The Big Story

Quick Take:

The median home in the US is surprisingly appreciating at a slower rate than inflation.
Mortgage rates remain stagnant, in the high 6-percent range that we’ve seen for a couple of years at this point.
Inventory is continuing to build, as existing home sales remain stagnant on a year-over-year basis.
Another FOMC meeting has come and gone, and the federal funds rate remains unchanged.

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.

Median home sales price grew by just 1.97%

In the not-so-distant past, housing price growth outstripped inflation growth by a wide margin. However, now that the housing market has normalized, we’re seeing more modest levels of appreciation, with the median home sale price increasing by just 1.97% on a year-over-year basis in June. This represents great news for home buyers, and the housing market as a whole, considering that the June CPI reading came in at 2.7%. It’ll be worth paying attention to this over the course of the next few months, especially considering that many analysts are expecting a rate cut from the Fed in the September FOMC meeting.

Inventory levels continue to build as more new homes hit the market

The trend of growing inventories has continued this month, with 15.91% more inventory on the market in June on a year-over-year basis. This growth in inventories can be attributed to the fact that the new homes are hitting the market at a much faster rate than new buyers are entering the market. In June, we saw a 0.77% increase in the number of existing homes sold on a year-over-year basis, while at the same time, we saw a 7.25% increase in the number of new listings hitting the market. Although there are still some buyers entering into the market every month, there is still a rather large contingent of people holding out until rates come back down.

The Fed is holding rates steady due to economic uncertainty

This past month, we saw the Fed hold rates steady once again, as they brace for the consequences of the newly minted tariff policies that went into effect in early August. Although inflation data has led many to believe that we need to see substantial rate cuts in the not-so-distant future, Fed officials are incredibly concerned about the potential impacts of the freshly enacted tariff policy. Additionally, the Fed has a dual mandate; it’s responsible for controlling inflation and promoting maximum employment. At this point in time, we’re seeing relatively low inflation, and a very low unemployment rate, so Fed officials seemingly aren’t in a hurry to cut the federal funds rate.

Mortgage rates remain stagnant, but comparatively high

It probably isn’t much of a surprise that inventories are building and median sale prices have remained relatively stagnant, given the lack of movement in rates. Many believe that there is a very large contingent of people who simply aren’t willing to pay a comparatively very high interest rate to purchase a home, especially given that many have locked into rates in the 2-4% range on existing homes. The consistently high mortgage rates that we’ve seen have led people to stay in their homes for longer, resulting in more sellers on the market than buyers. However, we might see some movement if we see some positive commentary from the Fed in the upcoming FOMC meeting.

However, it’s important to remember that this is what we’re seeing at a national level. Oftentimes, what we see in California can be quite a bit different than the nation as a whole. We’ve done a deep dive into California markets in the local lowdown section below.

Big Story Data

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The Local Lowdown

Quick Take:

Homes in the San Francisco area continue to sell within their historical average range.
Lack of inventory remains a huge issue throughout San Francisco.
Despite inventory being an issue, condos are still sitting on the market for quite some time.

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

Home values in San Francisco are “business as usual”

Although inventories have been steadily declining over time, median sales prices have stayed pretty consistent with a “band” in both the single-family home market and the condo market. While we did see the median sale price for condos in San Francisco decrease by 11.92% on a year-over-year basis, this can largely be attributed to the volatility in this metric. When we turn to the single-family home market, we saw a slight tick up of 2.34% in terms of median sale prices.

The inventory issue doesn’t look like it will be solved anytime soon

While much of the Bay Area is experiencing inventory issues, the vast majority of areas are seeing inventories begin to pile up. As we know, San Francisco has the opposite problem; the area can’t seem to keep enough inventory on the market. This trend has continued in July, with 15.93% less single-family inventory on a year-over-year basis and 19.91% less condo inventory. This is largely due to the fact that fewer new listings are hitting the market each month. On a year-over-year basis, the single-family home market saw 18.46% fewer new listings in July, and the condo market saw 5.09% fewer new listings.

Condos continue to sit on the market, while single-family homes are snapped up

With the inventory issues that San Francisco is experiencing, you’d probably expect both condos and single-family homes to move very quickly. While single-family homes are moving incredibly quickly, with the average listing sitting on the market for just 14 days, the average condo is sitting on the market for much longer. In July, the average condo took 44 days to sell, representing a 12.82% increase on a year-over-year basis. This is certainly an interesting phenomenon. However, it’s nothing new in this market, as condos have always taken a bit longer to sell than single-family homes.

The condo market becomes a more balanced 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 seller’s market, whereas markets with more than three months of MSI are considered buyer’s markets.

As inventories have been dwindling away over the course of the past few years, the condo market has steadily inched its way away from being a buyer's market. With just 3.1 months' worth of inventory on the market, the condo market looks like it might be a buyer's market within just a month or two. Additionally, when it comes to the single-family market, it continues to be a seller's market, with just 1.2 months' worth of supply available for sale.