Now a month into 2025, it’s time to reflect on the predictions I made for last year’s local real estate market (which you can read here), and set new expectations for the year ahead. In 2024, several factors shaped the market locally, including interest rates, inventory levels, the election, and post-COVID housing preferences. Below, I’ve outlined how these elements played out last year and what they might mean for the real estate market in the DC Metro Area in 2025.

Here’s a closer look at how recent events may affect our local market.

Interest Rates and Inventory

Interest rates and inventory are closely linked. Despite predictions of multiple Federal Reserve rate cuts in 2024, these cuts didn’t materialize, leaving many buyers hesitant. A brief dip in rates led to a spike in sales in the early Fall market, but it was short-lived. It’s worth noting that when the FED cuts rates, it doesn’t always translate to lower mortgage rates. The proposed FED cuts are often anticipated by the financial markets and are already baked into the mortgage rates in advance of the announcements. 

For those considering a move, I always recommend setting a strategy with your Realtor and lender to know what signals to watch. The inventory shortage is likely to remain a challenge in 2025, but any future rate drops (IF they happen) could encourage more homeowners to sell, increasing options but also competition. When homeowners who are in the typical “move-up” market feel more inclined to trade their mortgages with rates in the 2’s and 3’s, it will open up a huge backlog of inventory.  But again, more inventory provides buyers with more options but will also lead to heightened competition.

Is finding and buying a new home one of your goals this year? If so, the posts below can help you get started:

• Creative Home Loans to Help You Buy a Home
• Should You Listen to Friends When It Comes to Real Estate?
• Should First-Time Homebuyers Buy a Condo or a House?

Election and New Administration 

The 2024 election had a limited impact on the market for most of 2024, though the ultra-luxury segment (over $4 million) saw increased activity post-election due to new administration arrivals. The broader market saw little impact, but we will be watching to see how certain administration changes will influence financial markets, tariffs (which could impact interest rates), Federal grants, and a possible reduction of the Federal workforce. All of these bear watching for the national real estate market, but especially here in the DMV. (Please note, this was written originally at the end of January.  This is still largely the case, but for a more up-to-date read on changes due to the new administration, see this article written a week after the start of Federal layoffs, as the news has been moving quickly). 

Post-COVID Housing Preferences

The shift in work-from-home policies continues to influence housing decisions. Some individuals are returning to the office, prompting moves back to urban areas, while others are retiring or relocating out of the area. Additionally, many property arrangements, including those related to divorce settlements or other lifestyle considerations, are being impacted as people reassess their post-COVID living situations.

Are you planning to sell in the new year? The posts below will help you even during challenging markets:

• Staging a Home For Sale Vs. Decorating: What’s the Difference?
• The Power of Timing and Staging Real Estate Listings
• What to Do if You Need to Sell Your Home Fast

NAR Settlement and Commissions

The National Association of Realtors settlement made headlines, but its impact was more about disclosure practices than market disruption. It’s important to stay informed about these changes, as they affect how real estate transactions are conducted. Many of the headlines can be misleading, so you can read my full analysis on the settlement’s impact on our region here. 

Summary

Looking ahead to 2025, the real estate market in the DC area is poised for both growth, but there are still a lot of the same factors at play that we experienced in 2024. Interest rates, inventory, political factors and a re-settling in a post-Covid world will continue to shape the landscape. Buyers and sellers should remain informed and work closely with professionals to navigate this dynamic market effectively. It’s never too early to meet to set up a strategy for your future move, whether that is in a few weeks or a few years!  We are never too busy to chat with you about how we can help you meet your real estate goals on a timeline (and budget) that works for you.

Do have questions about the market today? Whether buying or selling, our top Alexandria real estate agents are here for you. Connect with us today by filling out the form below.