to affordability challenges.
In San Diego County, Realtor.com predicts a 7.3% price gain, while Zillow says we’ll only see a 2.5% increase.
Home values are influenced by local market dynamics. If you want to understand what home values are forecasted to do locally, consider talking to a real estate professional.
Want to increase your home’s value? Consider these remodeling projects for the highest return on investment.
Will Home Values Crash in 2025?
For home values to drop significantly, a major influx of homes for sale would have to hit the market. Freddie Mac estimates the U.S. housing stock is 3.7 million units below what’s needed to meet demand. It will take time to build up inventory to meet demand. Which is why a major drop in home values and prices is unlikely.
Market Prediction #3: Will 2025 Be a Home Buyer’s or Seller’s Market?
Who will have the advantage in the 2025 housing market, buyers or sellers? One measure of the market is months’ supply and it shows who has the advantage.
Months’ supply is calculated by dividing the total number of homes for sale by the average number of homes sold each month. For example, if there are 500 homes for sale in a particular area and an average of 100 homes are selling each month, the months’ supply is five months.
Here’s a national chart of month’s supply going back to November of 2023:
Five to six months’ supply is considered a balanced market. Over six months’ supply is considered a buyers’ market. At four months’ supply on a national level, the market slightly favors sellers.
The San Diego market has lower inventory compared to the national average, with just over two months’ supply. This limited inventory continues to support a sellers’ market here.
Inventory is rising locally and nationally, however. This could shift the market to favor buyers in the next year.
If you want to know if your area and price range favors buyers or sellers, send me a message.
What This Means for Homeowners
Homeowners will likely see a slight increase in their home’s value. If you want to increase your home’s value and enjoy the upgrades, consider making some home improvements. To get advice on which features or projects are best suited for increasing your home’s value, consult with a professional.
Tips for Potential Home Buyers
If you’re thinking of purchasing a home, the sooner you start planning the better. Knowing your price range, optimizing your credit, and working toward your downpayment are steps you can take now. Even if you’re in the market to buy in the next 12 to 24 months, talking with a real estate professional early in the process will set you up for success.
Tips for Potential Home Sellers
Sellers need to prioritize their objectives. Is getting top dollar for your home the highest priority, or is it moving within a specific timeframe? Do you have to sell a home prior to purchasing your next one? These objectives must be prioritized so that an effective plan and marketing strategy can be put into place.
Market Predictions Are Forecasts
Mortgage rates, economic changes, local, national and even international events all affect real estate values, as they influence buyer demand, investment patterns, and overall market confidence. These factors are continually in flux. So, the best time to buy or sell real estate is when it makes the most sense for you, considering your personal financial situation, goals, and timing.
Thinking of making a move? Give me a call!