Real Estate Market Update

As we move further into 2025, the housing market continues to evolve, shaped by volatile mortgage rates, changing buyer preferences, and economic trends. 

While affordability remains a challenge, inventory levels are improving, and market conditions show signs of stability.

Buyers are adjusting to the “new normal” of mortgage rates, while sellers are benefiting from sustained home values and strong demand in key markets. Meanwhile, new construction is playing a bigger role in meeting housing needs, and regional trends—especially in the DC area—highlight potential challenges and opportunities these changes may bring for both buyers and sellers.

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

February Housing Market Trends

We saw some ups and downs at the beginning of 2025, but the outlook for the year is still positive.

Existing Homes

Existing home sales fell 4.9% in January; however, year-over-year sales improved by 2%, according to the National Association of Realtors (NAR). Stubbornly high mortgage rates and elevated home prices mean affordability is still a major challenge for many homebuyers.

The median existing home price increased 4.8% from January 2024 to $396,900, the 19th consecutive month of yearly price gains. All four U.S. regions saw price increases.

New Construction Homes

Affordability challenges have steered buyers’ interest in smaller, more personalized new homes in 2025, according to the National Association of Home Builders (NAHB). The median home size was 2,150 square feet in 2024—the lowest in 15 years.

Low existing inventory continues to support new home sales volume. Sales of newly-built single-family homes in 2024 were 2.5% higher than the 2023 total. The NAHB expects more economic growth in the year ahead.

Housing Inventory

Existing home inventory grew 3.5% last month, or the equivalent of 3.5 months’ supply at the current monthly sales pace, NAR reported. This is a 16.8% increase over the past year.

In the new construction market, inventory is recovering much more quickly, and was up 10.8% in January, according to NAHB.

Mortgage Rates

Mortgage rates dropped to their lowest level in over two months. According to Freddie Mac’s Primary Mortgage Market Survey, the average interest rate on a 30-year fixed-rate mortgage was 6.76% as of February 27. The drop combined with improving inventory is a great sign for active buyers, especially as we get closer to the busy spring home buying season!

DC Housing Market Update

The Northern Virginia and D.C. housing markets are still going strong! Closed sales are up,  price growth has remained steady, and buyers are jumping into the market.

According to the Northern Virginia Association of Realtors (NVAR), the median sold price climbed to $685,000, up 5.4% compared to January 2024. 

Inventory levels also improved, which is a positive sign for buyers. In January, there were a 0.92 months’ supply of inventory, 25.1% higher than January 2024. The CEO of NVAR noted that as inventory levels inch higher, demand still remains high in the DMV with sustaining price appreciation.

Active listings rose by 28.5% year-over-year; however, new listings in January remained below the five-year average.

Buyers are still competing for well-priced homes, which shows the strength and resilience of the local housing market. Homeowners are also considering their options as home values remain strong.

The Impact of Federal Regulations on the Housing Market

The DMV’s housing market has recently gone viral on social media! 

There were several videos and images posted of the DMV showing a surge in new listing activity. Many have pointed this out as “evidence” of a mass exodus of federal employees from the region, but there’s nothing that actually supports this evidence.

According to Bright MLS data through February 16, the market has not significantly changed in the DC area that would suggest listing activity related with changes in the federal government workforce. Data shows that listing activity in the first two weeks of February is unchanged from a year ago.

For example, new listings were down by 2% in Arlington year-over-year in the first half of February, and down by 7% in Fairfax County. There was some increased activity in several markets, like Alexandria (up 7%), but it doesn’t suggest that it’s related to homeowners who are or were federal employees, Bright MLS reported.

The DMV has a large number of residents working for the federal government, but it only represents 9% of the region’s workforce, based on data from the U.S. Office of Personnel Management.

I go over this more extensively in a recent blog post. You can read more about it here: Trump’s New Federal Regulations: Implications for the DC Housing Market

Could 2025 Be the Last Year of an Inventory Shortage?

There are signs that the mortgage lock-in effect—when homeowners are hesitant to sell because they secured a lower rate—might ease.

Freddie Mac credited this to homeowners getting used to “the new normal with respect to rates, therefore adding more inventory to the market.”

And as more supply becomes available to more people, these homes have to be affordable to more people, according to HousingWire. Home price appreciation has slowed down, and mortgage rates are slowly easing. The publication expected an 18% growth in inventory by the end of the year.

Realtor.com chief economist Danielle Hale also says that by spring, inventory levels are projected to climb, even above the typical seasonal boost. She also anticipates that they will remain high throughout much of the summer.

Final Thoughts

The February housing market data reinforces what we’ve seen in recent months—while affordability remains a challenge, inventory is slowly improving, mortgage rates are easing, and demand is holding steady.

For buyers, this means more choices and potential opportunities as we head into the busy spring season. Sellers can also take advantage of strong home values and motivated buyers in competitive markets.

Despite the social media buzz around a supposed federal employee exodus, the data tells a different story. DC’s housing market remains resilient, with steady price appreciation and sustained demand.

Looking ahead, experts predict a gradual increase in inventory, which could ease some of the supply pressures we’ve seen in recent years.

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.