If there is a surge of inventory in early 2025, what will happen?
Here are the choices:
Frenzy – With rates stubbornly high, the best case is a mini-frenzy where buyers engage in bidding wars for only the top-quality listings. Some of the insanity bleeds over to the not-so-great homes and a few get picked up. About 33% to 50% of listings sell, and the more sane, rational buyers are left shaking their heads.
Not Frenzy – There aren’t enough buyers left who are willing to pay whatever it takes, and instead the wait-and-seers get even more picky and only 1 out of 10 listings are selling.
Middle Muddle – This is the most likely scenario. Great agents list the spruced-up homes for attractive prices and there is a good, solid flow of sales happening….while most listings are languishing on the market. Those sellers want to believe that if they just wait longer, they will be rewarded. By summertime, there are unsold listings stacking up everywhere – and being ignored.
I heard about one seller who has already moved, and intends to list their home for sale in early 2025. They paid $1,800,000 for it two years ago, and when you look at the listing photos, you wonder what they were thinking. But now their zestimate is $2,475,000, so they are going to list for $2,500,000 – even though they didn’t do any work.
There will be hundreds of listings that try to pull off a miracle like that one. Pricing will seem insane.
In the first quarter of 2024 there were 763 NSDCC homes listed for sale.
If there is the 20% surge on top of last year’s inventory, it would make for 916 listings in 1Q25.
Let’s predict 1,000 first-quarter listings to account for the many re-lists coming from late-2024.
I’m going to guess only 25% to 33% of those are salable.
We know that usually there are 2/3s of the listings that sell, so it will be a weird mix that nobody sees coming. There will be a steady flow of sales but only a minority of the total homes for sale are getting lucky.
It’s the swipe-left generation, where the junkers, bad-locations, and terribly-presented homes get ignored immediately. Buyers will forget them forever unless there are major price reductions – which won’t happen because “hey, I’ve only been on the market a couple of months and I’m not going to give it away”.
What will happen as we get into March-May? The unsolds will be stacking up to the sky, causing buyers to get even more picky, while sellers are digging in on price.
Mortgage rates are too high, and I think Powell is going to finally get what he wanted – peak pricing.
The main reason? If sellers have to take 5% to 10% less, they can.
Last time, they were maxed out on ez-qual financing and had no equity. But it’s the total opposite now, and we’re going to see how bad the sellers want and need to sell. If they had to take 10% to 20% less, they could, and they would still come out with a load of cash.
Think of my last Over-List report.
In November, HALF of the NSDCC sales closed for at least $100,000 UNDER the list price!
Because the creampuffs selling for top-dollar will be a smaller minority, our lousy pricing metrics will get dragged down by the sellers who dump on price. They could have spruced up their home and/or hired a better agent in the beginning, but nobody told them it was going to be this tough to sell. Instead, they dump.
A larger price gap between the creampuffs and fixers will develop, causing more appreciation for how critical it is to have an excellent presentation AND an attractive price.
Last week there were 386 NSDCC active listings, and today there are 343 – a difference of 57.
Impressively, there were 25 listings that were marked as ‘pending’ in the last week! But it also means that a load of the unsuccessful sellers of 2024 will be back early next year, with most relisting in January.
This year we began with 255 NSDCC active listings.
In 2025, there will be 300+ and dozens of others flooding back into the market.
Who are they?
We are a community dominated by empty-nesters. From last January:
Around 80% of the local homeowners have been here for more than eight years!
Those are the folks who have received $1,000,000+ in home equity since the pandemic.
It’s not hard to imagine that 10% to 20% of them will want to cash out in 2025!
An additional 15% to 20% of inventory next year (on top of the 14% surge in 2024) is in the bag.
Kayla is in town so we were trying to do the more-professional looking videos, which for me means doing a more-formal introduction of myself for those new to our Instagram channel.
On the same day, Robert Reffkin appeared on CNBC and said that research shows that inventory will climb another 15% in 2025 – which is what I said! Many observers will shrug it off and declare that we’re just normalizing back to pre-pandemic levels, but pricing has increased over 60% since then:
Will prices drop to adjust for more inventory?
There probably won’t be much movement on price early in the year, because sellers will be thinking about the spring selling season blah blah and they will be much more comfortable waiting until summer before looking for the panic button. They’re not in a hurry, and they’re not going to give it away!
