Welcome back to this week’s newsletter.
As we move into the final stretch of the year (and the Halloween candy disappears a little too quickly), the real treat for homeowners and buyers alike is what’s happening in the mortgage market (though it’s come with a few tricks along the way!)
The Federal Reserve officially cut the Fed Funds rate this week. But instead of dropping, mortgage rates actually rose about 14 basis points right after the announcement. It might sound confusing, but here’s what’s going on behind the scenes.
Powell’s “Halloween Hawk” Moment
Markets had been expecting not only this week’s rate cut, but another one in December. That confidence was shaken when Fed Chair Jerome Powell made it clear that a December cut is “not a foregone conclusion.”
Translation: Powell didn’t want investors assuming that more cuts were guaranteed. His cautious (or “hawkish”) tone reminded markets that the fight against inflation isn’t over. As a result, bond yields rose and mortgage rates followed suit.
This is a pattern we’ve seen before. Whenever the 10-year Treasury yield dips to yearly lows and mortgage rates hover near 6%, Powell tends to use the moment to tap the brakes and temper optimism. This time, he played the “Halloween Hawk,” reminding everyone that the Fed’s job is to keep prices stable, not to fuel another surge in borrowing or spending.
What’s Really Going On Behind the Scenes
Despite Powell’s tough talk, the economic backdrop is showing signs of cooling.
The labor market is softening but not collapsing. Job openings have declined slightly, jobless claims have ticked up, and manufacturing jobs have been trending lower since late 2022.
Powell’s message was clear: the Fed isn’t declaring victory yet. And while the Fed Funds rate technically impacts short-term lending, mortgage rates are tied more closely to investor confidence and bond yields. So when the Fed sounds cautious, mortgage rates can move in the opposite direction, even after a rate cut.
What It Means for Buyers
Even with this week’s small jump, mortgage rates remain near their lowest levels of the year- and that’s still a big win for buyers.
A buyer with a $3,000 monthly budget has gained roughly $26,000 in purchasing power compared to last year.
The average mortgage rate is around 6.17%, allowing buyers to afford a $473,000 home versus $447,000 a year ago.
Typical U.S. mortgage payments are up only 0.6% year-over-year, the smallest increase in three months.
Every quarter-point drop helps. A slightly lower rate can mean the difference between the home you like and the one you love fitting comfortably in your budget.
What It Means for Sellers
Buyer sentiment is improving, but caution remains. Many households are taking a “wait and see” approach as they watch inflation, job data, and global headlines. But the serious buyers (aka the ones who’ve been pre-approved and ready to act) are making strong moves when they find the right home.
Across the country, new listings are up 4.6%, but the Bay Area remains one of the tightest housing markets in the nation. Turnkey homes in desirable neighborhoods continue to sell quickly, often with multiple offers.
Elsewhere, builders and sellers are offering concessions like temporary rate buydowns or price reductions. Here at home, competitive pricing and strong presentation (staging, marketing, timing) are still key to capturing attention in a fast-moving market.
What’s Happening Closer to Home
The Bay Area continues to lead the nation in housing activity and it’s not just talk.
Pending home sales in San Francisco surged 17.1% year-over-year in September, the biggest jump among all major U.S. metros. Homes are also selling faster than almost anywhere else: the median home in San Jose went under contract in just 19 days, and San Francisco followed at 21 days, the quickest pace since 2021. Nationally, homes are sitting on the market for about 50 days.
Nearly half of all homes in San Jose (48.5%) and San Francisco (48.7%) went pending within two weeks which is a sharp increase from last year. Motivated buyers are moving fast when the right home hits the market.
Here’s what’s fueling that momentum:
Affordability is (slightly) improving. Median home prices remain around $1.5M in San Francisco and San Jose, but tech and professional incomes have outpaced price growth. Oakland’s median price dropped 1.3% year-over-year, and San Francisco’s edged down 0.7%.
Tech confidence and AI hiring. From OpenAI to Anthropic, local companies are expanding again. Younger professionals with strong compensation packages are re-entering the market with optimism.
Return to the office. San Francisco office visits rose 19% year-over-year, driving more moves closer to job centers.
Tight inventory. Active listings fell 7.7% in San Francisco and 6% in San Jose, making them two of the only metros in the country with shrinking supply.
Even with limited inventory and high prices, the Bay Area stands out as one of the most balanced markets in the country. Nationally, there are still 36.7% more sellers than buyers, but here, that gap is down to just 10%...a massive shift from nearly 47% in May.
That tells us one thing: demand is strong and confidence is slowly returning.
The Bottom Line
While I’d love to see those dreamy 3% rates again, what we really need is a sustainable, confident market. One where buyers can plan long-term and sellers feel secure making their next move.
Lower rates will help, but they won’t solve affordability on their own. They’ll simply invite more activity, more competition, and yes, likely some upward pressure on prices again.
If you’ve been thinking about buying, this next window could be your opportunity. Especially in the Bay Area, where strong incomes, limited inventory, and a growing job market continue to support home values; the homes that are priced right and show well are still moving fast.
If you’d like to run the numbers or discuss what these shifts mean for your goals, I’m always happy to help you map out a plan that fits your lifestyle, timing, and comfort level.