December Market Report

Despite most of the homes I see closing below the asking price, the median sale price is up. Houses saw a 5.6% YoY gain, with condos up 3% YoY. Interestingly, it was the condo market that outperformed the housing market MoM, with condos up 3% MoM and houses almost flat.

We saw a huge drop in new listings MoM. However, these numbers are similar to what we saw this time last year. This trend will continue for the next couple of months, until we see the late winter/early spring inventory starting to hit the market.

2026

This year will go down as one of the toughest markets to give advice. It was such a property-specific market that it made it impossible to give broad advice. However, I am optimistic that the market will be better for both buyers and sellers next year. Sellers would have (mostly) come to terms with the realities of the market, and buyers will appreciate that. Factor in the high likelihood that mortgage rates will come down, and things are looking up. 

I’ve never been one to try to predict mortgage rates; however, it feels different this time. The current administration is applying significant pressure to bring rates down. With Jerome Powell’s tenure ending in May, we expect a new Chair who will prioritize aggressive rate reductions. Remember, investors look to the future—if the market strongly believes this shift is coming, we won’t need to wait until May to see rates drop. The wildcard remains inflation (as tariff effects settle in), which may keep the current Fed board cautious in the short term.

We are not going to see a crash that all buyers are hoping for. Homeowners are so equity-rich that, unless they absolutely have to sell, they can wait if they don’t get the number they want. Plus, if they have a rate in the 2%’s or 3%’s, they need a lot of encouragement to sell.

Mortgage purchase applications are the highest they’ve been since early 2023 and significantly higher than the same time last year. There have been a lot of buyers sitting on the sidelines waiting for rates and prices to come down. Given that prices have mostly held steady and rates have finally lowered, with the high likelihood of further reductions, it appears people are gearing up to make a move in 2026. Given that currently about 80% of buyers are homeowners, this will translate into more inventory hitting the market, especially for those homeowners who took out 5-year ARMs during Covid, as those rates are either about to or have already reset to a rate much higher than what they originally had.

Even though it feels like it, we are not technically in a buyer's market, and there is a good buffer before that happens. It’s considered a buyer's market when inventory is at 6 months. Currently, it’s only at 4 months. We are still reminded by Covid and how it affected the housing market, even though the pandemic frenzy cooled almost 4 years ago. It’s those record-setting years that are muddying the waters and making it hard to remember what a normal market is, even though we are entering a balanced market.

Buyers, as I’ve always said, if the property you’re interested in gives you that feeling in your stomach, and you can comfortably afford it, go for it. 

Sellers, you need to be both realistic about price and patient. Unless you have a house that checks most buyers' boxes, your property will take time to sell. It is still very important to present your home in the best possible light. Don’t be lazy or try to penny pinch on the preparation. Your home needs to be fully dialed in to capture the buyer's attention.

Capital Gains

A new bipartisan bill has been introduced that would increase the capital gains exemption on primary residences to $1M for married couples and $500,000 for single owners—up from the current $500,000 and $250,000 limits. This change is long overdue and could help free up inventory. When I’m speaking with long-time homeowners, the capital gains tax hit is a major reason they haven't sold. Often, these homeowners have outgrown their houses but don’t want to sell because of the capital gains liability. Instead, they choose to keep their home until they pass away, effectively bypassing the tax and allowing their heirs to inherit the most money. Crucially, the bill also calls for the exemption amount to be adjusted for inflation each year.

Write Those Offers

I’m seeing a lot of stale inventory enter escrow as buyers are finding sellers who want to sell before the year is out. Think of this as the Black Friday time for real estate. There will be increased competition in the new year, and as I mentioned above, the market isn’t going to crash.

Off Markets

A decent number of homes will be kept off-market for the next couple of months during the holiday season. So if there’s something you’ve been looking for and you haven’t found it on the market, reach out so I can keep an eye out for you over the holidays.

Palisades

Active inventory is the lowest we’ve seen since April, mostly due to the holiday season and sold inventory. About 340 lots have been sold, with 35 sold last month and about 38 in escrow. There are about 160 on the market. Optimism is still high, and I haven’t yet heard anyone doubting the recovery. How long it’s going to take is still up in the air.

Click below to follow the land market in real-time. It’s an active link that will update with the current day's data. 

https://www.themls.com/MarketSnapshot/T/YWFhYWJmamRi