New listings: Using the San Francisco & San Jose Metro Areas (7 counties) as a large sample size for the greater Bay Area, the number of new listings in February rose 27.5% year over year and was the highest month-of-February count since the end of the pandemic boom. The “mortgage lock-in effect” appears to be quickly weakening. (Nationally, the percentage year-over-year increase was 4% – the spring market begins earlier in the Bay Area. The percentage in Sacramento County was +15%.)

Active/Coming-Soon listings on 3/1/25:  For the greater Bay Area, the count of listings on the market in MLS was up approximately 42% year over year, and was by far the highest March 1st count in at least 4 years. Note that this will not include hundreds of Compass Exclusives – or other brokers’ exclusive off-MLS listings – that might have added to the count in previous years. Looking at individual markets, San Francisco’s 3/1/25 count of active/coming-soon was barely higher year over year and relatively unchanged over the past 4 years. Tri-Valley & South Alameda County’s count was 89% higher year over year; Lamorinda (a small market) was 84% higher; Santa Cruz County was +70%; both Napa & Sonoma, +64%; North Contra Costa, +53%; Marin, +49%; Santa Clara County, +48%; Diablo Valley, +41%; Inner East Bay, +36%; San Mateo, +31%; Monterey County, +26%; Stanford Circle, +13%.

If the number of active/c-s listings was particularly low last year – for example, in the Tri-Valley & South Alameda County market – then percentage rebounds will often be outsized.

Price reductions (using the SF and San Jose metro areas as large Bay Area samples):  The early months of the year are typically not big months for price reductions, but the number of price reductions in February 2025 was 55% higher than in February 2024, and was the highest month-of-February count in at least 6 years. We will see how this trend develops in coming months. (Nationally, price reductions were up 30% year over year. In Sacramento County, reductions rose 83%.)

Of course, if inventory increases, it will be one factor in the increase in price reductions.

Initial calculations regarding January’s Bay Area new-listings numbers reflect a huge rebound from December (as is typical) and a large jump over January 2024.

Weekly average interest rate: relatively steady at just under 7%

The Fed left its benchmark rate unchanged at its 1/29/25 meeting. Expect to see a struggle between the new administration and the Fed regarding the benchmark rate in coming months. The next CPI (inflation) reading comes out on 2/12.

Q4 GDP change was just released: Came in slightly weaker than expected by most economists (but these quarterly numbers are often significantly revised – as the Q3 number has been since its initial release)

Consumer confidence dropped slightly in the January reading, reflecting some uncertainty as to where the economy is heading.

Stock markets have been rebounding from their “DeepSeek” plunge a few days back.

Another angle on Bay Area + Sacramento median house price changes over the long-term: All markets up from 2023, some hitting new price peaks. (See January newsletters for individual county/regional charts.)

The latest numbers and map, through 2024, regarding billion-dollar+ weather-related disasters and state insurance rates.

Though climbing rapidly in recent years, analysts believe CA insurance costs have been held down unnaturally low due to state insurance regulations, which are now being rapidly revised to try to stop insurers from completely fleeing the state (and continuing to shift enormous financial liabilities to the state Fair Plan). Needless to say, the horrifying fires in SoCal will only exacerbate the critical situation regarding insurance. The rates in this chart are changing quickly and substantially.

The number of new listings coming on market in 2024 rose from 2023, but remained low by historical standards, a common Bay Area county dynamic. Older homeowners who move (much) less often, and the mortgage lock-in effect remain significant factors.

Overall sales rebounded from the 2023 nadir, but remained far below longer-term averages: This trend was very common across Bay Area Counties. In the country as a whole, according to NAR, existing-home sales ticked down very slightly in 2024.

Luxury home sales rebounded much more dramatically than the overall market, hitting its second highest number in history. Soaring stock markets, especially in those counties where the AI boom was centered in 2024, were very big factors. Affluent buyers, buoyed by increases in their household wealth and rising home equity, jumped back in the market more than the general buyer – and affluent buyers were most likely able to pay all-cash, and thus not as concerned about interest rates.

2024 median house sales prices by county: Several counties hit new all-time highs, while others remain below the peaks hit in 2021 or 2022.

5-year appreciation rates illustrate how the big changes occurring since 2019 – pandemic, demographic shifts, inflation, interest rates, stock markets – impacted appreciation rates dramatically between counties. Santa Clara saw the highest appreciation rate, being the center of 2024’s enormous AI boom, but other counties were close behind. (The AI boom took a substantial hit today in stock markets, but it is far too early to come to any conclusions as to its future.) San Francisco saw the lowest 5-year appreciation rate, generally due to pandemic-fallout issues, which now appear to be fading. The full report includes 2024 year-over-year appreciation rates (from 2023) as well as the 5-year analysis below.