The one thing we know for sure: Home sellers will want to get what the last guy got. Nobody is going to be listing with a low price in the first 3-6 months of 2025.
The results will all be up to the buyers – are you willing to pay the same prices for homes when active listings are piling up unsold? Everyone will expect you to!
I guess if we’re doing billboards it’s not much of a secret any more.
Selling Compass listings off-market to buyers of other Compass agents is legal and within the rules of the Clear Cooperation Policy. The CCP doesn’t allow public advertising of individual homes, but advertising the PE program is fine.
It is inevitable that residential real estate will go the way that the commercial brokers do it – selling properties without any organized effort to cooperate between agents.
The Compass Private Exclusives is merely the next step in the evolution.
Our current program isn’t that effective yet – I don’t think many homes are being sold off-market within the Compass network, but it’s coming. I think the more-public advertising of it is because we’re trying to bust up the CCP, and when it doesn’t happen then Compass will have a great reason the leave NAR/MLS and go it alone. The PE program will already be well-known by then, and it will be what we use to attract more clients, especially sellers.
The Big Change is underway!
I don’t think it is a concerted effort, but it will look like it in the end:
Reduce the realtor population by any means possible.
Don’t go out of the way to share listings with other agents.
Market heavily to sellers and buyers directly.
Everything goes in-house; realtor commissions, loans, escrow, title, etc.
It allows for the brokerages to make a good living too.
I think we are in for several monumental changes in the market conditions next year.
Some will be quick to label it a simple change from a seller’s market to a buyer’s market and leave you hanging. But it is a description that needs more definition – specifically, what does that mean for the participants? Do buyers get a better price? Do sellers have to take less?
You better rely on a great agent to help you with those questions!
One change that will be more evident will be doom from the casual observers. The commentary from the cheap seats is already ramping up, and buyers and sellers need to decipher whether it has any relevance to their own situation.
This may be an accurate assessment….but it’s about Nashville, not here:
My prediction? The doomers will be back with a vengance in 2025, especially on social media.
They were vicious in the 2008-2012 era, and I’m sure it delayed home purchases for many potential buyers. Much of it was due to the unprecedented market conditions – foreclosures and short-sales everywhere, and the ez-qual/no-doc financing had been eliminated.
Because it’s been such a strong seller’s market since the pandemic, the basic inexperience with a surge in inventory will tempt buyers (and agents) to pause. The stronger the surge, the more likely the pause.
In the last couple of years, we’ve followed how many new listings come to market in January. It’s been a good indicator of what to expect for the Spring Selling Season!
In past Januarys, the guesses spanned a reasonable range and usually the winner was somewhere in the middle of the pack. These were the guesses from last January:
Contest to Guess the Total Number of NSDCC January 2024 Listings
142 Anne M
157 Skip
160 doughboy
170 Dale
174 SurfRider
176 LifeIsRadInCbad
180 Kingside
188 Stephanie R.
189 Chris
190 Tom
192 Sara G.
196 Derek
200 Curtis
208 Rob Dawg
210 Bode
213 Shadash
217 Nick
222 Majeed
223Joe
The final count was 255 listings in January, 2024, which was 14% over the highest guess!
After January, the inventory continued to rise, and there were around +15% more NSDCC homes for sale this year, than there were in 2023.
I mentioned last January:
My theory is that 10% more inventory is easily absorbed and really won’t be that noticeable. It’s when the inventory is growing at 20% or more that buyers may wonder what’s going on – and be tempted to pause, and/or get more picky, if that is possible.
The way it’s going, the 2024 Selling Season should be as hot, or hotter than it was last year!
The +15% was about the ideal increase in inventory because sales were higher too. Will 2025 be the year that we find out how much is too much?
It’s going to be a wild and crazy season – and not just for the Padres!
Leave your guess any time, and officially this contest will begin the first week of the year.
The was the Inventory Watch report in mid-December last year:
Today’s report:
The NSDCC median list price today is $3,895,000. (It was higher than $4M until April 15th this year).
There are 22 houses for sale priced under $1,500,000 between La Jolla and Carlsbad.
The current inventory is 386 NSDCC active listings (+23% YoY) that are also very picked over.
There are 185 actives priced over $4,000,000, and their average list price is $11,164,026.
