Silicon Valley Newsletter - October 2025

Real Estate

The Big Story

Quick Take:

Affordability remains an issue nationwide, as monthly P&I payments ticked up by 2.90% year-over-year.
Mortgage rates are finally starting to decline, as we enter a rate-cutting cycle.
Inventories are still growing at a faster rate than existing home sales.
Quick observation about Macroeconomics/The Broader Market

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 begun to decline thanks to the Fed

Recently, the Fed came out and announced a quarter-point cut to the federal funds rate, but that was not the most exciting news that they announced. Fed Chairman Jerome Powell announced that we should expect two more quarter-point cuts before the end of the year, signalling that we are in the beginning innings of a Fed cutting cycle. This, of course, is huge news for the housing market. Despite the fact that many markets have retained much of their post-pandemic gains in value, the housing market has been largely stagnant, with inventories building as home buyers decide to sit on the sidelines and wait.

Affordability remains a concern throughout the country

Housing affordability has been a huge problem facing the country ever since the onset of the COVID-19 pandemic. Although many thought that home prices would decrease as interest rates increased, many markets did not see a normalization of home prices. This, of course, has left many prospective home buyers worried about where the market will go as we enter a new rate-cutting cycle. Many fear that lower interest rates may bring a slew of new buyers to the market, pushing home prices up even further, and making home ownership even less attainable for first-time buyers. On the flip side, homeowners stand to benefit in a huge way if declining interest rates lead to a housing frenzy, as they’ll accumulate significant equity in a very small period of time, just like what we saw throughout 2020-2022.

Inventories continue to build nationwide

As we mentioned above, the national inventory is quite a bit higher than last year, with 11.68% more homes listed on the market. This really underscores the fact that buyers have decided mainly to throw in the towel and wait for a better chance to purchase a home. When you combine this with the fact that there were 4.88% more new homes hitting the market than this time last year, you have a recipe for growing inventory!

Current market dynamics have created an interesting setup for 2026

As we move into the seasonally slow months, the market environment that we’re in is setting up for what could be a very interesting 2026. Inventories are still growing (for now), and interest rates are falling, which could put us in a very interesting position when the spring frenzy begins next year. It’ll be important to keep a keen eye on both the market and broader macroeconomic conditions throughout the fall and winter, so that you and your clients are ready for whatever spring has to throw at you.

All of this is just what we’re seeing at a national level, though. To get a better idea of what’s going on in your local market, be sure to check out your local lowdown below:

Big Story Data

The Local Lowdown

Quick Take:

Median sale prices for condos declined across the board for the second month in a row.
Single-family home inventories declined year-over-year for the first time in months.
As inventories fall, listings are being bought up at breakneck pace!

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

Median sale prices remain within their historical “band”

The past month in Silicon Valley was not much more notable than the past few months in terms of median sale prices. We saw some slight movement in both the single-family and condo markets, with the median sale price for single-family homes increasing by 2.56% in San Mateo County and 2.63% in Santa Clara County on a year-over-year basis, while prices declined by 4.30% in Santa Cruz County. When we turn to the condo market, we see median sale prices downtrend across the board on a year-over-year basis, with San Mateo County experiencing a 3.88% decrease, Santa Clara County experiencing a 3.01% decrease, and Santa Cruz County experiencing a 2.53% decrease.

Single-family home inventory levels declined precipitously

While inventory levels are still a bit higher than they were last year in the condo market, with 6.65% more active listings when compared to last year, we saw a substantial decline year-over-year in the single-family home market. The SFH market bucked the trend of higher inventory levels that we’ve seen over the past few months, when they reported 5.34% fewer active listings on a year-over-year basis in September. This is largely due to the fact that there were 12.56% more homes sold when compared to last year! This underscores the fact that since there is a bit more economic certainty, homebuyers are back in the market!

