What to Expect in the Playa Vista First Quarter 2025 Housing Market

In the fast-paced Los Angeles housing market, spring typically comes early. With the help of milder weather than in most of the country, within a few weeks after the start of the year, buyers who are looking to get an early start on the spring housing market begin shopping. For renters or people who do not need to sell first, and who have their finances in order, it is fairly easy to mobilize to buy a property within days or weeks of having the notion to do so. At the same time, inventory is near its low for the year – sellers often take their properties off the market over the holidays and might not put them back on until the spring.

New Year’s Resolution Buyers, as I call them, are more focused on the time of year than on purchasing during less competitive buying opportunities like the 3^rd or 4^th quarters. While these buyers strongly influence demand in the first quarter, there is no such dynamic as New Year’s Resolution Sellers. In itself, the decision to sell one’s home or to move might be a “new year’s resolution”, selling requires having a place in mind to go, which requires a lot of planning. It also takes longer to organize and prepare a house for sale than it does to turn in a few documents to a lender and begin house hunting. This is why we see demand outpacing supply shortly after the new year.

Additionally, the first quarter features motivated and proactive buyers, such as families, looking to make housing plans that can be solidified before summer vacation season and in time for school placement for the upcoming school year. These buyers lose a lot of urgency by late spring when the kids get out of school, so they are often willing to pay top dollar to get a deal done earlier in the year. Market data shows that prices increase through these months and tend to level off by summer and decline slightly in the 4^th quarter of the year. More motivated buyers, in addition to lower supply, combine to make the first quarter market, more often than not, the strongest seller’s market.

For early 2025, with the election behind us, currently strong asset values, and interest rates expected to continue a slow downward trajectory, I foresee a strong start to the year, which should continue through the 2^nd quarter. From 2022-2024, the market started hot and fizzled by May or June, which is earlier than normal, as inventory increased and demand waned. This year, for the reasons I mention above, in addition to pent-up demand to transact, I expect the market to have more endurance. This assumes relatively consistent economic conditions and a continued steady deceleration in inflation. While we still will be facing the “lock-in effect” from the recent period’s increase in interest rates, this will fade over time.

As of this writing, in mid-December 2024, the active supply on the market in Playa Vista is 22 condos and houses, which is higher than in recent past Decembers, albeit lower than it would be if some sellers had not already removed unsold homes from the market for the holidays. I expect supply to increase above this after the new year before absorption, due to increased demand, reduces active inventory into the teens by February or March with a slow increase in supply thereafter. While distress is very minimal, costs of home ownership have gone up materially over the past couple of years for items such as insurance and HOA dues. There are also a number of homeowners with adjustable-rate mortgages resetting at much higher rates than their initial rates. The increase in these payments might be significant, and although it will not worry all homeowners, it might prompt some to sell. I doubt this will increase inventory drastically, but it will lead to some additional turnover. Overall, I expect a balanced market, with more transactions than in 2023 or 2024, but less than 2021, and low to modest value increases.