Inventory falls flat, cancellations spike and single family median sales price hit an all time high in May for Santa Clara County. As we enter the second half of the year, a common sentiment seems to be, "what is going on?" Regardless of your personal stance on current domestic and international events, it's clear there's a lot happening, and no obvious consensus on how it will all unfold.
This newsletter aims to provide a deep dive into the local housing market and how these broader macroeconomic events are affecting home values. For those short on time, an AI summary is provided HERE.
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Supply Levels
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Interest Rates
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Big Beautiful Bill’s Impact on Real Estate
Supply Levels
Inventory levels that took the market by surprise in quarter one have completely regressed back to the 2024 trend line. By the end of June, there were 626 more listings than last year, representing a mere 11% increase for single family homes in Santa Clara County.
|
New Listing/Mo |
2024 |
2025 |
YoY Delta ∆ |
|
January |
569 |
715 |
25.66% |
|
February |
778 |
959 |
23.26% |
|
March |
937 |
1275 |
36.07% |
|
April |
1,183 |
1,271 |
7.44% |
|
May |
1,239 |
1,231 |
-0.65% |
|
June |
1,019 |
1,025 |
0.59% |
*MLS data provided | Single Family Homes | Santa Clara County
On April 2nd, Trump's announcement of Liberation Day triggered a swift downturn in both the stock market and consumer sentiment. While this may feel like a distant memory, Liberation Day directly impacted the pace of the market and derailed the recent improvements to housing supply. Many that were considering selling, reevaluated their timing. This resulted in a rapid decline in inventory, which likely contributed to price stabilization.
The issue is also deeply rooted in that 87% of mortgage borrowers have interest rates below current market rates. This disincentives sellers to forfeit their low rate mortgage for a more expensive home with a significantly higher monthly payment. Sellers have shown that they will cancel the listing before accepting an offer below their perceived value. Listing cancellations/withdrawals are up 28% compared to the first half of 2024. You can also see this trend in the sales figures. While Santa Clara County has seen an 11% increase in inventory for the year, the number of single family home sales has actually decreased by 2.2%.
Despite all of this uncertainty, home prices reached new highs in May. However, when you review the chart below keep in mind sales data is typically 30-60 days behind. This means that homes closed in April and much of May were actually sold in March, prior to Liberation Day. The continuation of the downward trend observed in June for sales that were negotiated in April and May is something I anticipate to see as we enter the summer months, a typically slower period.
|
Median Sales Price ($) |
2024 |
2025 |
YoY Delta ∆ |
|
January |
$1,700,000 |
$1,800,000 |
5.88% |
|
February |
$1,800,000 |
$1,982,500 |
10.14% |
|
March |
$1,900,000 |
$2,100,000 |
10.53% |
|
April |
$2,000,000 |
$2,100,000 |
5.00% |
|
May |
$2,038,000 |
$2,150,000 |
5.49% |
|
June |
$1,950,000 |
$2,080,000 |
6.67% |
*MLS data provided | Single Family Homes | Santa Clara County
Beyond the data, our observations reveal a distinct market split. In June, Los Gatos saw a 10% year-over-year decline and hasn't matched last year's median sales price peak. Conversely, areas like Cambrian were up 5.5% in June, with consistent appreciation in 2025 year-over-year.
Our conclusion: Smaller single-family homes, favored by young families and first-time buyers, are selling fast. Larger homes, appealing to "step-up" buyers, continue to face resistance. Location, condition and market presentation continue to be driving factors as well.
Interest Rates
Mortgage rates have remained more or less the same the last few weeks after spiking in early April with the Liberation Day announcements. Since then rates have started to trend downward as inflation data consistently shows that prices appear to remain contained despite the implementation of tariffs.
With the S&P 500 setting new records, the stock market's recent surge has led to a rise in mortgage applications. The Mortgage Bankers Association (MBA) tracks the Purchase Index, which measures new home loan applications specifically for home purchases, excluding refinances. This index saw a significant spike in the second week of July, reaching a new annual high. What's interesting about this forward looking indicator is that as of July 21, interest rate traders assigned a 60% probability to a quarter-point cut at the September meeting, that's down from 66% a week ago.
