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Despite falling interest rates, inventories still remain higher than they were at this point last year.

Despite falling interest rates, inventories still remain higher than they were at this point last year.
The Big Story
Quick Take:
  • As interest rates continue to fall, median monthly P&I payments do as well, making housing slowly but surely more affordable on a national scale.
  • Mortgage rates are currently at the lowest point they’ve been at in recent years, as the Fed continues its rate cut cycle.
  • Despite falling interest rates, inventories still remain higher than they were at this point last year.
  • We very briefly saw rates break the 6% mark recently, following some commentary from Trump regarding the purchase of mortgage-backed securities by Fannie and Freddie.
 
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.
 
Homeownership is slowly but surely becoming more attainable
With the median monthly P&I payment hitting $2,056 in November, that marks a considerable decrease from the $2,311 maximum that we hit earlier in the year. As you might have guessed, this is largely due to interest rates declining, as the Federal Reserve continues its rate cutting cycle. In November of 2024, interest rates were at 6.79%, compared to 6.22% in November of 2025. This represents an 8.39% decrease in interest rates on a year-over-year basis, while the median sale price of a home in the US actually increased by 1.19% during that same period of time. As interest rates slowly creep down, we will likely see home values continue to increase, as the deciding factor for most people is not the total purchase amount, but instead the monthly payment that they can afford.
Mortgage rates fall to the lowest levels we’ve seen in years
As we mentioned in the prior section, interest rates continue to creep lower and lower. We saw rates hit 6.22% in November, and have fallen even further since then. As of right now, the average interest rate for a 30 year, fixed rate mortgage is sitting around 6.06%, which is actually a slight increase from what we briefly saw last week. Unfortunately, some recent commentary from the Fed has led markets to believe we won’t see a rate cut as a result of the January FOMC meeting, as CME FedWatch puts the probability of a 25 bps cut at just 5% for January. However, it’ll be important to pay attention to the economic data that’s being released over the coming months, as it’ll give us a good idea of where we can expect rates to go in the near term future.
Although mortgage rates are down, inventories are up!
While you might expect inventories to decrease as interest rates decrease, that wasn’t the case in November. In fact, we saw inventories increase by 7.52% on a year-over-year basis, despite falling rates. This is largely attributable to the fact that existing home sales decreased by roughly half a percent while new home listings increased by roughly 1.7% on a year-over-year basis. We’ll likely see inventories continue to increase as we move through the winter months, until the usual spring rush begins and inventories start to move once again. Overally, we had a very different year in terms of market dynamics in 2025, so it’ll be interesting to watch where the market goes in 2026.
Keep an eye on the market as we move through 2026
We’ve gotten to the point where rates have been so high for so long, that there is a considerable cohort of people that’s waiting on the sidelines, carefully watching interest rates. This cohort of people is ready to make a move on their first home, or is looking for a good point in time to sell their existing home and move. Lately we’ve seen quite a bit of commentary out of the Federal Reserve that has markets thinking we’ll see rate cuts, especially when you couple this with the commentary regarding interest rates coming from the executive branch. If we do see some steeper rate cuts (more than the 25 bps cuts we’ve seen recently), then moving quickly will be pivotal for you and your clients, as bigger cuts will likely lead to the floodgates opening!
 
Of course, this is all what we’re seeing at a national, macro level. As we all know, real estate is a localized game, so be sure to check out your local lowdown below, to see what’s going on in your market!
Big Story Data
The Local Lowdown
Quick Take:
  • Median sale prices continued their upward trajectory in December, with single-family homes gaining 8.63% year-over-year.
  • Inventory levels have plummeted to historic lows, with fewer than 100 single-family homes available for sale in San Francisco.
  • The average single-family home is selling in just 15 days, giving buyers very little time to make decisions.
Note: You can find the charts/graphs for the Local Lowdown at the end of this section.
San Francisco ends 2025 on a high note with strong price appreciation
The San Francisco housing market closed out 2025 with impressive year-over-year gains in median sale prices. Single-family homes saw an 8.63% increase, with the median home selling for $1,662,000. Condos also performed well, with the median sale price increasing by 5.21% to $1,075,000. Single-family homes continue to command significant premiums, with the average home selling for nearly 13% over the original asking price. Meanwhile, condos are selling right around their asking prices at 98% of list price.
Inventory hits rock bottom as fewer than 100 single-family homes remain on the market
December brought an unprecedented decline in inventory levels across San Francisco. There are currently just 93 single-family homes for sale in the entire city, representing a staggering 43.64% year-over-year decline. The condo market experienced a similar contraction, with inventory dropping by 44.10% to just 218 units. Combined, there are only 311 homes for sale in San Francisco, making it extraordinarily difficult for buyers to find suitable properties. Until more homeowners decide to list their properties, this severe inventory shortage will continue to define the market.
Listings are flying off the market at a breakneck pace
With inventory at historic lows, listings are spending very little time on the market before being snapped up by eager buyers. The average single-family home is selling in just 15 days, representing a 16.67% decrease compared to last year. Condos are also moving more quickly, with the average condo selling in 50 days, a 13.79% year-over-year decline. This rapid pace leaves buyers with very little time to evaluate properties and make informed decisions, creating an intensely competitive environment for anyone looking to purchase a home in San Francisco.
San Francisco has become one of the tightest seller's markets in the state
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 sellers’ market, whereas markets with more than three months of MSI are considered buyers’ markets.
 
With just 0.5 months of single-family home inventory and 1.2 months of condo inventory on the market, San Francisco has become a deeply entrenched seller's market across all property types. These are some of the lowest MSI figures we've seen in years, and there is no indication that conditions will ease for buyers any time soon. Until significant new inventory enters the market, sellers will continue to hold all the cards in San Francisco.
Local Lowdown Data

 

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Despite falling interest rates, inventories still remain higher than they were at this point last year.
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