📢 Randy Zimnoch's What to Expect in 🏠 Quarter 4 of 2025 and 3rd Quarter Recap of the Real Estate Market

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

3rd quarter started off with my birthday, followed by a boys trip to Medellin, Colombia, which was awesome. In August, we celebrated my wife's Mom's birthday in Virginia where we all got together as a family.  All the cousins absolutely loved seeing each other again. Then, it was time to start school / daycare for our 2 year old Ellyava and our 4 year old Adylina.

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Now let's get into the market updates 

LOOKING BACK AT QUARTER 3:

• Market was still sluggish in quarter 3, but inventory did stop rising and actually reversed, which was good news.

  • The peak came hard and fast...and early — 3 months earlier than last year and even 1 month earlier than 2022. Should this pace of decline continue at the same time as rates fall, a version of the recovery in values like we saw in 2019 or 2023 could be in the cards for early 2026.

  • However, buyers faced and continue to face additional challenges than they did in those years (labor market woes, higher consumer debt, bigger affordability hurdles), so I wouldn’t be placing any big bets on that just yet.

  • The inventory decline can also be explained by a lot of homes coming off the market because they couldn’t sell at the price the seller wanted. Some of this inventory will come back at some point (shadow inventory), so this decline (at least a portion of it) is a bit deceptive.

• Values have dropped in quarter 3 and year over year:

  • In August, the detached median price reading was $1,075,000, so the $1,025,000 number for September reflects a 5% decline month-over-month.

    • Last September (2024), that number stood at $1,050,000, so we’re down 2.8% year-over-year.

  • Attached median price dropped only slightly month-over-month, down from $675,000 in August (-0.52%), but up from $650,500 this time last year (+3.2%).

  • Also, if you compare inventory year over year for detached homes, it jumped by 19% and 45% for attached homes, and that's one of the major reasons we saw values decline.

• With that said, there is a lot of “noise” in the median price metrics, which is why we prefer the median price per square foot, as we feel it communicates a more accurate picture of the values.

  • Here’s what the last 3 years look like for that metric through the end of quarter 3 (blue = detached, orange = attached, green = all combined).

  • The declining trend took a pause in the attached slice of the market, and slowed to a crawl in detached after rates fell below 6.5%.

LOOKING FORWARD AT QUARTER 4:

• Everything right now is pointing to rates hovering where they are now, which is much lower than where we were most of the year, and there is talks that rates might drop even a bit more before the end of the year, but that's of course speculation. 

• The U.S. Federal Reserve recently dropped its policy interest rate by 0.25%, setting the new target range at 3.75%–4.00%. This follows a similar cut in September 2025, bringing the rate to its lowest level since 2022. This decision was driven by concerns over a softening labor market, even though inflation remains somewhat elevated. 

• What's important to remember is that even though the Fed has dropped the federal fund rate twice in the last two months, what usually follows is actually an up tick in the mortgage interest rates as you can see on the graph below. These two rates DO NOT correlate with one another. The banking industry starts baking in the rate fluctuations based off discussions of a future Fed Rate cut or not, which is also evident in the graph below.  Mortgage interest rates dropped in September and October leading up to the Fed Rate announcement of the Fed Rate drop.

• Also, we’re getting to that point in the year where new listings start falling off a cliff.

• Buyer demand usually falls with it, but not as prominently.

• As you can see in the chart below, it happens every year.

 (Source - Real Report)

• This seasonal drop in supply, and the price declines that come with sellers dumping homes in the slower holiday season, is what sets up Q1 for seasonal price recovery (gains) when more buyers jump back into the game.

 (Source - SDAR Infosparks)

• In summary, be prepared to see values decline slightly in quarter 4, probably about 1% to 2% depending where you are in Southern California.

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 STRATEGIES FOR SELLERS:

• Pricing your property below market value is strongly recommended in order to bring attention to your listing because of the higher inventory and time of the year.

  • Since CA MLS allows us to use ranges, what we started doing again is use the bottom number of the desired range as the list price and then mention the range in the first sentence of the public remarks. 

  • This allows us to get more eye balls on the property, get people in the door and then negotiate the offer up into the range, especially if we have two offers on the table, but it has even worked for us with only one offer as well.

  • We do it this way because if we actually put in the range in the MLS as the list price, then, the MLS will syndicate the higher number of the range to websites like zillow, redfin etc, and that does not work in our favor.

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

• I highly encourage to offer to pay the buyer's agent commission that is requested in the contracts, because a good amount of buyers don't have the extra cash to pay their buyer's agent on top of the down payment and all the closings costs.

  • However, my rule of thumb with sellers is that if the offer comes in much lower than what you were reasonably expecting, and it has let's say 2.5% to 3% commission being requested, then we would counter the offer up of course, but we can also counter the commission down to 1.5% to 2%, and let the buyer's agent either get their buyer to go up on price or lower their commission, or both.

• 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 over the last two years.

• If a property is sitting on the market for a while, usually around the 45 day mark, we would cancel the listing and re-list it again as new because this will show up in costumers' inboxes as a new listing.  When we do this, we also change the main photo, re-arrange other photos, maybe virtual stage some, and potentially reduce the list price as well.

