2025 Annual Market Report
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Equilibrium and the Return to Market Fundamentals
Welcome 2026! If I had to choose one word to define the real estate market in 2025, it would be “Recalibration.” If the post-COVID years were defined by speed and to some extent “buyer frenzy,” 2025 was the year the market paused to evaluate its own fundamentals. It was, frankly, an "odd" year. We witnessed a rare standoff: buyers, though well-capitalized, sat on the sidelines awaiting a definitive signal of price and rate stability, while many sellers remained anchored to the record-breaking "peak-boom" comps of 2022–2023.
For the first time in a decade, the "urgency of scarcity" has been replaced by the "discipline of value." This is a return to a balanced market - one that rewards patience and strategy over momentum and urgency.
The Pivot
It was around April-May that we noticed a real shift in buyers’ behavior and attitude. 2025 was not consistent. The first half maintained 2024's momentum, but the second half painted a starkly different picture as macro-economic policies and shifting confidence took hold. As I stated in my Fall 2025 market report, rapid changes in financial markets, uncertainty in the broader economy, and a softening labor landscape have collectively influenced buyer psychology, slowing decision-making and encouraging a more deliberate, value-focused approach.
Having said that, it’s also important to distinguish between various sectors of the market. The DC condo market, for example, responded very differently than the detached-home market in Bethesda and Chevy Chase. For the latter, buyer activity remained relatively strong; the dynamic has simply shifted from urgency to selectivity - and that change is now showing up in the data.
This "cooling" was mirrored across the region. In Potomac, the list-to-sold ratio fell from 101% to 99%, while NW DC saw contract volume drop from 361 in the first half to 284 in the second.
Price Segment Deep Dive: The Divergence of Value
The real story of 2025 lies in the divergence between different price points. But before we examine the specific brackets, there is an anecdotal data point worth noting: in my previous reports, I have tracked various measures of "affordability." In earlier years, we monitored how many detached homes sold under $700,000; more recently, that threshold shifted to $1,000,000 as local values appreciated at a historic pace.
In 2025, for the first time in at least 15 years, we witnessed a reversal - albeit a small one - of this shrinking segment. In 2024, the number of homes sold in Bethesda and Chevy Chase up to $1,000,000 stood at 94; in 2025, that number inched up to 98. We saw a similar pattern in NW DC, where detached sales under $1M rose from 82 to 86. While these are small shifts, they are significant indicators of the broader "cooling" and inventory expansion that defined the past year.
Now, let’s examine four price points more specifically:
UNDER $1,300,000 | The Inventory Surprise
For over 15 years, inventory in this entry-level price range has shrunk steadily. In 2025, that trend reversed dramatically. We saw 868 listings entered and 671 contracts signed, up from 727 and 603, respectively, in 2024. To put this course reversal in perspective: as recently as 2020, there were 1,590 listings in this range. The massive shrinkage we saw through 2024 took a sharp turn.
Despite this influx of supply, this remained the most competitive tier, boasting a 100.3% average List Price-to-Sold Price Ratio. However, this is a notable cooling from the 102.3% ratio seen in 2024. Consequently, the average Days on Market (DOM) rose to 23 days, up from just 15 days a year ago.
$1,300,000 – $2,800,000 | The Negotiating Table
This core segment of our market saw a modest rise in inventory, with 1,404 listings in 2025 compared to 1,355 in 2024. Looking back a decade to 2015, this segment stood at 1,047 listings, representing a 34% growth in ten years. Contract activity remained remarkably stable, with 1,035 contracts entered in 2025 - almost identical to the 1,044 seen in 2024.
However, buyer behavior changed drastically within this bracket. The average Original List Price-to-Sold Price Ratio dropped to 98.4% (down from 100.8% in 2024), and the average DOM rose from 29 to 37 days. Buyers were present and active, but they were unwilling to overpay, effectively forcing sellers back to the negotiating table for the first time in years.
$2,800,000 – $4,000,000 | High Volume, Hard Negotiations
This segment has seen the most dramatic growth in our region over the last five years, with inventory up a staggering 134% since 2020. In 2025, 300 new listings entered the market, a 14.5% increase over the 262 listings in 2024.
Contract volume followed suit with a significant 25% jump year-over-year. However, this increased activity came with more friction: the average DOM rose to 78 days, and the List Price-to-Sold Price Ratio dropped to 94.4% (compared to 97.2% in 2024). Notably, cash transactions dropped from 44.5% to 37%, indicating a higher prevalence of financing contingencies even at these elevated price points.
