Housing Markets Shift In Northern Virginia And Santa Monica

Northern Virginia and Santa Monica—two regions separated by thousands of miles and distinct cultures—found themselves navigating remarkably similar housing market turbulence in 2025. As 2026 dawns, both markets are recalibrating, offering up new realities for buyers, sellers, and renters alike. The changes, while nuanced and locally specific, reflect broader national trends: rising inventories, shifting prices, and a growing sense of balance after years of volatility.

In Northern Virginia, the real estate market was buffeted by uncertainty throughout 2025. According to the Northern Virginia Association of Realtors (NVAR) and George Mason University’s Center for Regional Analysis, the region saw a dramatic 45.1 percent jump in housing inventory by November, bringing the number of available homes to 2,042. This influx of listings was paired with a 5.7 percent increase in median home prices, which reached $740,000 in November 2025. As the local market absorbed shocks from mass federal worker layoffs and a prolonged government shutdown, both buyers and sellers were forced to adjust their expectations.

Looking ahead, the 2026 Regional Housing Market Forecast, published by NVAR and George Mason University, predicts that interest rates will hover around 6 percent. This relatively steady rate, combined with the higher inventory, is expected to produce a more balanced market. The report states that home prices will continue rising, but only at a moderate pace, reflecting "continued demand alongside a gradual increase in available inventory." Still, affordability remains a sticking point for many would-be homeowners.

"The Northern Virginia market is entering a more stable phase," NVAR CEO Ryan McLaughlin explained. "While affordability pressures continue, the fundamentals of our region—strong employment, a diverse economy, and sustained demand—position us well for a year of steady, sustainable growth." Yet, not all forecasts are equally optimistic. As reported by Bright MLS, another major listing service, uncertainty surrounding the federal government could continue to weigh on the region. Bright MLS warned that the recent surge in inventory might force sellers to lower their price expectations, potentially leading to weak or even negative home price growth in some localities.

The NVAR report breaks down the 2026 outlook by jurisdiction, revealing a patchwork of trends across Northern Virginia. In Fairfax County, home prices are expected to rise by 1.9 percent, with average monthly unit sales climbing 8.4 percent. Arlington, meanwhile, is forecast to see a 3.8 percent increase in median prices, a hefty 27.8 percent jump in inventory, but only a modest 1.1 percent rise in sales. Alexandria is set for a 4.2 percent gain in prices and a 4.5 percent increase in sales. Prince William County stands out for its flat to slightly declining prices—down 0.2 percent—with sales still projected to edge up by 3 percent. Loudoun County anticipates a 3.3 percent bump in median prices, with sales jumping 7.6 percent to match a 36.2 percent increase in inventory. Stafford County, on the other hand, is bracing for a 4.6 percent drop in prices and a 2.4 percent decrease in the number of homes sold, even as inventory grows by 33.3 percent.

Across the country in Santa Monica, the housing market’s story in 2025 was one of cooling after a period of intense heat. Rents fell 1.2 percent in November alone, capping a year-over-year decline of 0.1 percent, as reported by Apartment List’s December 2025 report. The median rent for a one-bedroom apartment stood at $2,316, while two-bedrooms averaged $2,776. The citywide apartment vacancy rate reached 5.2 percent, up 0.7 percentage points from the previous year, reflecting a broader national slowdown in the rental market. Indeed, November marked the slowest rental month in the country, with nationwide rents now 5.2 percent below their 2022 peak.

Santa Monica’s sales market was no less dramatic. Median home prices tumbled between 5 percent and 10 percent year-over-year, with October 2025’s median price of about $1.75 million representing a 10.5 percent drop from the same month in 2024. Mortgage rates, which averaged between 6.5 and 7 percent throughout 2025, contributed to the decline in both prices and sales volume. Only 48 homes sold in October 2025, compared to 58 a year earlier, as both buyers and sellers hesitated in the face of high borrowing costs.

Homes also took longer to sell, with the average listing going pending in 34 days versus 30 days the previous year. The era of feverish bidding wars appeared to be over: just 37 percent of sales closed above list price in fall 2025, while 54 percent sold below asking. The median sale-to-list ratio hovered at 0.99, a far cry from the days when homes routinely fetched more than their asking prices. "Buyers had more room for inspections and contingencies, and were often able to negotiate repairs or price reductions, especially on overpriced listings," noted Apartment List’s report.

Inventory in Santa Monica rose about 10 percent over 2025, with 275 homes on the market by year’s end—equal to five or six months of supply. However, the shift wasn’t uniform across all property types. Listings for one-bedroom homes fell 14 percent, while three-bedroom and five-bedroom listings surged by 28 percent and 25 percent, respectively. This meant that first-time buyers still faced stiff competition for entry-level properties, even as the broader market cooled.

Despite the market’s cooling, Santa Monica pressed ahead with several major housing developments in 2025. The city’s Architectural Review Board gave unanimous approval to an eight-story, 260-unit mixed-use complex on Wilshire Boulevard in September, including 26 affordable units. Construction began on the Pico Bowl redevelopment, a mixed-use project featuring 186 apartments (19 of them affordable). The City Council also greenlit a 122-unit, fully affordable project at 1318 4th Street and reviewed plans for a 257-apartment development at 1238 Lincoln Boulevard. These projects are part of Santa Monica’s effort to meet state-mandated housing targets—specifically, the creation of 6,168 affordable units by 2029.

Policy changes played a significant role as well. New California legislation, effective July 1, 2025, requires cities to approve subdivisions of up to 10 residential units on certain parcels, even in areas previously zoned for single-family homes. Santa Monica’s City Council initially adopted standards that exceeded state minimums, but the Planning Commission delayed permanent adoption in December, citing a need for more public input. Meanwhile, the city’s Rent Control Board approved a 2.3 percent general adjustment for controlled apartments, effective September 1, 2025, maintaining the city’s longstanding commitment to rent regulation.

Local economic conditions in both regions remained generally supportive. Los Angeles County’s unemployment rate hovered in the mid-5 percent range, and Santa Monica continued to attract high-earning professionals from expensive cities like San Francisco, Houston, and Washington, D.C., helping to sustain demand even as market conditions shifted.

As 2026 unfolds, both Northern Virginia and Santa Monica find themselves at a crossroads. The days of runaway price surges and frantic bidding may be behind them, but new challenges—affordability, policy shifts, and evolving buyer preferences—are shaping the next chapter in their housing stories. For now, the markets appear more balanced, but the pressure points of supply, demand, and policy will continue to test just how stable that balance remains.