Our team is committed to continuing to serve all your real estate needs while incorporating safety protocol to protect all of our loved ones.

In addition, as your local real estate experts, we feel it’s our duty to give you, our valued client, all the information you need to better understand our local real estate market. Whether you’re buying or selling, we want to make sure you have the best, most pertinent information, so we’ve put together this monthly analysis breaking down specifics about the market.

As we all navigate this together, please don’t hesitate to reach out to us with any questions or concerns. We’re here to support you.

- Charlie Brown, LIC #02028529

The Big Story

Quick Take:

Mortgage rates have ticked back up to roughly the same levels, as they were at prior to the Fed issuing its first rate cut in September.
Although housing affordability remains a concern, things have gotten slightly better year-over-year, with median monthly P&I payment decreasing by 1.84%.
Year-over-year growth in inventory is outpacing existing home sales by roughly 7%, meaning we could see affordability begin to increase over the coming 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.

Mortgage rates have returned to pre-rate cut levels

One very interesting phenomenon that we’ve seen play out over the past few months is that interest rates have largely returned to the levels that we saw prior to the Fed’s first rate cut in September. Unfortunately this is not what the market at large was expecting to see, since mortgage rates typically move in tandem with the Federal Funds rate. However, this suggests that the lending market expects the rate cuts that we have seen recently to be short lived, meaning that the lending market is expecting the Fed to begin increasing rates again within the coming years. This could be due to a variety of reasons, but inflation is the most likely culprit for rate hikes, as it has remained rather stubborn since it first became an issue in 2022.

Inventory is finally starting to build throughout the US

As we all know, inventory levels have been an issue Post-COVID, across the entire country, with many areas not having nearly enough inventory to support buying demand. This, in turn, helped to push up the values of homes nationwide.

It’s important to note though, that we’re beginning to see inventory growth outstrip existing home sale growth, as in December, inventory grew by 16.16% on a year-over-year basis, whereas existing home sales grew by 9.28% year-over-year.

Median sale prices continue to rise, despite interest rate headwinds

Many buyers still have the mortgage rates that they saw in 2021 and 2022 at the top of their mind, making it difficult for them to justify locking in a mortgage in the 6%-7% ranges that we’ve been seeing over the past couple of years. Despite many buyers sitting on the sidelines, and waiting for lower rates, we’re still seeing the median sale price of homes increase.

In both the months of November and December, the median sale price of a home in the United States was $404,400. This represents an increase in value of 6.03%, when compared to the December 2023 median sale price of $381,400. This is slightly concerning, given that the growth in median sales price continues to outstrip the growth in inflation, with December’s year-over-year CPI figures coming in at 2.9%.

The Fed continues to unwind its mortgage backed securities

As many of us know, in addition to the Federal Funds Rate, the Fed also has control over its own balance sheet. Throughout the COVID crisis, the Fed ramped up its purchase of mortgage backed securities at a rate we haven’t seen since the Great Financial Crisis. However, the Fed has since been unwinding its holdings of MBS’s at a steady rate, since late 2022, which it continues to this day.

How does all of this effect my local market

Although it’s great to know what’s happening at a national level, real estate is an incredibly localized industry. There are areas throughout the country that are doing considerably better or worse than the nation at large. To ensure you’re informed on the happenings at both a national level and a local level, we’ve included our local lowdown below. In our local lowdown, you’ll find the in-depth coverage you need to stay in tune with your area. As always, we’ll be monitoring the housing market and the economy from both a macro and micro level, and report back to ensure you’ve got the data you need to make the best decisions possible!

Big Story Data

The Local Lowdown

Quick Take:

The Bay Area market remains incredibly strong overall, despite some fluctuations across different regions.
Inventory trends are diverging, with some areas experiencing increasing supply while others continue to struggle with low active listings.
Market conditions heavily favor sellers in most counties, but select condo markets are seeing opportunities for buyers.
Pricing remains relatively resilient, though some regions have seen slight declines as interest rates influence affordability.

Note: You can find the charts/graphs for the Local Lowdown at the end of this section.

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The North Bay continues to be a very strong market

Although 2024 was definitely the year of uncertainty, as interest rates weighed on buyers and sellers alike, the North Bay retained a tremendous amount of strength, especially considering the environment we are in. Pricing in Sonoma and Solano Counties was the strongest in January, with these counties experiencing 1.80% and 1.65% decreases in year-over-year median sales prices. On the flip side, Marin and Napa Counties experienced 6.69% and 10.20% decreases in median sales price, respectively. However, this wasn’t very shocking, as this was just the market giving back some of the explosive growth that we saw during the first half of the year in these markets.

Single-family home inventories continue to present an issue in the North Bay

Inventory levels are typically a leading indicator for pricing trends in the housing market, and pretty much any other market in the business world. After all, the housing market is subject to the simple law of supply and demand.

With that being said, we saw a precipitous drop in the number of active listings for single-family homes in the North Bay in January, with for sale listings decreasing by a whopping 16.55% on a year-over-year basis. Typically in the winter and early spring months, we see inventory start to replenish itself, so it will be important to pay attention to where this trend goes over time.

If we don’t see inventory levels start to increase in the North Bay over the coming months, there’s a good chance we’ll see another great year in terms of appreciation of home values. However, it’s too early in the year to make a definitive call!

Napa remains a buyer-dominated market

When determining whether a market is a buyers’ market or a sellers’ market, we look to the Months of Supply Inventory (MSI) metric. The state of California has historically averaged around three months of MSI, so any area with at or around three months of MSI is considered a balanced market. Any market that has lower than three months of MSI is considered a sellers’ market, whereas markets with more than three months of MSI are considered buyers’ markets.

The trends that we’ve seen over the past couple of months remain true. Sonoma, Marin, and Solano Counties continue to be sellers’ markets, with 2, 1.2, and 2.1 months worth of inventory, respectively. Whereas Napa County continues to be a buyers’ market, with 3.8 months worth of inventory.

Looking Ahead

With inventory levels as low as they are, and pricing remaining strong throughout the holiday months, there’s a good chance that the market is setting itself up for another great year ahead. However, it’s too early in the year to make any definitive statements. We’ll simply have to keep an eye on inventory levels and sales trends moving forward!