Remember that if affluent buyers become a larger component in the market, as occurred in 2024, that will help pull up median sales prices simply because they buy more expensive houses.

Median house sales price by county since 2011:

Median 2-bedroom condo sales prices in 2024. San Francisco has by far the largest condo market as a percentage of sales in the Bay Area, and the most substantial luxury condo market – especially of high-rise luxury condos – and this is reflected in its higher median sales price.

Looking at the last 5 years, San Francisco condo prices were negatively affected by demographic shifts triggered by the pandemic, such as work from home,  population decline, and (well publicized) social issues in the downtown area of the city. However, the median SF condo sales price did tick up in 2024 over 2023 (not illustrated in the chart below), suggesting it is beginning to recover.

“The Federal Reserve cut interest rates by a quarter point on Wednesday, bringing the target range to 4.25% to 4.5%. The central bank revised its outlook for rate cuts in 2025, however, indicating that there will be two reductions. That’s down from the four forecast in September. Fed Chair Jerome Powell said that the central bank would be looking for progress on inflation, noting, ‘We have been moving sideways on 12-month inflation.'” CNBC, 12/18/24

The suggestion of only 2 cuts in 2025 was not what investors and bond markets wanted to hear. Stock markets plunged yesterday, though they started to rebound slightly today, and mortgage interest rates spiked up. These changes constitute very short-term data.

Interest rates:  Counter-intuitively, rates have climbed since the Fed first started reducing their benchmark rate – because the reductions and guidance on future cuts were never as substantial as investors desired.

Stock markets: The sudden drop from the latest historic highs followed the latest Fed pronouncement (but have rebounded slightly so far this morning). But as illustrated, short-term ups and downs are very common.

Snapshots regarding debt: Mortgage, credit card, margin, federal. Except pertaining to mortgage debt (which, though ticking up, remains historically very low), indicators pertaining to margin (investor), credit card and, especially, Federal debt are not moving in positive directions. The huge, continuing increase in federal debt and debt payments may eventually have serious ramifications for bond markets – and mortgage rates.

This week, mortgage rates decreased to their lowest level in over a month. Despite just a modest drop in rates, consumers clearly have responded as purchase demand has noticeably improved. The responsiveness of prospective homebuyers to even small changes in rates illustrates that affordability headwinds persist. Freddie Mac, 12/5/24

3 angles on mortgage interest rates: Weekly, Daily, Jumbo Loans

Stock markets (and bitcoin) continue to head into the stratosphere, regularly hitting new historic highs – clearly a major dynamic in higher-price home sales and all-cash buyers.

Inflation ticked up slightly in October. The November reading will be released on 12/11/24. It is unclear whether the Fed will reduce their benchmark rate again this month.

According to NAR Chief Economist Lawrence Yun, “Homebuying momentum is building after nearly two years of suppressed home sales. Even with mortgage rates modestly rising despite the Federal Reserve’s decision to cut the short-term interbank lending rate in September, continuous job additions and more housing inventory are bringing more consumers to the market.”

Per Freddie Mac (FHLMC) research report:

“In the November Economic, Housing and Mortgage Market Outlook, we forecast the mortgage market to improve in 2025, based on a decline in mortgage rates throughout the year. That should loosen some of the rate lock-in effect for existing homeowners and offer more inventory in the market, resulting in slightly higher home sales. It should also boost refinance origination volumes. We expect house prices to continue to grow, although at a slower pace. Our outlook has not been adjusted to reflect any impact of the U.S. election.” FHLMC Research, 12/3/24, Link to the full FHLMC research report

As is the typical seasonal trend, new-listing and accepted-offer activity dropped substantially in November and will almost certainly plummet in December.

The latest Profile of Owners & Renters was just published by the Census on 10/30/24: It compares a variety of factors – such as income, age, education – pertaining to owners and renters.

NAR updated their quarterly metro-area price data:  87% of metro markets registered year-over-year home price gains in Q3 2024, as the 30-year fixed mortgage rate ranged from 6.08% to 6.95%. Note that “metro areas” typically cover much larger areas than just the cities they’re named for. For example, the San Francisco metro area covers 5 counties (SF, Marin, San Mateo, Alameda, Contra Costa). However, the San Jose metro area is 99% composed of Santa Clara County, the county market in the U.S. seeing the biggest impact from the AI boom.

