We have an exciting month ahead with the midterm elections, CA governor race, the possibility of a historic Anthropic IPO, and our 49ers continuing to make a push in the NFC West. There will certainly be plenty to reflect on as we approach the end of the year.
In the meantime, I know I say this every year, but fall really is one of my favorite seasons. There's something refreshing about the transition out of summer. The days get a little shorter, schedules become more predictable, and life seems to settle back into a comfortable rhythm. It's a great time to reconnect with routines, tackle a few of those projects that took a back seat during the summer, and get organized before the holidays arrive.
We’ve outlined some data as well as our thoughts on the housing market, over the last few months. If you have any questions or would like to discuss your plans don’t hesitate to give us a call.
Supply Levels
The Bay Area housing market has never been particularly straightforward. Mortgage rates, stock market performance, inventory, and buyer confidence all influence how people make decisions around housing. The third quarter of 2026 was another reminder that these forces do not always move together.
In Santa Clara County, new single family home listings increased 9.42% compared with Q3 2025, while the number of sales declined 3.4%. The increase in supply was particularly noticeable toward the end of summer, with new listings up 20.55% in August and 7.79% in September.
*MLS data provided | Single Family Homes | Santa Clara County
With this increase in inventory and rising mortgage rates (we’ll touch on that in a moment), prices remained relatively soft. After a modest 1.06% year-over-year increase in July, median sales prices declined 1.60% in August and 4.10% in September. By the end of the quarter, the median single-family home price stood at $1,870,000, compared with $1,950,000 a year earlier.
*MLS data provided | Single Family Homes | Santa Clara County
That combination is worth paying attention to. More homes are coming to market, but fewer are selling. Buyers have more options, and they appear less willing to stretch on price, particularly for homes that need work or are not positioned correctly.
It is important to remember that median sales prices do not necessarily reflect how much individual homes have appreciated or depreciated. The types of homes selling in any given month can influence those numbers.
Another factor that is difficult to capture in the data is the quality of available inventory. Anecdotally, through our work with active buyers, we have observed that while overall inventory has increased, the selection of desirable homes has not necessarily improved. By quality inventory, I mean homes on desirable streets, in good condition, with renovations already completed for the buyer.
This distinction matters because buyers may have more homes to choose from on paper, but that does not mean they have more homes they actually want to purchase. As a result, well-located, move-in-ready properties can continue to attract strong interest even as the broader market experiences increased inventory and longer selling times.
Still, when we see an increase in new listings alongside declining sales activity, it suggests the balance between buyers and sellers may be shifting.
The demand is still there, but with mortgage rates on the rise and inventory up nearly 10% year over year, buyers seem increasingly comfortable waiting for the right home at the right price.
Mortgage Rates
One of the more interesting developments this quarter has been the bond market.
The 10-year Treasury yield, which heavily influences mortgage rates, moved in opposite directions during the third quarters of 2025 and 2026. Last year, 10-year Treasury yields declined from an average of 4.34% in July to 4.12% in September. This year, they increased from 4.60% to 5.27% over the same period.
By the end of September, the 10-year Treasury yield was nearly 115 basis points higher than a year earlier. That is a considerable difference, especially in a market where buyers are routinely financing loans well over $1 million.
As expected, mortgage rates followed a similar pattern. The average 30-year fixed mortgage rate reached 7.22% in late September, compared with 6.30% a year earlier.
The Federal Reserve has not made things easier. At its September meeting, the Fed raised its benchmark rate by 25 basis points to 3.75% to 4.00%, citing persistent inflation and continued strength in the broader economy.
It is worth remembering that the Fed does not directly set mortgage rates. Those are more closely tied to longer-term Treasury yields, which reflect expectations around inflation, economic growth, and future monetary policy. Even when the Fed holds rates steady, mortgage rates can move considerably in either direction.
What makes this environment interesting is that the economy can remain relatively strong while the housing market struggles to gain momentum. The technology sector continues to create substantial wealth, but not every buyer benefits equally from rising stock prices or equity compensation.
For buyers relying on traditional financing, affordability remains a significant constraint. For those with substantial liquidity, particularly in the higher end of the market, the equation looks very different. We will touch on what many are calling a “K-Shaped” recovery in our year end review.
That may help explain why we continue to see strong competition for certain properties while others sit on the market.
Since the end of Q3 we have seen mortgage rates trend downward sitting just north of 7%. However, many of our clients obtaining jumbo loan amounts are seeing rates in the mid to low 6% range. Recently the Fed decided to hold rates the same but this week's inflation data proved to be higher than expected, putting the odds of a December hike at near certainty.
What’s going on with Condominiums?
The condominium and townhome market in Santa Clara County continues to face challenges. During Q3 2026, the average of monthly median sale prices declined approximately 9.9% compared to the same period last year. While this does not necessarily reflect the depreciation of individual properties, it points to continued pricing pressure across the market.
Beyond elevated borrowing costs, another factor worth watching is the growing financial burden facing homeowners associations. Rising insurance premiums, aging infrastructure, deferred maintenance, and underfunded reserves are increasingly influencing purchasing decisions.
Recent legislative and lending changes could add further pressure. California's AB 2050, signed into law on September 29, 2026, establishes new reserve funding requirements beginning in 2032, requiring HOAs to develop funding plans designed to avoid projected reserve shortfalls over a 30-year period. For associations that have historically maintained low dues while underfunding future repairs, this could mean higher monthly assessments and possibly larger special assessments in the near future.
At the same time, Fannie Mae's Lender Letter LL-2026-03 eliminated the streamlined Limited Review process for condominium financing, effective August 2026. Most condominium projects must now undergo a more comprehensive Full Review unless they qualify for an exemption. Beginning in January 2027, Fannie Mae will also increase its standard minimum reserve allocation requirement from 10% to 15%.
These changes are intended to improve the long-term financial stability and physical condition of condominium developments. However, they may create near-term challenges for owners and prospective buyers. Higher HOA dues affect affordability, while developments that fail to satisfy conventional lending requirements could face a smaller pool of eligible purchasers as they turn to non-warrantable loans with higher down payment requirements and higher interest rates.
Looking ahead, I expect the financial health of an HOA to play an increasingly important role in property valuations. Well-maintained communities with adequately funded reserves should be better positioned than developments facing substantial deferred maintenance and future assessments. If you own a condominium or are considering purchasing a condominium or townhouse, reach out to us so we can help you understand what to look for when considering your next move.