Meanwhile, the odds of a cut coming at the next Fed meeting (July) stand at less than 5%. Put another way, the market gives a 95% chance to the Fed standing pat when it meets in late July and a coin flip as to whether they cut in September.
What's the hold up? Uncertainty.
A seemingly resilient labor force, characterized by low unemployment and consistent wage growth lessens the immediate need for the Federal Reserve to reduce interest rates. Furthermore, continued tariffs, especially on Chinese imports, are increasing business input costs, leading to fears of companies passing on these price increases to consumers and reheating inflation. Concurrently, global conflicts, including the war in Ukraine and instability in the Middle East, have left some calling for a precarious approach with concerns of a disruption in the supply chain, elevating energy and commodity prices. These combined elements leave too much uncertainty for the current Fed Chair, despite pressure from the President to relax monetary policy.
With that said, should current summer trends persist, showing continued low employment and inflation, a robust stock market and rising consumer sentiment we will be poised for a promising fall. Couple this with progress around discussions of the Fed resuming their rate-cutting cycle, a compelling narrative to draw in those currently on the sidelines.
The “Big Beautiful Bill” and what it means for Real Estate Owners
In July 2025, Congress passed what’s widely being referred to as Trump’s “One Big Beautiful Bill,” a major overhaul of the tax code that reworks and expands many of the provisions introduced under the 2017 Tax Cuts and Jobs Act (TCJA). The new legislation brings notable changes that will have far-reaching implications for the real estate market, small business financing, and investor behavior. Whether you're a homeowner, investor, developer, or small business owner, here’s a breakdown of what this means for you.
One of the most significant updates is the expansion of the State and Local Tax (SALT) deduction cap. Previously limited to $10,000, the cap has now been raised to $40,000 through 2029. Although the deduction begins to phase out at $500,000 in income for individuals ($600,000 for joint filers), this adjustment provides major relief for homeowners in high-tax states like California. Here is brief example for the fairly common California homeowner:
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Income: $350,000/year
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Filing status: Married filing jointly
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Property tax: $21,000/year (buying a home worth around $1.7MM)
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State income tax (estimated): ~$25,000/year (based on 2024 CA tax tables for this income level)
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Total SALT paid: $21,000 (property) + ~$25,000 (income tax) = $46,000
Before the Change (2024 rules):
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SALT deduction capped at $10,000
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So only $10,000 of the $46,000 SALT can be deducted
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Lost deduction = $36,000
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That $36K stays in their taxable income
After the Change (2025 and beyond):
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New SALT cap = $40,000
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They can now deduct $40,000 of their $46,000 in SALT payments
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Taxable income reduced by an additional $30,000 compared to 2024
What's the Tax Savings?
The couple is likely in the 32% federal tax bracket for their income level.
Tax savings = $30,000 × 32% = $9,600
Secondly, the mortgage interest deduction was preserved at its current cap of $750,000 for new loans, but with one important addition: mortgage insurance premiums are now deductible once again. This change could especially benefit first-time homebuyers and those using FHA loans, helping lower monthly costs and making homeownership slightly more accessible in tight markets.
Investors and developers are also celebrating the return of 100% bonus depreciation through 2029. This allows for immediate expensing of certain property improvements and equipment purchases, dramatically reducing taxable income in the first year. Coupled with an increased Section 179 deduction limit of $2.5 million, this is a powerful tool for anyone investing in upgrades or new construction for residential, commercial, or mixed-use properties. This can also be done using a cost segregation analysis for existing systems and equipment.
One of the more controversial provisions of the bill is the change to Small Business Administration(SBA) loan eligibility. As of June 1, 2025, only U.S. citizens and lawful permanent residents (green card holders) may qualify for SBA 7(a) and 504 loan programs. This change effectively excludes foreign nationals, visa holders, and even DACA recipients from accessing SBA-backed financing. The policy applies to all owners, guarantors, and managers — meaning that even a small percentage of foreign ownership can disqualify an applicant.
It should be noted that I am not a tax professional and this information is for educational purposes. You should consult personally with a tax professional if you have specific questions on how the latest changes in tax code affect you personally
If you would like an introduction to a tax professional, let us know and we will gladly assist you in connecting you with one of our trusted partners.
Enjoy the rest of your summer!
