Southern California Real Estate Q3 2024 Market Recap and 2025 Outlook Report

Southern California's housing market continues to be a whirlwind of activity, and Q3 2024 was no exception. Let’s dive into what the third quarter brought to the region’s housing scene and what to expect as we move into 2025. With interest rates shifting, home prices adjusting, and an ever-changing market landscape, it’s important to keep up with the latest trends if you’re thinking of buying, selling, or just staying informed.

Q3 2024 Snapshot: Trends and Market Dynamics

Home Prices and Sales Activity

Home prices across California rose by 3.9% year-over-year in September 2024, bringing the median home price to $816,100, according to Redfin. Southern California mirrored this trend, albeit at varied rates depending on the local area. For instance, Los Angeles home prices edged up by 0.4%, reaching a median of $984,000, while San Diego saw a more robust increase of 6.5%, with median prices hitting $945,000. Anaheim also joined the trend with home prices up 4.8% compared to last year.

Sales activity in Q3 offered some mixed signals. Despite an increase in inventory, with California seeing a 22.6% year-over-year rise in homes available for sale, buyer demand appeared tepid. According to the California Association of Realtors (C.A.R.), single-family home sales declined by 3.4% from August, though they did see a 5.1% increase year-over-year compared to September 2023. The rise in available homes combined with an off-peak buying season suggests a slight market shift towards buyers having more options than before.

Most Competitive Areas

San Diego emerged as one of the most competitive markets in Southern California this quarter. Homes in San Diego sold in an average of 23 days, down significantly from the 14 days seen in Q3 2023. Many properties are still receiving multiple offers, some even waiving contingencies to stand out. Meanwhile, Los Angeles saw a slower market, with homes taking an average of 51 days to sell. According to Redfin, the competition score suggests that while hot homes in L.A. can go for 3% above the asking price, the broader market is taking a bit longer to finalize deals.

Market Supply and Buyer Demand

Inventory Boost and Buyer Hesitation

One notable trend in Q3 2024 has been the increase in inventory. California had approximately 97,998 homes for sale in September 2024, up 22.6% from the year prior. This boost in inventory has given buyers a bit more breathing room compared to the ultra-tight market conditions of recent years. As C.A.R. President Melanie Barker noted, “The inventory of homes for sale has steadily improved in recent months as the market moves into the typical off-peak homebuying season.” However, despite increased inventory, demand has been hesitant, driven in part by fluctuating mortgage rates, which, while declining, still hover above pre-pandemic levels.

In Los Angeles, just 41.1% of homes sold above the list price in September, indicating a less competitive environment compared to previous years. On the other hand, areas like Santa Barbara have seen some of the fastest-growing sales prices, with a massive 46.7% increase year-over-year, suggesting that certain desirable regions are still experiencing strong demand.

Mortgage Rates and Market Sentiment

Interest Rates Playing a Major Role

Mortgage rates have been a critical factor in shaping the housing market this year. September 2024 saw the 30-year fixed mortgage interest rate averaging 6.18%, down from 7.2% in September 2023, as noted by C.A.R.. The lower rates have enticed some buyers to return to the market, but economic uncertainty continues to weigh heavily on consumer sentiment. Many prospective buyers seem to be taking a wait-and-see approach, hoping for even more favorable borrowing conditions in the near future.

2025 Outlook: What’s Next for Southern California?

Projected Increase in Sales and Prices

Looking ahead, 2025 is expected to bring renewed energy to the Southern California real estate market. The California Association of Realtors predicts a 10.5% increase in home sales, which would bring the total number of single-family home sales to approximately 304,400 units. This uptick in sales will likely be fueled by a combination of improved inventory levels and a more favorable mortgage environment, with rates projected to dip to around 5.9% by next year.

Home prices are also expected to continue their upward trend, with a projected 4.6% increase, which would put the median home price in California at $909,400 by the end of 2025. This price growth will be slower compared to the past few years but still reflects a strong demand, particularly in regions with limited housing supply. Southern California, with its desirable climate and robust job market, is likely to see continued interest from buyers, both local and from out-of-state.

Affordability Remains a Challenge

While there’s good news for market stability, affordability remains a pressing issue. Housing affordability in California is projected to remain stable at 16% in 2025, following a dip from 17% in 2023. Despite some softening in price growth, many buyers, especially first-timers, may continue to find it difficult to enter the market. However, opportunities may emerge as more inventory comes online, and as mentioned by the President of C.A.R., Melanie Barker, the easing of the “lock-in” effect could motivate more sellers to upgrade, thereby opening up more entry-level options.

Southern California’s Housing Market in Transition

Q3 2024 has showcased the resilience and complexity of Southern California’s real estate market. With a rise in inventory, fluctuating interest rates, and nuanced shifts in regional dynamics, the market appears to be gradually transitioning to a more balanced state. As we move into 2025, the outlook remains cautiously optimistic—home sales are expected to rise, interest rates are predicted to fall, and prices should continue to grow, albeit at a more moderate pace.

For buyers, sellers, and investors, the next year holds potential opportunities, especially for those ready to move as the market stabilizes. The key will be keeping an eye on mortgage trends and understanding the local dynamics of each specific market, as conditions can vary significantly across the vast Southern California landscape.

If you’re planning on buying or selling in Southern California in 2025, staying informed will be crucial. With market conditions expected to shift, having the latest data at your fingertips can make all the difference in making the best real estate decisions.