At this point, most everyone is in the wait-and-see mode for 2025, but I think I have another sale in me this year. Donna is feverishly preparing five homes for sale that will hit the open market in January and February. Instead of some holiday relaxing with family, we are in full-tilt boogie mode and pedaling as fast as we can – let’s go 2025!
Last Friday I had my nine reasons why inventory is going to surge in 2025, and it’s going to start up in January just like it did this year. It wasn’t a bad thing in 2024 because NSDCC sales have increased +6% year-over-year as the demand picked up some of the extra supply.
But as we saw in August, the demand has its limits, so any surge in supply in 2025 needs to be muted, and hopefully we’ll end up with about the same number of listings as we had in 2024 – and they just come earlier.
My nine categories are full of potential home sellers, and here’s #10 – covid buyers:
Younger Americans who bought homes during the COVID-19 pandemic could account for a surprisingly large share of home sellers in the coming year, as boomers who have owned their homes for decades mostly refuse to sell, a new survey finds.
Among current homeowners, nearly 1 in 5 say they plan to sell their home next year, according to the results released on Wednesday by Bright MLS. Although people who purchased their home in the past five years accounted for just 24% of all homeowners, they made up 32% of those who plan to sell their home in 2025.
Homeowners in their 30s and 40s will be the most active group of sellers in 2025, with 27% of homeowners aged 30 to 39 and 28% of homeowners aged 40 to 49 indicating they expect to sell in the coming year. By comparison, just 10% of older homeowners plan to sell.
“Record-low mortgage rates during the pandemic were a huge incentive for individuals and families to buy a home. Many of these buyers also have been able to quickly accumulate significant equity in their homes as home prices have escalated,” says Lisa Sturtevant, Bright MLS chief economist.
In November, national median list prices were up 37% from the same month five years ago, according to Realtor.com® economic research data.
“This wealth gain has created financial security for this group of homeowners, and is also allowing them to be move-up buyers even in today’s relatively high interest rate environment,” says Sturtevant.
The Realtor.com 2025 Housing Forecast notes that the market is shifting from a strong seller’s market to one in which buyers and sellers have more balanced market power.
“As a result, sellers will need to price carefully to attract buyers, especially in markets where affordability is an issue,” says Realtor.com Chief Economist Danielle Hale.
Hale adds that while there’s potential for a favorable market for sellers, “the overall landscape will depend largely on how economic conditions, interest rates, and housing supply evolve over the first few months of the year.”
The survey found that of homeowners in their 30s and 40s who are planning to move, 30% have a mortgage with an interest rate below 4% and more than two-thirds have a rate below 5%.
Mortgage rates are currently averaging 6.69%, and the Realtor.com economic research team forecasts they will continue to average above 6% through the end of 2025.
It means that many families who plan to move will do so regardless of the higher rates. The survey found that the traditional reasons of family and career were the main impetus for moving among younger homeowners who plan to sell.
Among homeowners in their 30s who plan to sell, 37% said it would be for job reasons and 34% cited family reasons, including marriage, children, divorce, and being closer to family.
For homeowners in their 40s, the priorities were reversed, with family changes cited as the most common reason for moving, at 44%, and career changes, at 26%.
Only about 6% of homeowners aged 60-plus said they were planning to sell their home in 2025, according to the survey.
To demonstrate further how the momentum is building, let’s look at SE Carlsbad.
4th Quarter SFR Closed Sales Between $2,000,000 and $3,000,000 in the 92009:
2023: 9
2024: 23
The optimism coming off the election helped, because ALL of these went pending since November 5th:
Only one had to take a real haircut on price – so far, two sold for full price and one sold over list!
If four of the pendings close this month, it will mean that the 4Q24 sales were 3x more than last year!
True, those could have been the last buyers ever for the 92009. But doesn’t there have to be potential buyers who decided to wait-and-see what 2025 has in store? I think so, and around the 92009, there will be a strong set of recent comps to support the valuations!
It reminds me of the 4th quarter of 2012 which snuck up on us because the short sales and foreclosures had not cleared yet. The NSDCC sales in 4Q12 were 44% higher than in the previous fourth quarter, and the following year, 2013, was the hottest year of the decade.
There are 20% more active listings, and 21% more pendings than we had last December – a monthly trend here in the fourth quarter of 2024 as the demand is keeping up with the supply.
Compare it to August when there were 26% more homes for sale year-over-year, but 17% fewer pendings!
The momentum going into the new year is terrific – it’s going to feel like the frenzy is back!
