Happy New Year! As we step into 2025, it’s the perfect time to reflect on what happened in the real estate market throughout 2024 and look ahead to what 2025 might hold. Whether you’re considering buying, selling, or investing, understanding the previous year’s trends can help you make informed decisions. Let’s dive in!

In 2024, home prices in Virginia showed a clear upward trend. The average price per square foot increased from $161.21 to $168.32, and the average sale price climbed from $307,773 to $323,888. This reflects the growing demand and limited housing supply in the area. If you’re currently in the market for a home or are thinking about selling, you may already feel the effects of the low inventory.

The typical home sold in 2024 was a three-bedroom, two-bathroom house, averaging just under 2,000 square feet. These homes are staying on the market longer than in recent years, averaging 37 days. While that’s a bit higher than the rapid turnover we saw in 2021 and 2022, it’s still far below the six-month average that was common in markets before 2020.

In the greater Lynchburg area, the median home value increased by 5% in 2024, which means that if you’ve been holding off on buying, you may have missed out on a chance to save a little more money. That 5% increase reflects how quickly prices are rising and serves as a reminder that waiting may only result in paying more for the same home.

 

Interest Rates and Affordability in 2024

Interest rates are a significant factor in home affordability. As of the end of 2024, interest rates were sitting at about 6.91%. This is just under the 50-year median of 7%, which is a positive sign compared to rates we saw last year. However, it’s still higher than many would like, especially for first-time homebuyers. Realistically, we probably won’t see rates below 4% in our lifetime and will probably be tempered for rates in the 5%-6% range for several generations.

Higher interest rates directly impact your monthly mortgage payments. For example, a higher rate means paying more in interest over the life of the loan, which can make owning a home less affordable. Early data also indicates that median household incomes in Virginia did not show significant improvement in 2024. This has created a challenging affordability situation, with households spending about 28% of their income on housing. Ideally, this percentage should be under 25% to maintain a healthy balance in household budgets.

 

Home Prices: Will They Continue to Rise?

The ongoing question on everyone’s mind is whether home prices will continue to rise in 2025. Historically, real estate prices tend to increase over time, with only brief periods of decline, such as during the 2008 housing crash. Even then, home values only dipped slightly compared to the long-term trend. The only people who made a “steal” then were the investors who bought foreclosures off-sight and without an inspection.

Looking at 2024, home values in Lynchburg increased by 5%, continuing the trend we’ve seen in the last few years. For homeowners, this has been great news, with many seeing substantial increases in their property value. In fact, over the last five years, home prices in the area have risen by 56%. This is significant equity that homeowners can leverage for future purchases, upgrades, or liquid cash with downsizing.

For potential buyers, this means that waiting for prices to drop could lead to paying even more down the road. Real estate is an appreciating asset in the long term, so buying sooner rather than later often leads to greater wealth-building opportunities. Even with higher interest rates, buying a home now can still be a wise investment if you plan to hold it for several years. Nathan can help you out with these calculations at no cost to you.

 

Will Home Prices Continue to Appreciate in 2025?

While nobody can predict the future with certainty, there are several factors to consider that could influence the local market. Interest rates will likely remain a major driver. If the new administration follows through on its promises to lower interest rates in the coming months, we could see more people entering the market, which would likely drive up demand and, in turn, home prices will surge.

However, if rates remain high or rise further, we could see a slowdown in price increases, though a slight appreciation is still expected.

Based on current trends, I predict that home values could increase by 6–7% in 2025, especially if interest rates ease. Even a 5% increase would be a solid gain, considering the strength of the market. If you’re thinking about buying, selling, or investing in real estate, it’s important to act sooner rather than later. Real estate has consistently proven to be one of the best ways to build wealth, and the longer you wait, the more it could cost you.

 

Equity Gains: Is Now the Time to Upgrade or Downsize?

If you already own a home, you’ve likely seen a significant boost in your equity over the past few years. Home prices in Virginia have increased by 56% in the last five years, which means you’ve built up considerable value in your property.

Now could be a great time to consider upgrading to a larger home if your current space no longer meets your needs, or downsizing to free up some cash for other investments or retirement plans. Don’t fall for the fallacy of “Sell High, Buy High.” Afterall, would you rather lose all that equity and “Sell Low, Buy Low.” Of course not!

 

2025 Market Outlook: A Strong Year for Buyers and Sellers

Looking ahead to 2025, the real estate market is showing promising signs of continued growth. While interest rates and affordability will remain key factors, the overall trend points toward sustained home price appreciation. Whether you’re thinking about purchasing your first home, upgrading, or diving into real estate investing, acting sooner rather than later could be a smart decision. With home prices expected to rise further, the sooner you enter the market as a homeowner or investor, the more wealth you could potentially build over time.