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📢 Randy Zimnoch's What to Expect in 🏠 Quarter 1 of 2025 and 4th Quarter Real Estate Market Recap

Writer's picture: RealtyNationalRealtyNational

My quick life update before my market update (if you are not interested in my life shenanigans, scroll down to the good stuff below). 


Basically, lots of family time on the east coast throughout the 4th quarter. Visited family in New Jersey where we celebrated my sister's big 50. We also had an incredible time in Tampa, FL with family for Christmas, where we had an opportunity to go to Busch Gardens, Orlando Magic basketball game and the Tampa Bay Buccaneers football game. So many unforgettable memories were created! It's so fun and rewarding when you have your own kids! :) 




 

I want to start with saying that are thoughts and prayers are with everyone affected by these LA Fires. We had our team meeting last Tuesday and pretty much every one of us knows someone that lost their home; it's absolutely devastating.  In light of it, I have gathered different website that offer assistance and guidance during these difficult times.  If you were impacted or know someone that has, please make use of it or forward to the person that can.


Resources for the LA Fires victims:


FINANCIAL ASSISTANCE:

MORTGAGE ASSISTANCE:


HOUSING:


HERE IS A FULL GUIDE FOR NEXT STEPS: Next Steps Full Guide


 

 

Now let's get into the market updates 


If you own a house or a rental or know someone that does: 


INFORMATION PREVIOUSLY PROVIDED IN MY REPORTS:

  • Fixing up a House in CA requires New Disclosures: 

  • New Rental Laws: Many new laws went into affect in 2024 that provide tenants more rights so if you own a rental, you must get familiar with all these changes:

    • Attorney website I found that provides lots of details about all the changes:  NEW CA RENTAL LAWS

    • Now, City of San Diego passed new tenant protection laws for 2024 that are even stricter than the California Laws mentioned above so here is a property management website I found that has these changes nicely laid out: NEW CITY OF SAN DIEGO RENTAL LAWS


  • Short Term Rental Laws officially came into Effect on May 1st, 2023 

    • There are still licenses available contrary to what most would expect!

    • To View All STR Regulations for the City of San Diego or to apply for a license, Click Here


OTHER USEFUL RESOURCES:

  • Have you ever wondered what you might be able to additionally build on your property?

    • Search and discover what is possible on any property. Browse property and permit details. Apply for permits and rebates. Learn if an ADU is possible

  • Are your electric bills out of control?  If so, consider installing solar panels like many of our clients have.  Reply to this email and I will connect you with my trusted solar contact, Eric Goldstein from Powur.


 

If you are planning on selling or know someone that is thinking about it: 


LOOKING BACK:

  • 4th quarter was slow as expected due to the holidays and higher rates, however, not as bad as the previous two years in the 4th quarter. The market didn't drop too much in value, and I have to say, it's thanks to that one month in September where rates dropped into the 6% range as that fueled some unexpected activity that carried over a bit into the 4th quarter.

  • We ended December with 3,738 active properties on the market. For comparison, we were are 5,292 active properties on the market at end of September and at 4,761 at the end of June. That's a 30% decrease from September to end of December!  

  • Keep in mind that active inventory dropped a lot in December mainly as a result of a huge spike in expired listings. The jump in expired listings is completely normal for the last week of the year, but as you can see in the graph below...the spike is bigger this year, even compared to the end of 2022.



  • We go into 2025 with the highest active inventory number since COVID. The large drop in inventory in Q4 is comparable to the end of 2022 which was followed by a big run-up in prices in early 2023. However, our median price at the beginning of 2025 is starting over $100k higher and rates are higher as well, so affordability is a much bigger concern.



  • Median price data for all homes combined (attached and detached) ended the year at $860,000. That's 6.7% above December of last year, and 6.5% off the peak, which was in June.



  • The detached median price ended up just above $1m ($1,010,000 to be exact) - up 6.9% for the year and down 1.3% compared to November. 

  • The attached median price ended up at $660,000, up 1.5% for the year and down 1.5% compared to November.

  • Other interesting tidbit: 1,720 total sales in December is greater than 2023 and 2022.


LOOKING FORWARD:


  • Here is what I stated in the last report:

    • Well, we got very close to the 5,500 inventory mark, ending the 3rd quarter at 5,292. So with rates going back up over the last few weeks, I do anticipate a dip in values in the 4th quarter.  It might not be the 10%-15% like two years ago, but somewhere around 5% to 8% is my prediction.  What saved us was the dip in rates back in September. 

  • Well, it happened just as I was predicting, and the market did dip in the last two months of the year, but it wasn't that dramatic as you can see in the graph above in the looking back section.

  • Now, that we are a couple weeks into the 1st quarter and bunch of listings have hit the market  as expected, it's still too early to tell how it will all play out. The rates climbing above 7% for a conventional loan over the last couple weeks is a bit shocking to most of us, so that might put a damper on things a bit and slow the typical burst of sales that take place early in the year. 

