Silicon Valley Newsletter - September 2025

Real Estate

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.