The Local Lowdown: January 2025

Michelle Kim | January 31, 2025

The Local Lowdown

Quick Take:

The median single-family home prices fell in December but are still near their record highs with the exception of Marin, which peaked at over $2.2 million back in 2022. We expect prices to contract in January 2025 before rising in the spring and summer months.
Total inventory fell 34.8% month over month, continuing the substantial Q4 decline. We expect inventory to continue to decline in January and the overall market to slow due to lack of supply.
Months of Supply Inventory fell across the North Bay in December, implying a shift that favors sellers. MSI indicated a sellers’ market in Marin, Solano, and Sonoma and a more balanced market in Napa.

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

The median single-family home price fell slightly month over month, typical for December

Single-family home prices are near record highs across most of the North Bay, with the exception of Marin. Persistently low, but rising inventory relative to the high demand in the area has more than offset the downward price pressure from higher mortgage rates. Prices in the North Bay generally haven’t experienced larger drops due to higher mortgage rates. Year over year, single-family home prices in Marin and Napa fell 3% and 5%, respectively. Prices rose 1% in Solana and 5% in Sonoma. Prices typically peak in the summer months, and the mild contraction after the post-summer peak has fallen in line with expectations. We expect some minor price contraction in January 2025 before rising into the spring and summer months.

High mortgage rates soften both supply and demand, but homebuyers and sellers seemed to tolerate rates near 6% much more than around 7%. Mortgage rates fell significantly from May through September, but rose significantly in the fourth quarter of 2024. Now, rates are far closer to 7% than 6%, so we expect sales to slow further.

Single-family home inventory plummeted in November

In 2024, the housing market had looked progressively healthier with each passing month. Then Q4 happened, and inventory dropped by over 50%, more than erasing the large gains from the first nine months of the year. Even though sales volume 2024 was similar 2023, far more new listings came to the market, which allowed inventory to grow significantly. Typically, inventory begins to increase in January or February, peaking in July or August before declining once again from the summer months to the winter. The precipitous fall in November and December was unusual and seems to be driven by the extremely low level of new listings coming to market.

In terms of sales and new listings in December 2024, the number of home sales was 17% higher than the previous year, while new listings fell 24%. The North Bay housing market is notably responsive to mortgage rates, and as rates increased in December, it likely gave buyers and sellers pause.

Months of Supply Inventory in December 2024 indicates a sellers’ market in Marin, Solano, and Sonoma and a balanced market in Napa

Months of Supply Inventory (MSI) quantifies the supply/demand relationship by measuring how many months it would take for all current homes listed on the market to sell at the current rate of sales. The long-term average MSI is around three months in California, which indicates a balanced market. An MSI lower than three indicates that there are more buyers than sellers on the market (meaning it’s a sellers’ market), while a higher MSI indicates there are more sellers than buyers (meaning it’s a buyers’ market). MSI in the North Bay markets trended higher throughout most of 2024. However, in Q4, MSI fell across markets, implying the market shifted more favorably toward sellers. Currently, MSI indicates a sellers’ market in Marin, Solano, and Sonoma and a balanced market in Napa.