Condos are spending considerably more time on the market than they did last year

Unfortunately, this exuberance has not translated well into the condo market, as condo listings are spending quite a bit of time on the market. The average condo listing is spending 40 days on the market in San Mateo County (+25% YOY), 28 days on the market in Santa Clara County (+55.56% YOY), and 41 days on the market in Santa Cruz County (+2.5% YOY). The single-family home market tells a much different story, though, as listings in San Mateo and Santa Clara County are scooped up in under 2 weeks, and the average listing in Santa Cruz County spends just 29 days on the market.

It’s business as usual in Silicon Valley

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.

As always, there is a very low supply of single-family homes in San Mateo and Santa Clara Counties, with just 1.7 and 1.4 months' worth of inventory on the market, respectively. This, of course, makes them buyer-dominated markets. On the flip side, there are 3.9 months' worth of single-family inventory on the market in Santa Cruz County, making it a buyer's market. When we turn to the condo market, the entire market is a buyer's market, with 3.3 months' worth of inventory on the market in San Mateo and Santa Clara Counties and 5.7 months of inventory on the market in Santa Cruz County.

Local Lowdown Data

📞 Contact Patrice Horvath today at (650) 520-7675

Patrice and the Illuminate Properties team specialize in helping Palo Alto, Mountain View, Los Altos, Los Altos Hills, Menlo Park, Portola Valley, Redwood City, San Carlos, Sunnyvale, and Woodside buyers and sellers navigate today’s evolving market with confidence.

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

The Local Lowdown

Quick Take:

Median sale prices increased across the board in the single-family home market in August.
Single-family home inventory levels are actually lower on a year-over-year basis for the first time in months.
Single-family home listings continue to be snapped up at a breakneck pace.

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

Single-family median sale prices increased across the board for the first time in four months

In recent years, Silicon Valley has been one of the strongest markets in terms of price appreciation. However, over the past few months, there has been quite a bit of softness, as certain counties saw their first year-over-year price declines in over a year. However, in August, we saw price appreciation across the board in the single-family home market, with median sale prices increasing by 3.01%, 5.54%, and 6.74% in Santa Clara, Santa Cruz, and San Mateo Counties, respectively. Unfortunately, the same cannot be said for the condo market, though, as we saw year-over-year decreases in median sale price across the board. Median sale prices decreased by 3.64% in Santa Cruz County, 4.02% in San Mateo County, and 5.20% in Santa Clara County, on a year-over-year basis.

Inventories for single-family homes made an unexpected reversal in August

Inventories have been building throughout California, starting in late spring and continuing throughout the early summer, resulting in many areas having considerably more inventory on the market on a year-over-year basis. However, inventories began to normalize in the back half of the summer, with the Silicon Valley single-family home market making a full reversal in August. In fact, Silicon Valley ended August with 4.04% fewer active single-family listings on the market when compared to last year! The condo market has not made this same recovery, but it is on the same trajectory, with 16.77% more inventory on the market than this time last year - a drastic decrease when compared to prior months.

Most single-family home listings spend just two weeks on the market

Although single-family homes are spending quite a bit more time on the market on a percentage basis when you compare to last year, on an absolute basis, they’re still moving incredibly quickly. The average single-family listing in San Mateo and Santa Clara Counties spends just 14 days on the market, and the average listing in Santa Cruz County spends 26 days on the market. When we look to the condo market, things generally move a bit slower, with the average condo in Santa Clara County spending 31 days on the market, and the average condo in San Mateo County spending 38 days on the market. Santa Cruz County bucks the trend here, with the average condo spending just 15 days on the market.

The San Mateo and Santa Clara County single-family home markets are tremendously competitive

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.

Few markets are more competitive than the San Mateo and Santa Cruz County single-family markets. These markets have just 1.5 and 1.3 months of inventory, respectively. On the flip side, the Santa Cruz County single-family home market is a buyer's market, with 3.9 months of inventory on the market. Likewise, the entire condo market is a buyer's market, with 3.4 months of inventory on the market in San Mateo County, 3.2 months in Santa Clara County, and 5.5 months in Santa Cruz County.