OVER $4,000,000 | The Outlier
The ultra-luxury market uniquely bucked the slowing trend seen elsewhere. This segment experienced a 19% increase in inventory (211 new listings in 2025 vs. 178 in 2024). To illustrate the rapid expansion of this tier: in 2020, there were only 97 new listings—a 117% segment growth in just five years.
Demand in this category was robust, with a 26% bump in contracts (92 vs. 73). In a complete reversal of the broader market trend, the average DOM dropped from 112 to 91 days, and the average Original List Price-to-Sold Price Ratio actually increased slightly to 95%. Cash remains the primary lever here, accounting for 63% of all transactions, up from 56% in 2024.
New Home Development:
The appetite for new construction in the Bethesda-Chevy Chase neighborhoods remains a primary driver of our local real estate economy, yet this segment was not immune to the broader market’s recalibration in 2025. This year, we saw a notable increase in supply with 193 new homes hitting the market—a 13% rise over the 171 listings in 2024. Demand remained healthy, with 101 contracts signed compared to 87 the previous year, proving that the desire for "new" is still a dominant force.
However, a deeper look at the metrics reveals a clear shift toward buyer deliberation. The Original List-to-Sold Price Ratio softened to 94.8%, down from the 95.3% average we saw in 2024. Perhaps more tellingly, the average Days on Market (DOM) stretched to 111 days, a jump from the 85-day average of the prior year.
Note: These figures focus on the public market and exclude "off-MLS" transactions.
The Pricing Paradox
The most striking story in this segment is the aggressive push in pricing. The Median Original List Price for new homes hit $2.8 million in 2025, representing a significant 16.6% year-over-year increase from $2.4 million in 2024. However, the market is beginning to signal a "limit" to this premium.
Currently, there are 45 new homes listed for sale in Bethesda-Chevy Chase - 29 are "Active" and 16 are "Coming Soon." When we analyze these 29 active listings, we see the recalibration in real-time: the current median price for these homes has settled at $3.1 million, a notable 9% correction from their collective original median list price of $3.4 million.
What this data tells us is that while the "New Home Premium" is a reality, it is no longer an unconditional one. Buyers in 2025 were willing to pay for new, but they were not willing to buy at any price, forcing a price correction that has brought the market back into a more sustainable equilibrium.
Note: These figures exclude the large-scale Amalyn subdivision by Toll Brothers to ensure that we are only focusing on the unique dynamics of in-fill development.
2026 Outlook
We have officially exited the post-Covid "boom" and entered a balanced market. The hesitation of 2025 was largely psychological, driven by buyers waiting for a floor, but this "wait and see" approach created a dam of pent-up demand. On December 10, the Federal Reserve delivered its third consecutive 0.25% rate cut, bringing the benchmark range to 3.5%–3.75%. In his year-end address, Chair Jerome Powell noted, "This further normalization of our policy stance should help stabilize the labor market... Our adjustments since September bring it within a range of plausible estimates of neutral." *
As we look toward the 2026 Spring market, the narrative is shifting from one of "uncertainty" to one of "opportunity." Two fundamental pillars support this optimistic outlook, providing a clear signal that the window of hesitation is closing:
The Return of Economic Predictability
The volatility that characterized much of 2025, driven by aggressive inflation and rapid-fire policy shifts, is finally fading. With inflation now nearing the Federal Reserve’s 2% target, the "paralysis of the unknown" is being replaced by a more predictable landscape. Both buyers and sellers can plan with more confidence.
The DC Region Advantage
While other regions may be subject to broader national swings, the Washington, D.C. metro area, and specifically Bethesda, Chevy Chase, Upper NW DC, and Potomac enjoy a unique structural "insulation." Our market is anchored by the federal core, providing a level of employment stability that is virtually unmatched elsewhere, even with the Federal layoffs last year. Furthermore, we continue to see a consistent influx of high-level talent, top-tier professionals in biotech, defense, and law, who generally view local real estate not just as a home, but as a premier asset. This constant "human capital" flow ensures that demand for well-positioned, quality homes remains decoupled from the more volatile national trends.
As always, please reach out with all of your real estate questions. It is my pleasure to offer my guidance and services and to tailor a plan to your goals and needs.
Wishing you and your family a very healthy, happy and prosperous 2026!
Avi
*A Note on Mortgage Rates:
While the Fed has lowered the benchmark rate by 75 basis points since September, it is vital to remember that the Fed does not set mortgage rates. Long-term rates are driven by the 10-Year Treasury Yield. As of late December, 30-year fixed rates are averaging 6.18%–6.29%. The true catalyst for 2026 isn't just "lower rates," but the stabilization of those rates, which allows the "lock-in" effect to finally thaw.
