Santa Clara, Santa Cruz, San Mateo Housing Market Update - November 2024
The Big Story Sellers are coming back to the market Quick Take: After the election of Donald J. Trump, bond prices increased in anticipation of his inflationary policy positions. Interest rates are the most significant factor financially in purchasing a home for most buyers, and as we’ve seen over the past two years, higher rates translate to lower sales. From October 1 – November 7, the average 30-year mortgage rate rose 71bps, landing at 6.79%. The Fed cut rates by 50 bps in September and another 25 bps during the Fed’s November 6-7 meeting. Sales declined 1.0% month over month, falling to the lowest level in modern history, while inventory rose to its highest level since 2020. The spike in mortgage rates should further slow the market in the winter months. Note: You can find the charts & graphs for the Big Story at the end of the following section. *National Association of REALTORS® data is released two months behind, so we estimate the most recent month’s data when possible and appropriate. Bond and mortgage rates are risings as the Fed is cutting rates Let’s talk about rates. The benchmark 10-year Treasury rate rose by as much as 18 basis points the day after the election, pushing the overall rate on the bond to 4.47%. The price of bonds and their yield move inversely, with prices falling as rates rise. For example, if you have a $100 bond paying 10% and then rates rise to 20%, the original $100 at 10% becomes less valuable because now investors could get a $100 bond that pays 20%. A rising yield on Treasury bonds raises the cost of the U.S. federal government when it borrows new money or rolls over existing debts. In short, the cost of borrowing increases and, therefore, more money is needed to pay interest rather than paying for tangible government programs. The 30-year mortgage rate trends with the 10-year Treasury rate, usually about 2% higher. As of November 7, 2024, the average 30-year mortgage rate was 6.79%, a significant increase from 6.08% at the end of September. In just over a month’s time, the monthly payment on a $500,000 loan increased 7.7%. But the question you may be asking is, why did rates go up even in the wake of the Fed cutting the federal funds rate? Real interest rate returns account for inflation, so the $100 bond at the nominal rate of 10% can be rewritten as 10% minus inflation (currently 2.4%) to get the real return of the investment. If inflation is expected to rise, the nominal rate can increase, so real return is unaffected or, at least, less affected,, in which case real return would decrease. Trump’s economic plans are inflationary and, therefore, increase rates. The U.S. economy is operating at close to capacity, and unemployment is low. Tax cuts will increase demand, but higher tariffs will push up prices. The U.S. is a net importer, so blanket tariffs will drive up the prices of an incredible number of day-to-day goods. Higher inflation will result, meaning the Federal Reserve will be more cautious about cutting interest rates. Currently, mortgage rates rise higher when the housing market already tends to slow. Typically, the holiday season experiences fewer sales then picks up again in January. A month ago, rates were dropping, and we were extremely bullish on the spring market. However, if rates rise above 7% or higher, the market will be slower than usual. Since the market has already been slower than usual, a further slowdown coupled with higher inflation would likely slow price growth next year. Different regions and individual houses vary from the broad national trends, so we’ve included a Local Lowdown below to provide you with in-depth coverage for your area. As always, we will continue to monitor the housing and economic markets to best guide you in buying or selling your home. Big Story Data The Local Lowdown Quick Take: Median home prices are slightly below peak levels across Silicon Valley. We expected price contraction after peaking in the second quarter, which is the seasonal norm. Prices will likely decline for the rest of the year. Total inventory rose 15.0% month over month, as new listings fell and sales of single-family homes increased. However, we expect inventory to decline and the overall market to slow over the next three months. Months of Supply Inventory indicated a sellers’ market for single-family homes in San Mateo and Santa Clara and a balanced market in Santa Cruz. Note: You can find the charts/graphs for the Local Lowdown at the end of this section. The median single-family home prices are up year to date and year over year In Silicon Valley, home prices haven’t been largely affected by rising mortgage rates after the initial period of price correction from April 2022 to January 2023. Low, but growing, inventory and high demand have more than offset the downward price pressure from higher mortgage rates. Year to date, in October, the median single-family home and condo prices rose across counties. Year over year, prices increased most significantly for single-family homes in Santa Clara and Santa Cruz, up 8% and 9%, respectively. Prices typically peak in the summer months, and the mild contraction after the post-summer peak has fallen in line with expectations. Home prices will likely continue to decline slightly for the next three months. High mortgage rates soften both supply and demand, but home buyers and sellers seemed to tolerate rates near 6% much more than around 7%. Mortgage rates fell significantly from May through September, but rose significantly in October. Now, rates are far closer to 7% than 6%, so we expect sales to slow starting in November. Single-family home sales rose in October, while new listings and inventory fell The 2024 housing market has looked progressively healthier with each passing month. We’re far enough into the year to know that inventory levels are about as good as we could’ve hoped, although single-family