After a slower-than-expected spring and summer sales season, the Bay Area’s housing market is expected to see renewed activity this fall following a dip in mortgage rates to their lowest level in nearly a year.
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Last week, in anticipation of the Federal Reserve’s announcement that it would cut rates for the first time in nine months, the average 30-year fixed mortgage rate dropped to 6.26%, down from a high of 7.04% in January. Agents and loan officers say it could be enough to pull hesitant homebuyers and sellers back into the market, giving this year’s sluggish housing market an end-of-the-year bump.
“Many prospective homebuyers have been holding out in hopes of lower mortgage rates,” California Association of Realtors President Heather Ozur said. “The declining trend in rates observed in the last few weeks could be the nudge that draws them back to the market.”
According to the association’s most recent data, pending sales rose 8.3% statewide from July to August — a sign that the market is chugging back to life after the slow summer.
That’s typical of the housing market seasonality, in which sales drag in the summer following the usual spring home-buying rush. Still, this summer was even slower than a year earlier, with sales in the Bay Area down 4.1% from August 2024 to August 2025. This is the third straight year of slow home sales since interest rates began to climb in 2022.
Home prices haven’t let up, though. The median sales price of existing single-family homes in the nine-county Bay Area was $1.28 million in August, up 2.8% from a year prior. The median price was $850,000 in Contra Costa County, $1.27 million in Alameda County, $1.5 million in San Francisco, $1.9 million in Santa Clara County and $1.99 million in San Mateo County.
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The high prices are driven by low inventory, said Jordan Levine, the association’s chief economist. Most Bay Area counties have less than three months of supply, which is considered a seller’s market.
“The slight improvement in rates could lead to a little bit more supply,” Levine said. “We think we’ll see sales start to improve, albeit at a modest pace, as we move into the final quarter of the year.”
Fremont homebuyers Palash Shah and Pushti Dalal took advantage of the slow summer to close a deal for a townhouse.
“We knew interest rates were high, but that also makes the market less competitive,” Shah, 29, said. He noticed that many of the townhouses under $1 million had also reduced their prices recently. In August, they found a townhouse in Fremont listed for $995,000. They came in under the asking price, bidding $980,000, but because they used a flat-fee brokerage, TurboHome, their offer was more competitive than other buyers who wanted the seller to cover their agents’ fee. Eventually, they agreed on $990,000, winning out over two other bids.
“We hope to refinance when the interest rates come down a bit more,” Shah said.
For sellers, the high interest rates are a source of anxiety. Will Mollard, president of workshop1, an East Bay development firm, finished construction on eight townhouses in Oakland’s Glenview neighborhood, priced around $1 million. They hit the market in June, when rates were at 6.85%.
“We haven’t seen a market quite this slow and torturous in years past,” Mollard said. “Buyers at this price point are very sensitive to rates. … We’re hopeful that rates coming down will have an impact, but we’re still waiting.”
Some agents say they’ve already seen some buyers return to the market since rates dipped at the start of September. Claudia Mills, an agent based in the East Bay, said that she’s seen a number of first-time buyers at open houses.
“People are ready to step back in,” Mills said. “They’re working on pre-approvals and getting geared up to swoop back into the market.”
Michele Reen, a loan officer with Citywide in Los Gatos, said her company’s September first-time homebuyer seminar had notably higher attendance than earlier this year.
“We’re doing pre-approval after pre-approval right now,” Reen said. Nationally, mortgage purchase applications during the week of Sept. 15 were up 20% from the same period last year.
Even though rates are just slightly lower than earlier this summer, a small drop can make a significant difference in a buyer’s monthly payment. Buyers putting 20% down on a median-priced Bay Area home with a 30-year fixed rate mortgage at today’s rate, 6.26%, would pay $6,312 before taxes and insurance, versus $6,710 had they bought in June when rates were at 6.85%.
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Plenty of buyers are still waiting to see whether rates come down further. John Glynn, a loan officer at CrossCountry Mortgage in Walnut Creek, said that he’s seen more refinancing applications than those for new purchases.
“A 6% rate is better than 7%, but it’s still a big pill to swallow,” he said. During the pandemic, mortgage rates hovered around 2% to 3%.
More consumers say they would come back to the market if rates dip below 6%, according to a March survey by John Burns Research and Consulting. Nearly half of potential homebuyers said they would be OK with a mortgage rate between 5% and 5.49%, but just 22% said they would accept a rate between 6% and 6.49%.
Though the Fed’s recent cuts to the short-term borrowing rate brought optimism to the housing market, it’s unclear whether mortgage rates will keep falling. Mortgage rates don’t directly correlate with the short-term borrowing rate.
Still, it’s not as if demand in the Bay Area has dried up. The region has more buyers than homes for sale, even with several months of slow job growth. Luxury buyers are less sensitive to interest rates and more influenced by fluctuations in the stock market, which on Monday soared to a record high.
“We’re still getting multiple offers on our listings,” said Marcie Soderquist, an agent with Compass based in Los Altos. “I don’t think we’ll ever have enough property for all the people that can afford to buy here.”