Market Pulse May 2025: Spring Bay Area real estate market faces crosswinds with more listings, higher rates

Spring is in full swing, and the housing market is feeling the effects of rising mortgage rates again, which climbed to nearly 6.9% following recent international trade agreements that pushed bond yields higher. Federal Reserve Chair Jerome Powell has signaled that interest rates may remain elevated due to ongoing inflation concerns, reinforcing the outlook that significantly lower mortgage rates are unlikely in the near term.

In the San Francisco Bay Area, inventory surged in April, but buyer demand showed signs of softening. While some homes — particularly single-family properties under $2 million — continue to draw multiple offers, many others are sitting longer and seeing price reductions. The market remains segmented, with strength in the luxury tier while the condo sector is more challenging.

Key Takeaways as of May 2025:

Mortgage rates rose to nearly 6.9%, driven by global trade agreements and rising Treasury yields.
The Fed signals higher-for-longer rates, with no short-term relief expected due to inflation concerns.
Forecasted rates may stay between 6.2% and 6.7% through the end of 2025.
Buyers are cautious, with concerns over tariffs, tech layoffs, and stock market volatility.
Bay Area inventory jumped 48% year over year, while pending sales declined across many counties.
Price reductions surged 65%, marking the highest April total in at least six years.
Single-family homes under $2M remain competitive, especially in desirable school districts.
Luxury market strength persists, with a 24% year-over-year increase in April sales.
Rising home insurance costs in California and buyer hesitancy are pushing sellers to evaluate pricing and timing.