Another year has come and gone, and what a year it was! So much happened—and some things didn’t happen as predicted—that it was a whirlwind for the real estate industry. The most significant changes came with updates to our industry practices, particularly regarding commissions.

One major shift was that commissions are no longer allowed to be published in MLS systems or websites connected to them. Additionally, buyers and agents are now required to sign an Exclusive Right to Represent Buyer Agreement before viewing homes. While this has been the law in Virginia since 2012, it’s now more crucial than ever to determine how an agent’s commission will be paid if it isn’t negotiated within the contract. On the bright side, these changes have brought greater transparency to how real estate professionals are compensated.

What Didn’t Change in 2024?

Despite widespread predictions, interest rates did not fall as expected. Many anticipated rates would dip into the mid-5% range, but they stayed elevated throughout the year, even reaching the mid-7% range. This kept many homeowners from selling, resulting in continued low inventory instead of the expected rise in homes for sale.

As a result, sales remained flat compared to 2023 and may even show a slight decrease when final numbers come in. Similarly, while some forecasted a drop—or even a “crash”—in home prices, the opposite occurred. Prices increased, which added to the wealth of homeowners. However, rising prices and rates made affordability a significant challenge, especially for first-time buyers.

Another area where expectations fell short was regarding Federal Reserve rate cuts. While many predicted six cuts in 2024, there were only three. I felt six was ambitious, so I predicted three, which turned out to be correct.

What’s Ahead in 2025?

Here are my predictions for the coming year:

• Mortgage rates will remain volatile but slightly lower by year-end, likely in the high 5% to low 6% range.
• Inventory levels will remain low but improve slightly as more baby boomers age in place and homeowners stay “rate locked” in their current mortgages.
• Home prices will continue to rise due to low inventory and strong demand.
• Affordability will remain a significant challenge, especially for first-time buyers.
• The Fed will cut rates three times, fewer than predicted earlier.
• Fewer agents will remain in the business due to declining transactions and commission compression.
• Homeowner’s insurance rates will rise due to the impact of natural disasters, making insurance harder to secure in some areas.
• Unemployment will increase slightly but remain below 5%, leading to a softer labor market.
• Inflation should stay manageable, in the range of 2.5–3%, supported by Fed actions and economic conditions.
• Now more than ever, having a Realtor® represent you is critical to navigating the evolving real estate landscape.

As we step into 2025, it’s clear that the real estate market will continue to present its challenges, but with the right guidance, opportunities abound. Whether you’re looking to buy, sell, or simply understand how these changes affect you, I’m here to help. Together, we can navigate this ever-changing market with confidence.

Here’s to a prosperous and fulfilling 2025 — Happy New Year!