Bay Area Housing Market Update 2026

Where the Bay Area Market Stands in Early 2026

As we move through the first quarter of 2026, the Bay Area housing market continues to evolve. After several years of dramatic swings — from the pandemic-era frenzy to the rate-driven cooldown of 2023-2024, and the gradual stabilization of 2025 — the market is finding its footing. Here's what I'm seeing on the ground in the South Bay, backed by current data and local insight.

Home Prices: Steady With Upward Pressure

South Bay home prices have shown steady appreciation through late 2025 and into 2026. Here are the current median single-family home prices in key cities:

• Campbell: $1.58M (up 4% year-over-year)
• San Jose (overall): $1.32M (up 3% YoY)
• Willow Glen (San Jose): $1.72M (up 5% YoY)
• Los Gatos: $2.65M (up 4% YoY)
• Saratoga: $3.45M (up 3% YoY)

The appreciation rates are more moderate than the double-digit gains we saw in 2021-2022, but they represent healthy, sustainable growth. The South Bay continues to benefit from strong demand driven by the tech industry, limited buildable land, and strict zoning regulations that constrain new housing supply.

Interest Rates: The Defining Factor

Mortgage rates have settled into the low-to-mid 6% range for 30-year fixed loans as of early 2026. The Federal Reserve's rate decisions throughout 2025 brought rates down from their 2023 peak of nearly 8%, providing meaningful relief for buyers. While rates in the 6% range are still higher than the sub-3% rates of 2020-2021, they represent a new normal that the market has largely absorbed.

What this means for you:

• Buyers: Your purchasing power has improved compared to 2023-2024. A buyer who could afford a $1.3M home at 7.5% rates can now afford closer to $1.45M at 6.25%.
• Sellers: The "lock-in effect" that kept many homeowners from selling (because they didn't want to give up their 3% mortgage rate) is slowly fading. More sellers are coming to terms with the new rate environment, which is gradually increasing inventory.

Inventory: Still Tight, But Improving

The Bay Area's chronic inventory shortage continues, but we're seeing improvement. In January 2026, active listings in Santa Clara County were up approximately 12% compared to January 2025. However, we're still well below pre-pandemic levels — roughly 35% fewer homes on the market compared to January 2019.

In the South Bay specifically:

• Campbell: approximately 3.2 weeks of supply (still firmly a seller's market)
• San Jose: approximately 4.1 weeks of supply
• Los Gatos: approximately 4.5 weeks of supply
• Saratoga: approximately 5.8 weeks of supply (closest to balanced)

A balanced market is typically defined as 4-6 months of supply, so we're still deep in seller-favoring territory across most price points. However, the luxury segment ($3M+) has more inventory and less urgency, giving high-end buyers more negotiating power.

Tech Industry Impact

Silicon Valley's tech sector remains the primary demand driver for South Bay housing. After the layoffs and uncertainty of 2022-2023, the tech industry has stabilized and is growing again, fueled by artificial intelligence, cloud computing, and the continued dominance of companies like Apple, Google, Meta, and Netflix — all headquartered within a short drive of the South Bay.

AI-focused companies in particular are hiring aggressively, and many are requiring at least partial in-office work, which keeps demand high for South Bay housing. Remote work hasn't disappeared, but the hybrid model (3 days in office, 2 days remote) has become the standard, keeping workers tethered to the Bay Area.

Stock market performance also influences the market. When tech stocks are up, employees with equity compensation feel wealthier and more confident about making big purchases. The strong market performance through late 2025 has contributed to buyer confidence heading into 2026.

What's Happening Neighborhood by Neighborhood

Campbell: Remains one of the most competitive markets in the South Bay for homes under $1.8M. Well-maintained homes near downtown or in the Capri neighborhood continue to attract multiple offers, often selling within 7-10 days. The city's walkability, restaurant scene, and central location keep demand strong.

San Jose — Willow Glen: The crown jewel of San Jose continues to command premium prices. Homes on the tree-lined streets near Lincoln Avenue rarely last more than a week. The neighborhood's charm, walkability, and strong schools make it perennially popular.

Los Gatos: The luxury market here is seeing the most activity in the $2M-$3.5M range. Homes above $4M are taking longer to sell, with an average of 35-45 days on market. Downtown Los Gatos condos and townhomes remain popular with downsizers from the surrounding hills.

Saratoga: The ultra-premium market ($4M+) is more balanced, with buyers able to negotiate. Homes in the $2.5M-$3.5M range near Saratoga Village and Saratoga High School continue to move well, driven by families prioritizing schools.

My Predictions for the Rest of 2026

• Home prices will continue to appreciate at a moderate 3-5% pace in the South Bay
• Inventory will gradually increase as more homeowners decide to sell, but supply will remain below historical norms
• Mortgage rates will likely stay in the 5.75%-6.5% range, barring any major economic disruptions
• The spring market (March-May) will be competitive — buyers should be pre-approved and ready to act
• The South Bay will continue to outperform the broader California market due to tech employment and limited supply

What Should You Do Right Now?

If you're a buyer: Don't wait for rates to drop further before starting your search. Inventory is rising, and the spring competition hasn't fully heated up yet. Get pre-approved now and position yourself to act when the right home hits the market.

If you're a seller: This is a great time to list. Demand is strong, inventory is still low, and well-prepared homes are selling quickly at premium prices. The spring window is opening — let's get your home ready.

Whether you're buying or selling, I'm here to help you make the best decision for your family. Let's connect and talk about your specific situation.