Mortgage rates are finally starting to decline, as we enter...

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 have remained roughly stagnant year-over-year
Inventories declined on a year-over-year basis for the first time in months!
The average listing is quite a bit more time on the market.

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

Median sale prices remain stagnant as we move closer to winter

This past month, there wasn’t much movement in terms of median sale prices in the North Bay. Sold listing prices are generally staying within their pricing bands, despite the fact that we saw quite a bit of inventory accumulate over the past six months or so. This means that the market has remained tremendously strong. The median listing in Sonoma County is selling at a 3.47% discount to last year’s pricing, while Marin and Solano County listings sell for 1.43% and 0.81% discounts, respectively. The median Napa County listing is actually selling for a very small premium to last year, with the median sale price for homes in the area coming in at 0.17% more on a year-over-year basis.

Inventories are beginning to decline?

For the first time in several months, we actually saw year-over-year declines in the amount of active inventory in the single-family home market. The number of for-sale listings declined by 2.98%, which is huge considering the inventory levels we’ve seen throughout the summer. This decline in inventory was largely caused by a sharp 14.75% decline in the number of new listings hitting the market, and a slight 3.95% increase in the number of listings that were sold. This, of course, caused a drastic 12.14% drop in inventories on a month-over-month basis! However, when we look at the condo market, inventories are still at a slightly elevated level, with 3.49% more listings on the market right now, than there were last year.

The average Napa County listing spends 88 days on the market

Although we saw an inventory decline last month, it may take a month or two to see a decline in the amount of time that listings are spending on the market. As of right now, listings in Napa and Sonoma Counties are spending more time on the market in September than they were throughout the holiday season last year! The average single-family home listing in Napa County is spending a whopping 88 days on the market, marking a 72.55% year-over-year increase and a 69.23% month-over-month increase! Single-family homes in Solano and Sonoma Counties are also spending a good bit longer on the market, with average listings on the market for 14.71% and 34.21% longer, respectively. Surprisingly, Marin County listings are spending the exact same amount of time on the market as they were last year!

The continued shift in power towards sellers

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 inventories decline, we’re seeing the broader market move back toward a seller's market. In the single-family home market, Marin County is a balanced market, with exactly 3 months' worth of inventory on the market, whereas Sonoma, Solano, and Napa County are slowly creeping back toward a balanced market, with 3.9, 3.3, and 7.7 months' worth of inventory on the market. Turning to the condo market, the entire market is a buyer's market that’s slowly drifting toward a balanced market as well, with 4.1 months of inventory on the market in Sonoma County, 4.2 months in Marin County, 5.7 months in Solano County, and 7.5 months in Napa County.