October '24 Market Update

Market Update

As we move into the final quarter of 2024, the real estate market is showing signs of shifting dynamics. Sellers are gradually returning, driven by improved affordability and easing mortgage rates. Although prices are following the usual seasonal trend of slight contraction, the recent decline in mortgage rates suggests potential opportunities for buyers. However, despite these positive shifts, sales have yet to pick up, reaching historically low levels even as inventory climbs. Let’s dive into the key trends and what they mean for the market this October.

Sellers are coming back to the market

Quick Take:

Affordability improved dramatically in Q3 2024 with the monthly mortgage payment for a 30-year loan down 10%. Prices are contracting slightly, which is the seasonal norm.
In September, the average 30-year mortgage rate declined for the third month to 6.08%, a 1.14% drop from the 2024 high reached in early May. The Fed also cut rates in September and will likely continue cutting them over the next six months.

Sales declined 2.5% month over month, falling to the lowest level in modern history, while inventory rose to its highest level since 2020. Better affordability hasn’t yet translated to higher sales.

The national housing market peaked in June 2024, with prices now following a typical cycle of rising early in the year and declining later. Sales have been decreasing for nearly three years, leading to high inventory levels. Even though mortgage rates have dropped, sales remain at historic lows.

The Fed’s rate cut in September had limited impact, as it was already factored into current rates. Lower rates did improve affordability, with buyers saving significantly on mortgages compared to June. However, changes in the Mortgage-Backed Securities (MBS) market have made loans harder to originate, contributing to a slowdown.

Despite fewer sales, home prices have continued to rise, behaving more like risk assets since the mid-1990s. Looking ahead, lower rates, high inventory, and lower seasonal prices could drive a stronger spring market in 2025.

BIG STORY DATA

THE LOCAL LOWDOWN

Quick Take:

The median prices rose across most of the Bay Area in September as lower mortgage rates brought more buyers and sellers back to the market. Typically, prices contract this time of year, highlighting the outsized effect mortgage rates have on the market.
Total inventory in the Bay Area increased, with the exception of the North Bay, as more sellers came to the market. However, we expect inventory to decline and the overall market to slow in the fourth quarter.
Months of Supply Inventory has remained below three months of supply for single-family homes, indicating a sellers’ market, with the exception of Napa and Santa Cruz, which favor buyers.

Months of Supply Inventory indicated a sellers’ market in most of the Bay Area

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 Bay Area markets tend to favor sellers, which is reflected in their low MSIs. Currently, MSI is below three months of supply (a sellers’ market) in every Bay Area county, except for single-family homes in Napa and Santa Cruz, which favor buyers.

LOCAL LOWDOWN DATA