The Big Story

Quick Take:

Median monthly principal and interest payments remain near the highest levels we’ve seen in the past year.
Mortgage rates have begun to drop, as we near the highly anticipated rate cut from the Federal Reserve.
Existing home sales remain slightly higher than they were last year, while we observe nearly a 16% year-over-year increase in available inventory.
We may see rates start to drop sooner rather than later!

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 monthly payments remain high, for now

At $2,235 per month in principal and interest payments for the median homeowner, housing costs are near the highest points we’ve seen in the last year. As we all know, this is driven primarily by the fact that interest rates have remained high for quite some time, and home prices have not fallen by much over the past few years. However, existing homeowners might be able to save some money in the coming years/months, as Federal Reserve Chairman Jerome Powell mentioned in his speech at Jackson Hole that the Fed is keen on cutting rates in the near term. This, of course, would translate into lower P&I payments for new and existing homeowners alike.

Are there rate cuts on the horizon?

As we mentioned in the previous section, the Fed Chairman mentioned in a speech at Jackson Hole that we’re likely to see cuts to the federal funds rate in the not-so-distant future, which would, of course, be great for the largely stagnant housing market that we’ve been in recent months/years. For prospective buyers, now might be a great time to lock in a great home at a relatively low price. If real estate values perform the same way as the last time we saw substantial decreases to mortgage rates, now might be an opportune time to lock in a home before values surge, then refinance once rates have bottomed out!

Mortgage rates have already started to decrease a bit

Although mortgage rates were in the mid to high-6% range throughout July and August, they’ve started to come down since the Fed Chairman’s speech. At the time of writing this newsletter, the average mortgage rate was 6.35%, according to Freddie Mac. Although this likely represents the market pricing in the rate cut before it even happens, if the Fed is entering a rate-cutting cycle, then there will be more rate cuts to come. If you want to keep an eye on where mortgage rates are going, then it’s particularly important to pay attention to any commentary out of the Fed, as well as economic data that’s published surrounding employment and inflation, as the mandate of the Fed is to control inflation and promote healthy employment.

Inventories are relatively high right now, but we might see that change in the near future

Over the course of the past few months, we’ve seen inventories remain at an elevated level on a year-over-year basis. However, with the recent drop in interest rates and the prospect of lower interest rates in the near-term future, we might see some of the built-up inventory begin to move, as housing becomes more affordable. Over the coming months, it’ll be important to pay attention to inventory levels, as they’re often leading indicators of price movements over time!

It’s important to note, though, that all of this is just what we’re seeing at a national level. To learn more about your local market, be sure to check out the Local Lowdown below:

Big Story Data

What’s Moving: Sold Homes & Upcoming Listings in SF

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The Local Lowdown

Quick Take:

In August, median sale prices increased on a year-over-year basis in the East Bay for the first time in six months!
Despite median sale price growth, inventories remain at an elevated level on a year-over-year basis.
While inventories are normalizing, the average listing is still spending quite a bit more time on the market when compared to last year.

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

Median sale price growth returns to the East Bay

Over the past few months, we have seen nothing but year-over-year declines in median sale price throughout the East Bay. However, for the first time in 6 months, we saw median sale prices increase in August. Median sale prices for single-family homes increased by 1.20% and 1.33% in Alameda and Contra Costa Counties, respectively. Unfortunately, when we turn to the condo market, we did not see the same widespread increase in values, with median sale prices increasing by 2.04% on a year-over-year basis in Contra Costa County, and decreasing by 7.41% in Alameda County.

While inventories are decreasing, they’re still high year-over-year

Much like the rest of California, inventories built at a breakneck rate throughout the late spring and early summer this year. However, this trend seems to be reversing to a degree. In August, there were 9.97% more active single-family home listings on the market, and 11.67% more active condo listings. This month was the first time in a while that we saw fewer new listings hitting the market on a year-over-year basis, though, with there being 6.18% fewer single-family homes and 3.44% fewer condos hitting the market on a year-over-year basis.

As inventory levels remain high, so does the amount of time the average listing spends on the market

Since inventory levels remain relatively high on a year-over-year basis, listings are spending more time on the market, as buyers have more options. However, despite the fact that single-family homes are spending 21.43% more time on the market in Alameda County and 37.50% more time on the market in Contra Costa County, they’re still being bought up at a relatively fast rate, with the average listing spending 17 and 22 days on the market, respectively. Things are a bit different when we turn to the condo market, with the average condo listing in Alameda County spending 58.33% more time on the market (38 days), and the average Contra Costa County condo spending 10.34% less time on the market (26 days).

The single-family market is a seller's market, and the condo market is a buyer's 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 buyers’ markets.

The East Bay single-family home market is entirely a seller's market, with just 1.9 months of inventory on the market in Alameda County and 2.6 months of inventory on the market in Contra Costa County. However, the condo market tells a much different story. There are 4.2 months of condo inventory on the market in Contra Costa County, and 4.4 months of inventory on the market in Alameda County, making the entire condo market very buyer-friendly.