  • Because rates are above 7%, I don't expect property values to trend upwards this quarter, unlike the last two years in the 1st quarter, where we saw significant gains in buyer activity and values.

  • BELOW STRATEGIES I RECOMMENDED IN MY LAST REPORT APPLY FOR THIS QUARTER:

    • Pricing your property below market value is still strongly recommended in order to bring attention to your listing because there are much less buyers in the market currently that can afford homes at these elevated rates and home values.

    • Offering concessions to help buyers buy down their interest rate is strongly recommended as well, especially when asked by the buyers in their offer. 

    • Also, if you have an FHA or VA loan with a low interest rate (2% or 3%), then, those loans are actually assumable by the new buyer, so it's a great way to get more attention to your property, because what buyer wouldn't want a low interest rate in this high interest rate environment that we are in currently.  

      • NOTE:  there are many caveats to this approach, so if you want to discuss this in more detail, reach out to me as I have become an expert in assumptions in the last few months.

  • In conclusion, expect a pretty flat 1st quarter with still an increased amount of activity compared to the 4th quarter, but that's just because of the market dynamics that usually take place in the 1st quarter of every year. Also, most lenders I have spoken to are anticipating for the rates to drop in February and March back in to the mid 6% range, so that should help fuel the spring market.

 

If you are planning on buying or know someone that is:


LOOKING BACK:


  • Buyers had leverage overall in the 4th quarter of 2024 since the market dipped in the last couple months as anticipated.

  • Interest rates went up by 1% and erased the 1% drop we saw in September, which further fueled the slow down. (see graph below)


  • If you were a VA or FHA buyer in the 4th quarter, and you needed concessions of any kind, it was pretty easy to get them, especially once Thanksgiving week came and after.

  • Similarly, negotiating repairs was easier since sellers knew they might not have any other buyers interested in their property in the last couple months of the year, so they were more willing to provide credits. For example, we got two huge credits accepted for two buyers of ours, one at $20,000 and one at $30,000, which was a huge win!


LOOKING FORWARD:


  • The leverage will be somewhere in the middle in the 1st quarter, unless interest rates ease up quite a bit.

  • I expect for both parties to hold their ground because buyers will want to come in much lower with their offers due to higher rates and sellers won't want to give big discounts because it's the beginning of the year and buyer activity has slightly picked up as it naturally does beginning of the year. 

  • If you are in the market to buy this quarter, consider looking at properties that have been on the market for a while, ideally ones that were listed in the 4th quarter, as those sellers might be more motivated to negotiate and provider larger discounts, concessions and later repair request credits once under contract.

  • Inventory will continue to increase again after dropping below 4,000 by the end of the year. I expect that inventory will climb back up above 5,000 by the end of the 1st quarter.

  • Opportunities to buy with an assumable loan that carries a low interest rate will be an option with rates being much higher, so listing agents will be proactively marketing properties with those loans to attract more buyers to those properties.

    • If the assumable loan route really interests you, please reach out to me to talk details as there are many things we would have to go over to see if this route really makes sense for you. 

  • In Conclusion, as a buyer, you should have plenty of options inventory wise, however, affordability will still be an issue due to interest rates being elevated. However, the good news is that you most likely won't be competing with 10 other buyers, like it's been the last two years in the 1st quarter, so purchase prices won't be driven up by thousands of dollars, if at all.

  • And as always, If you are planning on relocating to another state even though I would be sad to see you leave, let me know and I can help locate a great agent in whatever city that you are planning to move to. I will actually identify a couple great agents there, interview them on your behalf and connect you to that agent once I feel like he or she can serve you as I would here. (Bonus: I would stay involved over-seeing your purchase transaction on top of it for you and consult you along the way. That's if you value my opinion, of course.)  


IMPORTANT NOTE: The one HUGE variable to all of this that might impact our Southern California real estate market is the influx of potential buyers that have lost their homes in the LA Fires.  There are talks and speculations that a lot of them will leave California all together, however, there are also talks that many will end up buying in Orange County and San Diego County, which would then put pressure on the market, increase buyer activity and amount of offers received, hence lead to home values to increase once again.  I did not take this into account in my predictions as it's still too early to tell what will actually happen, but it's something we are watching very closely. 


Have a prosperous New Year and an amazing first quarter!


Let me know if you have anything specific that you want to discuss with my team and I.  We are here to help you navigate through it all and yes, I would love it if you can refer me to anyone that is thinking about buying or selling in Southern California. Thank you in advance!


Cheers


p.s. Thank you to Jacqueline for this 5 start review



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 eXp Realty Inc.

3033 Bunker Hill St

San Diego, CA 92109

​​

Randy Zimnoch

CA DRE # 01900957

Tel: 619-399-3829

randy@realtynational.com

Broker of Record: eXp Realty Inc.

CA DRE #01878277

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