home inventory is still lower than we would like. In 2023, single-family home and condo inventory followed fairly typical seasonal trends, but at significantly depressed levels. Low inventory and fewer new listings slowed the market considerably last year. Even though sales volume this year was similar to last, far more new listings have come to the market, which has allowed inventory to grow. For single-family homes, even though inventory grew meaningfully in the first half of the year, it’s 11% lower year over year. Months of Supply Inventory indicated a sellers’ market in San Mateo and Santa Clara Months of Supply Inventory (MSI) quantifies the supply/demand relationship by measuring how many months it would take for all current homes listed on the market to sell at the current rate of sales. The long-term average MSI is around three months in California, which indicates a balanced market. An MSI lower than three indicates that there are more buyers than sellers on the market (meaning it’s a sellers’ market), while a higher MSI indicates there are more sellers than buyers (meaning it’s a buyers’ market). The Silicon Valley market tends to favor sellers, which is reflected in its low MSI. In 2024, Silicon Valley MSI moved higher, particularly in Q2. In October, MSI dropped across markets. MSI indicated a sellers’ market for single-family homes in San Mateo and Santa Clara and a buyers’ market in Santa Cruz. For condos, San Mateo and Santa Clara favor sellers, and Santa Cruz is more balanced. Local Lowdown Data
San Francisco Housing Market Update - November 2024
The Big Story Sellers are coming back to the market Quick Take: After the election of Donald J. Trump, bond prices increased in anticipation of his inflationary policy positions. Interest rates are the most significant factor financially in purchasing a home for most buyers, and as we’ve seen over the past two years, higher rates translate to lower sales. From October 1 – November 7, the average 30-year mortgage rate rose 71bps, landing at 6.79%. The Fed cut rates by 50 bps in September and another 25 bps during the Fed’s November 6-7 meeting. Sales declined 1.0% month over month, falling to the lowest level in modern history, while inventory rose to its highest level since 2020. The spike in mortgage rates should further slow the market in the winter months. Note: You can find the charts & graphs for the Big Story at the end of the following section. *National Association of REALTORS® data is released two months behind, so we estimate the most recent month’s data when possible and appropriate. Bond and mortgage rates are risings as the Fed is cutting rates Let’s talk about rates. The benchmark 10-year Treasury rate rose by as much as 18 basis points the day after the election, pushing the overall rate on the bond to 4.47%. The price of bonds and their yield move inversely, with prices falling as rates rise. For example, if you have a $100 bond paying 10% and then rates rise to 20%, the original $100 at 10% becomes less valuable because now investors could get a $100 bond that pays 20%. A rising yield on Treasury bonds raises the cost of the U.S. federal government when it borrows new money or rolls over existing debts. In short, the cost of borrowing increases and, therefore, more money is needed to pay interest rather than paying for tangible government programs. The 30-year mortgage rate trends with the 10-year Treasury rate, usually about 2% higher. As of November 7, 2024, the average 30-year mortgage rate was 6.79%, a significant increase from 6.08% at the end of September. In just over a month’s time, the monthly payment on a $500,000 loan increased 7.7%. But the question you may be asking is, why did rates go up even in the wake of the Fed cutting the federal funds rate? Real interest rate returns account for inflation, so the $100 bond at the nominal rate of 10% can be rewritten as 10% minus inflation (currently 2.4%) to get the real return of the investment. If inflation is expected to rise, the nominal rate can increase, so real return is unaffected or, at least, less affected,, in which case real return would decrease. Trump’s economic plans are inflationary and, therefore, increase rates. The U.S. economy is operating at close to capacity, and unemployment is low. Tax cuts will increase demand, but higher tariffs will push up prices. The U.S. is a net importer, so blanket tariffs will drive up the prices of an incredible number of day-to-day goods. Higher inflation will result, meaning the Federal Reserve will be more cautious about cutting interest rates. Currently, mortgage rates rise higher when the housing market already tends to slow. Typically, the holiday season experiences fewer sales then picks up again in January. A month ago, rates were dropping, and we were extremely bullish on the spring market. However, if rates rise above 7% or higher, the market will be slower than usual. Since the market has already been slower than usual, a further slowdown coupled with higher inflation would likely slow price growth next year. Different regions and individual houses vary from the broad national trends, so we’ve included a Local Lowdown below to provide you with in-depth coverage for your area. As always, we will continue to monitor the housing and economic markets to best guide you in buying or selling your home. Big Story Data The Local Lowdown Quick Take: The median single-family home price rose 7.7% month over month, while condo prices increased 9.2%. We expect prices to contract over the next three months, which is the seasonal norm. Total inventory declined 11.0% month over month, as new listings declined and sales spiked, which is common for San Francisco in October. We expect inventory to decline and the overall market to slow through January 2025. Months of Supply Inventory declined in October. Currently, MSI remains under three months of supply for single-family homes, indicating it’s still