Mid-Year Market Update: Silicon Valley Real Estate Analysis | Keith Walker Team

Thank you to everyone who reached out after my last post. We had some great conversations, and I really appreciate you taking the time.

Let's talk about what's actually happening in the real estate market—specifically here in Silicon Valley and the surrounding areas. This update is based on real MLS data and market analysis, not speculation.

What Homebuyers Are Actually Concerned About

According to a recent CNBC study of potential homebuyers, the top concerns are:

1. The economy
2. Prices
3. Mortgage rates
4. Rising inventory
   

These concerns are understandable and grounded in real market conditions. Let's break down what's actually happening with each of these factors.

What We Expected vs. What Actually Happened

Coming into the year, expectations were high. I shared that we were in a fairly balanced, normal market, and that we should see stronger pending sales alongside a much-needed increase in inventory.

I also said the biggest variable this year would be mortgage rates—and that has absolutely played out, driven by factors most people didn't fully anticipate.

So let's unpack what's happening right now, starting with the number one measure of any housing market: supply and demand.

Supply & Demand: The Real Story

To understand the current market, we need to look at actual MLS data from our key markets. I'm focusing on Santa Clara County and Alameda County, which represent the heart of Silicon Valley and the surrounding Bay Area.

Santa Clara County Data

Single-Family Homes

• Active Listings: 1,429 homes
• Pending Sales: 673 homes
• Absorption Rate: 47.1%

3+ Bedroom Townhomes & Condos

• Active Listings: 386 units
• Pending Sales: 144 units
• Absorption Rate: 37.3%

2- and 1-Bedroom Townhomes & Condos

• Active Listings: 672 units
• Pending Sales: 162 units
• Absorption Rate: 24%

Alameda County Data

Single-Family Homes

• Active Listings: 1,253 homes
• Pending Sales: 675 homes
• Absorption Rate: 53.9%
  

3+ Bedroom Townhomes & Condos

• Active Listings: 289 units
• Pending Sales: 105 units
• Absorption Rate: 36.3%
  

2- and 1-Bedroom Townhomes & Condos

• Active Listings: 524 units
• Pending Sales: 150 units
• Absorption Rate: 28.6%

What Absorption Rates Mean

To put this data into context, you need to understand what absorption rates tell us about market conditions:

• Above 60%: Seller's market — multiple offers, fewer contingencies, faster sales
• 35-60%: Balanced market — normal conditions, fair for both buyers and sellers
• Below 35%: Buyer's market — more negotiation, longer days on market, buyer advantages

Looking at our data, single-family homes in both counties are in a balanced to slightly seller-favored position, while the condo and townhome markets are leaning toward buyer-favorable conditions.

Understanding the Bifurcated Market

What we're seeing right now is a very segmented—or bifurcated—market. This means conditions vary significantly depending on what type of property you're looking at.

The Remodeled Home Trend

One interesting trend: there are significantly more fully remodeled homes hitting the market. In one neighborhood we're tracking, about 70% of the inventory is newly remodeled, compared to a typical 25%.

That creates stronger competition for sellers who haven't updated their homes. If your home hasn't been recently updated, you may face more negotiation or longer days on market. This is a critical insight for sellers.

Micro-Climate Variation

Micro climates are very strong and varied right now. Conditions can change from street to street, and factors like schools, commute, and even a vanity city name—think Los Gatos versus San Jose—still matter a lot.

This means a one-size-fits-all strategy doesn't work. Your specific neighborhood, your specific home, and your specific situation require analysis tailored to your micro market.

Price Trends & What They Mean for Affordability

Single-Family Home Prices

Despite all the noise out there, the market is balanced and stable. Price reductions in Santa Clara County are down 7% compared to this time last year—meaning sellers are getting closer to their asking prices.

Santa Clara County Single-Family Homes:

Up 2.5% year over year, sitting just under $2.6 million

Alameda County Single-Family Homes:

Up 8.4% year over year, sitting just under $1.6 million

Both markets are at all-time highs and holding steady. Inventory itself is down 1% year over year—even though it was already historically low—and pending sales for single-family homes have increased every month this year.

Townhome & Condo Prices: A Different Story

On the flip side of that bifurcation, townhome and condo prices tell a very different story:

Santa Clara County Townhomes/Condos:

Down 4% year over year

Alameda County Townhomes/Condos:

Down 5.3% year over year

They're at both their lowest average price of the year and the lowest we've seen in about three years. This tells a very clear story: with higher interest rates, entry-level and first-time buyers are the most impacted.

Affordability Improvements & Opportunities

But here's the good news: higher rates have also created opportunities. There are strategies right now—like negotiating seller-paid rate buy downs—that can significantly improve affordability. That's often a win-win for both buyer and seller.

On a $2 million mortgage in the Bay Area, compared to mid-2025, buyers today need roughly $20,000 less in income to qualify at a similar ratio—and the payment is about $500 less per month. At the same time, wages in the Bay Area have increased year over year.

Economic Fundamentals & Job Market

On the economic side, unemployment is holding steady at 4.3%, and 172,000 jobs were added nationally in May—well above expectations. The trade-off is that rates are unlikely to drop quickly.

This is a healthy labor market supporting home buying, but with mortgage rates stable, the housing market is adjusting to new pricing equilibrium rather than expecting quick rate drops.

Understanding "Waves" in the Market

One more important concept: the "waves" of the market. When demand heats up or cools down, it doesn't happen uniformly across all property types. Instead, demand typically moves in a predictable pattern.

When the Market Heats Up (Demand Increases)

Demand typically moves in this order:

• Single-family homes
• 3+ bedroom townhomes/condos
• 2-bedroom units
• 1-bedroom units
  

When the Market Slows (Demand Decreases)

When things slow down, it reverses—starting with 1-bedroom units cooling off first, then working back toward single-family homes.

What We're Seeing Now

Right now, what we're seeing is a market that is stable. It's not overheating, and it's not crashing. Despite major external pressures—from global conflicts to economic uncertainty—we're holding steady. And that should tell you something about market fundamentals.

The Big Picture

There are a lot of narratives out there right now—about mortgage rates, foreclosures, jobs, and what's next. My overall take is that we are experiencing small steps that are improving affordability on a larger scale. That is healthy.

And after decades in this business, here's what I know:

People buy homes for lifestyle reasons—stability, raising a family, having control over their living situation. Appreciation is a great long-term benefit, but it's usually not the primary driver. And people make intentional choices and trade-offs to make that happen.

The Questions You Should Be Asking

If you're thinking about buying, here's the question I want you to consider:

Has anyone actually taken the time to walk you through the differences in this market—four-bedroom versus two-bedroom, one neighborhood versus another—so you can make a fully informed decision?

And as a home seller: Have you made a personalized strategy for your home in your particular segment of the market?

If not, that's exactly what we do. Reach out to me directly to get the real data, the real deal, and create the perfect strategy for you!