Welcome to 2025! While our Southern California community has faced great challenges already in this new year, we believe that bright days lie ahead. Yet, it is difficult to predict how our local housing market will respond to all of the disruption coming our way. Rather than guessing, we offer a discussion to highlight important factors to watch that will impact our local real estate market. We’ll follow up with some suggestions to put you on a path of success this year in relation to your real estate investments.

Important Factors To Watch

  1. Mortgage Rates – With the super low 3% rates further in the rearview mirror, we’ve begun to adjust to the more historical average mortgage rates near the 7% level. Recent mortgage rates enjoyed a downward trend for a bit at the end of 2024 but have now increased due to subsequent job reports. Now, we are trending back down as a result of the stubborn inflation numbers that were reported. In general, rates remain volatile. NAR chief economist, Lawrence Yun, said on January 15th that a decreased 6.5% rates are expected by the Spring selling season. Click here to read. While this is helpful news, until rates are in the mid-5% range, some homeowners will continue to delay any potential sale of their current homes, resulting in a continued market of low inventory. This leads us to our new item to watch.
  2. Housing Inventory – While taking photos for a new listing coming in early 2025, my real estate photographer told me that they have been extremely busy. While this does not meet high scientific standards of testing, we are also experiencing an uptick of discussions with our own clients, who are ready to make a move. In combination, this leads us to believe that many sellers and buyers are tired of putting off their moves and are more ready than they have been in the past couple of years. However, LA County has just lost thousands of homes; see here and more in next point: click to read.
  3. Wildfire Disaster Recovery – While the wild fires did not physically impact the South Bay, many of us here have family and loved ones in the impacted area that need our help. We are expecting this greater demand on local housing to impact us all. Changes to local building policies may help move along the recovery effort but, this will be a long, difficult road. See policy changes: click to read. In the short term we will see a rise in demand for rental housing putting pressure towards higher rents. In the mid-term, and even now, many areas will also see an upward pressure on home values as those that have lost their homes begin to look towards more long term housing solutions.
  4. Tax Policy – There is a new Administration and a new Congress in session. It has been boldly stated that their goal is to renew the previous Trump Administration tax cut package (Tax Cuts and Jobs Act of 2017, “TCJA”) that sunsets at the end of 2025, if not extended. See a summary of provisions here: click to read. If these provisions expire, it will be tantamount to a tax increase for many. Tax increases typically dampen the economy as consumers have less to spend. It is unclear if the small majority margins can hold together to get this extension passed. And, if extended, we do not know which provisions will be extended and which will be lost or altered. A lot of negotiating has likely already begun! See provisions set to expire here: click to read. See discussion of the battle lines: click to read.

Path To Success

  1. Estate Plan – It is easy to put your estate planning on the back burner. But, now is the time to at least start thinking about how your plan should look. Of primary importance, understand that if you and/or your spouse should pass without a will or trust in place, your assets will end up in the costly process of probate. It is a lengthy and costly process that shrinks the size of your remaining assets to be transferred to your beneficiaries. Further, it is a frustrating and highly administrative process left to those that are grieving a loss. For more, click here and here to read. In order to avoid probate, you must stop procrastinating and set up an estate plan. Keep in mind that your estate planning professional should discuss your options if lower estate tax exemptions due to the sunset of the tax laws will impact your estate (see above regarding extension of the TCJA provisions).
  2. Are you thinking about buying a home this year? Contact us for a list of preferred lenders so that you can get your pre-approval now. This may change a bit during the year based on mortgage interest rate movements (see discussion of mortgage rates above) but, you will know the range of your purchasing power. And, it will be easy to update your file in case you need to move quicker than anticipated when your dream home hits the market.
  3. Are you thinking about selling a home this year? Meet with Team Plunkett now to discuss how to prepare your home and your family, for the best process and results.
  4. Are you thinking about remodeling your home this year? Contact us for referrals and/or suggestions. We are happy to comment on improvements that are best for resale value and to help you achieve your remodeling goals.

Leverage the strength of Vista Sotheby’s, experience the dedicated attention of Team Plunkett. Schedule your free consultation today and let’s discuss what your next move could be!