Real Estate Market Update

New year, same unpredictable housing market.

Mortgage rates are higher than most economists and analysts expected, and home prices keep ticking higher. But the surge has definitely slowed down… and some sellers in certain markets have even cut prices to entice homebuyers.

Affordability and lack of inventory are still the biggest challenges would-be buyers face. If mortgage rates come down to around 6% and builders ramp up the production of single-family home construction, there’s no doubt buyers will jump back into the market.

Want the latest real estate news? Here’s the housing market update for January 2025!

January Housing Market Trends

Job and wage gains, as well as increased inventory, are making positive impacts on the real estate market.

Existing Homes

Existing-home sales increased 2.2% in January, according to the National Association of Realtors (NAR). This is the strongest pace since February 2024. On an annual basis, sales have dropped to the lowest level since 1995.

The median existing-home price in December was $404,400, a 6% increase from one year ago. For 2024, the median price reached a record of $407,500.

New Construction Homes

The new construction industry ended 2024 on a high note.

Due to limited existing inventory and solid demand, sales of newly built, single-family homes increased 3.6% in December, according to the National Association of Home Builders (NAHB). The median new home sale price in December was $427,000—a 2.1% increase from a year ago.

The pace of sales was also up 6.7% in December compared to a year earlier. Housing starts also increased by 15.8%, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. This is the highest rate since Feb. 2024.

Despite challenges for housing demand and higher mortgage rates, builders are optimistic about the building market for 2025.

Housing Inventory

There was a huge drop in unsold existing home inventory from November to December. Unsold inventory is currently at a 3.3-month supply at the current sales pace, a 13.3% drop, NAR reported.

New construction inventory is doing much better. According to NAHB, new single-family home inventory increased by 10% in December. This represents an 8.5 months’ supply at the current building pace. Complete, ready-to-occupy inventory is up 46% compared to a year ago. 

Mortgage Rates

After passing the 7% mark, the interest rate for a 30-year fixed-rate mortgage declined for the first time in six weeks to 6.96% as of January 23, 2025, according to Freddie Mac’s Primary Mortgage Market Survey.

In response, purchase application volume went up. The Mortgage Bankers Association reported a 2% increase above last year at this time.

DC Housing Market Update

We could see the Northern Virginia and D.C. housing market strengthening this year!

The Northern Virginia Association of Realtors (NVAR) predicts that the worst of the housing inventory shortage is ending, mortgage rates are stabilizing, and new job gains are continuing.

In December 2024, the median sold price was $700,000, up 3.7% compared to last year and nearly unchanged from November. Inventory was tight, around 0.8 months, better than last year but down from November’s 1.1 months.

NVAR noted that sellers have certainly benefited from rising prices, while buyers face limited options and need to act fast to secure a home.

More Than 80% of Mortgages Have a Sub-6% Rate

As mortgage rates continue to hover around 7%, the lock-in effect remains. 

According to Realtor.com, 83% of mortgages have an interest rate under 6%, and in the third quarter of 2024, 21.3% of mortgages had a rate below 3%. This has kept many would-be sellers from listing their homes on the market.

Easing inflation and interest rates could help boost seller activity, but a recent Redfin-commissioned survey found that more than one-third of homeowners say they’ll never sell thanks to high housing costs.

Today, most sellers are moving due to a new job or a significant life event. However, with affordability challenges persisting, motivated buyers may find themselves exploring new construction options instead.

Widespread Price Cuts

One in three homes listed for sale in January has had a price reduction, according to the founder and president of real estate analytics firm Altos Research.

As mortgage rates continue to hover around 7%, would-be homebuyers are cautious about jumping into the market, forcing some sellers to cut prices to attract multiple offers.

But this doesn’t mean the market will crash.

According to experts, there are indicators that the housing market will improve in 2025, and prices are likely to continue rising, albeit slowly.

Housing economists and analysts agree that any market correction will likely be modest. Major price drops, similar to those during the Great Recession, are not expected.

Final Thoughts

The 2024 housing market was tough, thanks to rising home prices and high mortgage rates. While home prices likely won’t drop, the 2025 market could be slightly easier for homebuyers.

Experts predict mortgage rates will ease this year if inflation continues to cool, and home price gains should be relatively moderate—about 1.3% to 3.6% higher.

The low housing supply has been a continuous problem for several years. There are only two ways to increase supply: list existing homes for sale or build new ones. Considering more homeowners are choosing not to move, buyers will need to consider new construction homes.

That said, there’s still plenty of opportunity out there—staying flexible can make all the difference!

Looking to buy or sell in the DC area? Don’t navigate the complexities of the current housing market alone! Reach out today for expert real estate leadership.