Higher mortgage rates and higher prices
The 2024 housing market saw low sales volume, elevated mortgage rates (6.73% on average), and record-high home prices, which peaked in June at $426,900 before declining 6.3% to $400,000 by year-end. High prices, rates, and reduced affordability limited buyer activity, though this seasonal dip aligns with typical trends. Despite higher borrowing costs, the overall economy remained strong, with low unemployment, declining inflation, and robust job growth. However, the incoming Trump administration's proposed tariffs and immigration policies may raise costs for goods, food, and construction while creating labor shortages, especially in agriculture and construction. Looking ahead to 2025, mortgage rates are expected to stabilize around 6.5%, limiting affordability and likely keeping home price growth modest. New construction costs may rise due to higher material prices and labor shortages.
THE LOCAL LOWDOWN
Months of Supply Inventory (MSI) quantifies the supply/demand relationship by measuring how many months it would take for all current homes listed on the market to sell at the current rate of sales. The long-term average MSI is around three months in California, which indicates a balanced market. An MSI lower than three indicates that there are more buyers than sellers on the market (meaning it’s a sellers’ market), while a higher MSI indicates there are more sellers than buyers (meaning it’s a buyers’ market). The Silicon Valley market tends to favor sellers, which is reflected in its low MSI. In 2024, Silicon Valley MSI moved higher, particularly in Q2. In October and November, MSI dropped across markets. MSI indicated a sellers’ market for single-family homes and condos with the exception of the Santa Cruz condo market, which is more balanced.
LOCAL LOWDOWN DATA
Stay up to date on the latest real estate trends.
December 18, 2024
December 17, 2024
November 15, 2024
October 22, 2024
October 22, 2024
Sellers Return as Affordability Improves
September 20, 2024
September 20, 2024
August 21, 2024
August 12, 2024
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