a sellers’ market, while condo MSI continues to indicate a buyers’ market. Note: You can find the charts/graphs for the Local Lowdown at the end of this section. Median home prices increased month over month and year over year In San Francisco, home prices haven’t been largely affected by rising mortgage rates after the initial period of price correction from April 2022 to August 2022. Single-family home prices peaked at $2.05 million in April 2022 as mortgage rates rose rapidly; $2 million homes are simply far more affordable with a 4-5% mortgage than a 6-7% mortgage. Because of the relatively high prices of homes in San Francisco, prices had to come down to keep buyers in the market. Since August 2022, the median single-family home and condo prices have hovered around $1.6 million and $1.1 million, respectively. Year over year, the median price was up 6% for single-family homes and 12% for condos. More sellers came to the market in September and buyers rushed in, pushing up prices. Inventory is so low that rising supply only increases prices as buyers are better able to find the best match. High mortgage rates soften both supply and demand, but home buyers and sellers seemed to tolerate rates near 6% much more than around 7%. Mortgage rates fell significantly from May through September, but rose significantly in October. Now, rates are far closer to 7% than 6%, so we expect sales to slow starting in November. Sales spiked in October, while inventory and new listings fell In October, sales spiked, following the September surge in new listings. New listings nearly doubled from August to September, largely contributing to the 52% increase in sales from September to October. In San Francisco, a significant number of new listings tend to hit the market in January and September in any given year. Compared to this time last year, sales are up 18%, while inventory is down 13%. Total inventory has trended lower essentially since 2010, but active listings fell precipitously from October 2020 to December 2021, as sales outpaced new listings, before stabilizing to a degree from January 2022 to the present at a depressed level. Low inventory and new listings, coupled with high mortgage rates, have led to a substantial drop in sales and a generally slower housing market. Typically, inventory begins to increase in January or February, peaking in July or August before declining once again from the summer months to the winter. In 2023, sales didn’t resemble the typical seasonal inventory peaks and valleys. It’s looking like 2024 inventory, sales, and new listings will follow historically seasonal patterns, albeit at a depressed level. Supply will remain tight until spring 2025 at the earliest. Months of Supply Inventory in October 2024 indicated a sellers’ market for single-family homes and a buyers’ market for condos Months of Supply Inventory (MSI) quantifies the supply/demand relationship by measuring how many months it would take for all current homes listed on the market to sell at the current rate of sales. The long-term average MSI is around three months in California, which indicates a balanced market. An MSI lower than three indicates that there are more buyers than sellers on the market (meaning it’s a sellers’ market), while a higher MSI indicates there are more sellers than buyers (meaning it’s a buyers’ market). The San Francisco housing market tends to favor sellers, which is reflected in its low MSI, at least for single-family homes. MSI has been below three months since October 2023 for single-family homes. From May to August, MSI declined meaningfully. In September, MSI jumped significantly higher as new listings spiked. However, in October, sales jumped and MSI fell. Currently, condo MSI indicates a buyers’ market, while single-family home MSI still implies a sellers’ market. Local Lowdown Data
Marin, Napa, Solano, Sonoma North Bay Housing Market Update - November 2024
The Big Story Sellers are coming back to the market Quick Take: After the election of Donald J. Trump, bond prices increased in anticipation of his inflationary policy positions. Interest rates are the most significant factor financially in purchasing a home for most buyers, and as we’ve seen over the past two years, higher rates translate to lower sales. From October 1 – November 7, the average 30-year mortgage rate rose 71bps, landing at 6.79%. The Fed cut rates by 50 bps in September and another 25 bps during the Fed’s November 6-7 meeting. Sales declined 1.0% month over month, falling to the lowest level in modern history, while inventory rose to its highest level since 2020. The spike in mortgage rates should further slow the market in the winter months. Note: You can find the charts & graphs for the Big Story at the end of the following section. *National Association of REALTORS® data is released two months behind, so we estimate the most recent month’s data when possible and appropriate. Bond and mortgage rates are risings as the Fed is cutting rates Let’s talk about rates. The benchmark 10-year Treasury rate rose by as much as 18 basis points the day after the election, pushing the overall rate on the bond to 4.47%. The price of bonds and their yield move inversely, with prices falling as rates rise. For example, if you have a $100 bond paying 10% and then rates rise to 20%, the original $100 at 10% becomes less valuable because now investors could get a $100 bond that pays 20%. A rising yield on Treasury bonds raises the cost of the U.S. federal government when it borrows new money or rolls over existing debts. In short, the cost of borrowing increases and, therefore, more money is needed to pay interest rather than paying for tangible government programs. The 30-year mortgage rate trends with the 10-year Treasury rate, usually about 2% higher. As of November 7, 2024, the average 30-year mortgage rate was 6.79%, a significant increase from 6.08% at the end of September. In just over a month’s time, the