Summer 2025 Market Update

Greetings, friends, colleagues, and clients. We hope this message finds you well - ideally swaying in a hammock somewhere, cool beverage in hand.

Because absolutely nothing has happened in the world since we last published in March, writing this edition was challenging. We’re being facetious of course. We had “Liberation Day” tariffs, one of the fastest market crashes and recoveries since 2020, some frightening developments with Israel, Iran, and the US, and social unrest and protests. Distilling useful take-aways took some serious filtering, so on to the good stuff!

A Surge of New Energy

It’s hard to miss the renewed buzz across San Francisco and the greater Bay Area. Multiple forces are driving that optimism, and two in particular stand out:

Mayor Daniel Lurie: In just a few months he has tackled problems that hobbled San Francisco last cycle, working to restore confidence in the City and its trajectory. This is huge for the City and by extension, real estate.

The AI boom: Venture data show the Bay Area still attracts roughly twice the funding of the next-largest U.S. metro (NY). We are early in a wave that could reshape the world more than any prior technology, and the excitement is spilling into every corner of the local economy. Office leasing is up, sales in typically slower neighborhoods have renewed vigor, and many people are moving back to the Bay Area to be part of the action.

Real-Estate Snapshot

For the third year in a row, transaction volume for San Francisco + Marin remains near Great-Recession lows and well below pre-pandemic norms. The key culprit is the “lock-in effect”, as millions of owners refinanced at 2%–4% rates during the pandemic and refuse to surrender those mortgages. That has kept activity muted, which also means that pent-up energy is brewing. When that is finally unleashed, buckle up.

Meanwhile, the Federal Reserve left policy rates unchanged (4.25-4.5%) and warned that upcoming inflation prints will run hotter; with the 30-year jumbo mortgage near 6.8%, buyers shouldn’t count on lower financing costs any time soon- except maybe in the window discussed below (see our “Probabilities Favor” section).

Advice to sellers in this environment: Price to the live comp set, not last quarter’s, and presentation must be flawless. Homes that cut corners linger and invite price cuts.

For buyers: Underwrite a ten-year hold so you can ride out any volatility and view future rate dips as upside, not a prerequisite.

First-Half Highlights

Despite contracted volume, our team sprinted through a very busy first half. We also have several beautiful listings teed up for late summer and early autumn, including three brand new condos in Mission Dolores that will bring to market a bespoke, never-before-seen product from an extremely talented architect, design, and build team.

We’re also prepping a gorgeous Bernal Heights home, a lovely single-family in Golden Gate Heights, and a new-construction condo in Sausalito.

Speaking of Sausalito, we have a rare Sausalito construction opportunity at 77 Crescent Avenue, which is a shovel-ready project ready to be built (currently offered at $1,750,000). 

Back in May, RealTrends ranked us in the top 1.5% of all agents nationwide! We’ve also been featured in the media several times this spring, from discussing how tariffs are shaking up the Bay Area’s housing market to mixed signals in the market and the struggle to fill the void left by First Republic. 

Arrian recently attended two standout New York conferences—Christie’s International Real Estate’s annual summit, and a Wall Street forecasting think-tank—bringing back fresh macro insight we now weave into discussions with clients and our own due diligence around market conditions.

Probabilities Favor (formerly “Predictions”)

Welcome to many readers’ favorite part, our Predictions section. We’re changing the section name, which we’ll carry forward, to a more precise descriptor. Thinking in probabilities is more accurate than the black and white nature of predictions, and thus the section has been renamed “Probabilities Favor”.

Returning from the New York conference on economic forecasting, we’re equipped to make judgement calls on which way certain factors will lean. While no one can predict the future, one can certainly assign probabilities based on data and analysis.

So what do probabilities favor in this edition?

Let’s start with a little story.

For years I felt like I was running on a treadmill, sometimes at a full sprint, while some invisible force controlled the speed dial. Other times, the treadmill slowed, or even came to a halt. Who or what was controlling the speed dial? I turned over every rock until finally finding the smoking gun. It’s the 10-year bond yield. If the yield went up, the treadmill slowed, and if the yield went down, the treadmill sped up.

And while the yield was important, it was the rate of change - that is - the yield relative to where it just was - that made the biggest difference. If there was a drastic change, the impact was very pronounced. 

The 10-year yield doesn’t just affect mortgage rates (that would be too obvious), it affects how just about every asset is priced. It influences the IPO market. It prices risk. And in a market where risk is taken more than others, thanks to our startup ecosystem, you could think of our local real estate market as being more affected than others (high beta).

And that brings us to this edition’s “Probabilities Favor”. Is the yield headed up or down from here?

We’re certainly approaching a crossroads. At the conference in NY, chatting with a few experts in this domain, the consensus was that yields likely drift down into August–September before turning up into year-end. The chart is compressing into a pennant pattern (see below). A continuation is usually how pennant patterns resolve - historical tests put the odds at 60-65% when the entry move is up. And given rates were rising into the pennant formation, probabilities favor a break to the upside (various studies have confirmed this tendency).

Key areas to watch are:

A break above 4.65% likely races to 5%—a headwind for asset prices and real estate activity (and the IPO market).

A break below 4% could send yields into the mid-3% range—rocket fuel for real estate and a thawing IPO market that eventually feeds local housing demand.

Probabilities favor yields down until August / September, and then a swing higher into year end. 

What would be the catalyst to push them higher? Possibly the return of inflation - not 8-9% like we saw right after the pandemic - but a bump up from where we are now. Or perhaps if the Fed cuts and the bond market reacts like it did in September 2024 (fed cut 50 bps, 10-year bond yield went up 100 bps in 3 months). 

Obviously the market is incredibly dynamic, and this is the best information we have on the subject at this snapshot in time, so we wanted to share it right away. And remember, just because probabilities favor something, doesn’t mean it will play out that way. Underdogs win and upsets happen all the time. But knowing the slant is a distinct edge (the title of our newsletter!)

Want to keep up with how fast or slow the treadmill is moving? Be sure to check in regularly or feel free to reach out directly for a one-on-one consultation.

Gratitude & Summer Wishes

Thank you for your continued trust, referrals, and camaraderie. And special congratulations to families celebrating milestone graduations this season!

Enjoy a wonderful summer, and we’ll be ready when opportunity knocks.

Warmly,

The Binnings Team

This newsletter is for informational purposes only and does not constitute financial advice.