NAR also just issued their “2024 Profile of Home Buyers and Sellers.” Following are highlights. Read the full report here at https://www.nar.realtor/research-and-statistics/research-reports/highlights-from-the-profile-of-home-buyers-and-sellers

National Jobs Report & Unemployment: The unexpectedly high new jobs number in September – which made interest rates spike up in early October – was revised downward by 10%, and the October jobs number just came in at its lowest count since December 2020: Some ascribe the plunge to the effects of the 2 recent, terrible hurricanes. The unemployment rate was unchanged at 4.1%. So far this morning, stock markets are up and interest (bond) rates are seeing little change.

It’s worth pointing out that the latest economic indicators put out by the government – over which stock and bond markets can react very dramatically – are initially labeled “preliminary” and often subsequently revised, sometimes substantially.

30-Year Loan Rates, Weekly & Daily Averages (the providers of this data use different methodologies, though the trends are very similar). It’s been a tough month for interest rates and the analyst forecasts of late September – that rates were heading down through the end of the year – were almost universally wrong (so far).

“Increasing for the fifth consecutive week, mortgage rates reached their highest level since the beginning of August. With several potential inflection points happening over the next week, including the jobs report, the 2024 election, and the Federal Reserve interest rate decision, we can expect mortgage rates to remain volatile. Although uncertainty will remain, it does appear mortgage rates are cresting, and are not expected to reach the highs seen earlier this year.” Freddie Mac, 10/31/24

Real GDP continued to see robust growth in Q3.

Stock markets: As of November 1, the 2 main stock indices were climbing, though that’s a little hard to see in this chart.

Bay Area, preliminary supply & demand snapshots: New, active & pending listings; price reductions. Generally speaking, the trends we’ve been seeing since spring have continued: More inventory, lower absorption, more price reductions. Listing and sales activity typically begins to plunge in November and December.

“Following the release of a stronger-than-expected September jobs report, the 30-year fixed rate mortgage saw the largest one-week increase since April. However, the rise in rates is largely due to shifts in expectations and not the underlying economy, which has been strong for most of the year. Although higher rates make affordability more challenging, it shows the economic strength that should continue to support the recovery of the housing market.” FHLMC, 10/10/24

Weekly, conforming-rate from Freddie Mac, released today:

Weekly average rate from Mortgage News Daily:

Latest inflation report released this morning: General CPI declined again, to the lowest reading since February 2021. “Core” CPI was unchanged at 3.3%. So far today, the response in stock and bond markets has been relatively muted.

NATIONAL supply and demand indicators: The basic reality since spring is that sales activity has been increasingly outpaced by the increase in active listings for sale, which offers more choice and lessens the competitive environment for buyers. The recent drop in interest rates through very early October – before the latest spike up in rates on 10/4 – did not precipitate the substantial rebound in buyer demand that many had expected in September. It may have been that prior to the jump in rates buyers were holding back in expectation of further declines (as forecast by most analysts). October is typically the last major month of market activity before heading into the big mid-winter holiday slowdown, which usually starts in mid-November and lasts until mid-January.

Generally speaking, the overall national market is seeing similar trends to the general Bay Area market.

The pending-sale ratio – a version of the absorption rate – has been falling as the increase in inventory outpaced sales activity. In September, it was as low as last December, and December typically sees the lowest pending-sale ratio of the year.

Inventory outpacing buyer demand has led to a significant increase in price reductions, comparable to levels seen right after interest rates soared in the first half of 2022.

The Fed dropped its benchmark rate today by half a point: As illustrated, once the Fed decides a change in direction is warranted, it can make significant changes quickly.

The daily average 30-year rate is running a little above 6% (though it actually ticked up slightly yesterday).

Stock markets:

The general inflation rate dropped in August to its lowest reading since early 2021.

The Fed left its benchmark rate unchanged at its 7/31 meeting, but based on comments made by the Fed chief and recent economic data, most analysts believe a September rate cut is (finally) coming. The next inflation report comes out on August 14th.

Interest rates have been falling. The weekly average rate (1st chart) is a few steps behind the daily average rate (2nd chart). Note that the providers of these averages use different methodologies as to exactly what types of mortgage rates they are measuring – but the trends are always similar.

Stock markets have been having a rockier time of it since mid-July, though still far up since the year began. Of course, short-term volatility is not uncommon.

Consumer confidence has not yet really rebounded, remaining flat over the past 3 months, though up from the severe lows of 2022-2023.

NAR issued their pending-sale report for June: Pending sales were up slightly from May, but down almost 8% from June 2023. This is consistent with other indicators that some cooling is occurring in the national market. A recent quote from the NAR chief economist: “We’re seeing a slow shift from a seller’s market to a buyer’s market,” said NAR Chief Economist Lawrence Yun on national dynamics. “Homes are sitting on the market a bit longer, and sellers are receiving fewer offers [with more contingencies, and] inventory is definitively rising.”