monthly payment on a $500,000 loan increased 7.7%. But the question you may be asking is, why did rates go up even in the wake of the Fed cutting the federal funds rate? Real interest rate returns account for inflation, so the $100 bond at the nominal rate of 10% can be rewritten as 10% minus inflation (currently 2.4%) to get the real return of the investment. If inflation is expected to rise, the nominal rate can increase, so real return is unaffected or, at least, less affected,, in which case real return would decrease. Trump’s economic plans are inflationary and, therefore, increase rates. The U.S. economy is operating at close to capacity, and unemployment is low. Tax cuts will increase demand, but higher tariffs will push up prices. The U.S. is a net importer, so blanket tariffs will drive up the prices of an incredible number of day-to-day goods. Higher inflation will result, meaning the Federal Reserve will be more cautious about cutting interest rates. Currently, mortgage rates rise higher when the housing market already tends to slow. Typically, the holiday season experiences fewer sales then picks up again in January. A month ago, rates were dropping, and we were extremely bullish on the spring market. However, if rates rise above 7% or higher, the market will be slower than usual. Since the market has already been slower than usual, a further slowdown coupled with higher inflation would likely slow price growth next year. Different regions and individual houses vary from the broad national trends, so we’ve included a Local Lowdown below to provide you with in-depth coverage for your area. As always, we will continue to monitor the housing and economic markets to best guide you in buying or selling your home. Big Story Data The Local Lowdown Quick Take: The median single-family home prices are still near their record highs with the exception of Marin, which peaked at over $2.2 million in 2022. We expect prices to contract through January 2025. Total inventory fell 22.9% month over month, as homes coming under contract and sales spiked in October along with fewer new listings. We expect inventory to decline and the overall market to slow for the next three months. Months of Supply Inventory fell across the North Bay in October, implying a shift that favors sellers. MSI indicated a sellers’ market in Marin, Solano, and Sonoma and a buyers’ market in Napa. Note: You can find the charts/graphs for the Local Lowdown at the end of this section. The median single-family home price in Napa declined year over year across markets Single-family home prices are near record highs across most of the North Bay, with the exception of Marin. Persistently low, but rising, inventory relative to the high demand in the area has more than offset the downward price pressure from higher mortgage rates. Prices in the North Bay generally haven’t experienced larger drops due to higher mortgage rates. Year to date, in October, the median single-family home price rose across the North Bay with the exception of Napa. Year over year, however, prices declined across markets. Prices typically peak in the summer months, and the mild contraction after the post-summer peak has fallen in line with expectations. Home prices will likely continue to decline slightly for the next three months. High mortgage rates soften both supply and demand, but home buyers and sellers seemed to tolerate rates near 6% much more than around 7%. Mortgage rates fell significantly from May through September, but rose significantly in October. Now, rates are far closer to 7% than 6%, so we expect sales to slow starting in November. Sales rose across the North Bay, while inventory and new listings fell The 2024 housing market has looked progressively healthier with each passing month. We’re far enough into the year to know that inventory levels are about as good as we could’ve hoped. In 2023, single-family home inventory followed fairly typical seasonal trends, but at significantly depressed levels. Low inventory and fewer new listings slowed the market considerably last year. Even though sales volume this year was similar to last, far more new listings have come to the market, which has allowed inventory to grow. Typically, inventory begins to increase in January or February, peaking in July or August before declining once again from the summer months to the winter. It’s looking like 2024 inventory, sales, and new listings will resemble historically seasonal patterns, and at more normal levels. In October 2024, the number of homes for sale was 11% higher than last year, which was largely caused by the number of homes coming under contract in September, up 17% month over month and 48% year over year. The North Bay housing market is notably responsive to mortgage rates, and as rates fell in September, buyers rushed to the market. Homes under contract increased even further in October, so sales will likely rise again in November. Months of Supply Inventory in October 2024 indicates a sellers’ market in Marin, Solano, and Sonoma and a buyers’ market in Napa Months of Supply Inventory (MSI) quantifies the supply/demand relationship by measuring how many months it would take for all current homes listed on the market to sell at the current rate of sales. The long-term average MSI is around three months in California, which indicates a balanced market. An MSI lower than three indicates that there are more buyers than sellers on the market (meaning it’s a sellers’ market), while a higher MSI indicates there are more sellers than buyers (meaning it’s a buyers’ market). MSI in the North Bay markets has trended higher throughout most of 2024. However, in October, MSI fell across markets, implying the market shifted more favorably toward sellers. Currently, single-family home MSI indicates a sellers’ market in Marin, Solano, and Sonoma and a buyers’ market in Napa. Local Lowdown Data
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