• Ultimately, if you can wait till mid-January to list your home, it might work out better for you based on what the data tells us over the last 3 years and I expect the same to happen in the first quarter of 2026, however, if you are looking to buy with a contingency of selling, then, it doesn't really matter that much because you will have an advantage on the buy side if you list your home now.

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 STRATEGIES FOR BUYERS:  (very similar to quarter 3 strategy)

• Buyers continue to have leverage due to much higher inventory and the time of the year.  If you have patience, you will find sellers that are more in need to sell than others, and those sellers will accept a lot less than their asking price. 

• So continue looking at properties that have been on the market for a while, as those sellers might be more motivated to negotiate and provide larger discounts, concessions and later repair request credits once under contract.

• Opportunities to buy with an assumable loan that carries a low interest rate will continue to be an option with rates being where they are, so listing agents will continue to proactively market properties with those loans to attract more buyers to those properties.

  • Most of these type of properties will have a large gap between the loan amount and purchase price, so you will either have to have cash for that gap or get secondary financing. 

  • You can watch a training that I did about assumable type transactions here: https://www.youtube.com/@Assumable-Sales

  • 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 will continue to have plenty of options inventory wise, however, affordability will still be an issue due to interest rates being elevated, even though they are a lot lower than they were a year ago. Don't be afraid to ask for seller concessions to buy down your rate and to pay for your buyer's agent commission.  Most sellers will be open to all of the above and a few will still try to negotiate, especially if they got a lot of interest because they listed their home way below market value. At the end, don't be discouraged, stay within your budget and remember that the market will continue to bring more opportunities for you to consider in quarter 4.

• And as always, If you are planning on relocating to another state, let me know as 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.)  

  
  

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 IF YOU OWN A HOUSE OR RENTAL OR KNOW SOMEONE THAT DOES: 

• Insurance updates: homeowners in California have several relief options, including California FAIR Plan for those who cannot secure private coverage, moratoriums on non-renewals in declared disaster areas, and grants and tax credits to help with property hardening through new legislation. Additionally, federal programs like the Homeowner Assistance Fund (HAF) provided support for mortgage payments and other housing-related costs, though the availability of this specific fund may vary. 

• Insurance relief programs and measures 

  • California FAIR Plan: This is a “last resort” insurance option for those who are unable to obtain a standard policy from a private insurer, according to the Department of Insurance. It provides basic fire protection, and can be supplemented with extended coverage.

  • Moratoriums: Following a major wildfire or other declared disaster, the California Insurance Commissioner can issue a one-year moratorium that prevents insurance companies from canceling or non-renewing policies in the affected areas, notes the Department of Insurance.

  • Property hardening grants and tax credits: New legislation, such as the Disaster Resiliency and Coverage Act of 2025, aims to help homeowners in high-risk areas. This includes potential grants (up to $10,000) and a 30% tax credit for mitigation activities like fire-resistant roofs or clearing vegetation, as outlined by Representative Mike Thompson.

  • Home hardening discounts: Some insurers offer discounts on existing policies if homeowners take steps to mitigate wildfire risk, such as structural hardening or clearing vegetation around the home, notes United Policyholders.

  • Homeowner Assistance Fund (HAF): This federal program, authorized by the American Rescue Plan Act, was created to help homeowners impacted by COVID-19.

    • Availability and application processes for HAF-funded programs may have changed over time, so it's important to check with your state or local government for current options, notes the U.S. Department of the Treasury. 

    • It provides funds to states for programs that can assist with mortgage payments, homeowner's insurance, and other housing costs, according to the U.S. Department of the Treasury.

INFORMATION PREVIOUSLY PROVIDED IN MY REPORTS:

• Big Beautiful Bill Act

  • As it relates to real estate, the Big Beautiful Bill Act reinstates and makes permanent the mortgage insurance premium deduction, which can help homeowner with low down payments:  READ MORE HERE

  • The bill temporarily increases the state and local tax (SALT) deduction cap from $10,000 to $40,000, potentially benefiting homeowners in high-tax states:  READ MORE HERE

  • The bill makes permanent the 100% first-year bonus depreciation deduction for qualified property acquired and placed in service after January 19, 2025.  READ MORE HERE

• Landlord-Tenant Laws for 2025 in California

  • As of January 1, 2025, several new landlord-tenant laws have come into effect in California, marking important changes in real estate and rental agreements. These changes aim to improve transparency, fairness, and security for both landlords and tenants.

  • Here are couple of many:

    • Landlords must now offer tenants the option to report positive rental payment history to at least one nationwide credit reporting agency. This new law is designed to help tenants build their credit

    • California has introduced a law banning “junk fees” These are fees unrelated to rent, such as charges for personal checks or unnecessary service fees.

    • See all the new laws HERE

• 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

    • https://symbium.com/ 

• 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 a couple trusted solar contacts so you can compare prices and service.

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!

Hope that you had a fruitful quarter 3 and I wish you an amazing holiday season with family and friends!

p.s. Thank you to everyone that has left a review for our team over the years! We have officially crossed over One Hundred 5 Star Reviews on Zillow!