Rates Dropped This Year. Affordability Still Got Worse in 7 of 10 Cities We Track.
Rates fell this year. In 7 of the 10 cities we track, buyers are still worse off than they were 12 months ago. The 30-year fixed dropped from 6.72% to 6.49%, real relief on paper, but price growth outran it almost everywhere.
A falling rate headline reads like good news for every buyer. It isn’t. Whether it helped you depends on what happened to your city’s median at the same time, and in most of the county, prices moved faster than rates did.
The trap in a rate-drop headline
A rate drop shrinks your payment. It does nothing to shrink the price tag. If your target city’s median rose 10% this year, a 23-basis-point rate improvement isn’t close to enough to offset it. You need both numbers, not the one that made the news.
Where the math landed
Here’s the net change in monthly principal and interest, comparing today’s median at 6.49% to a year ago’s median at 6.72%, both at 20% down:
- Los Altos: down 7.0% YoY, payment improved by $2,304/mo
- Saratoga: down 5.7% YoY, payment improved by $1,824/mo
- San Jose: down 6.9% YoY, payment improved by $833/mo
- Sunnyvale: up 3.0% YoY, payment got worse by $81/mo
- Palo Alto: up 3.6% YoY, payment got worse by $250/mo
- Cupertino: up 5.5% YoY, payment got worse by $526/mo
- Menlo Park: up 12.8% YoY, payment got worse by $1,908/mo
- Los Gatos: up 15.3% YoY, payment got worse by $2,005/mo
- Mountain View: up 19.2% YoY, payment got worse by $2,192/mo
- Atherton: up 34.4% YoY, payment got worse by $13,467/mo
Only 3 cities got more affordable this year, and all 3 are the same cities where the median price fell. The rate drop helped everyone a little. Price growth erased it almost everywhere.
Atherton is the extreme case, and it’s instructive
Atherton’s median rose 34.4% this year, from about $8.33M to $11.2M. Even with rates falling, that’s the difference between a $43,107 monthly payment and a $56,574 one, a $13,467 swing in the wrong direction. No plausible rate move offsets a price gain that size. This is what happens when you read “rates are dropping” as universal good news without checking what your city did in the same window.
What this means for your own numbers
You don’t buy the county. You buy one city, sometimes one street. The countywide rate story is real, but it’s the smaller half of your actual affordability picture. The bigger half is what your specific market did, and that’s exactly why a single “rates fell” headline can’t tell you whether you’re better off than last year.
Run your own base salary, savings, and today’s rate against all 10 tracked cities in our RSU home buying power calculator to see where you stand, not where the headline says you stand.
FAQ
Did the 2026 mortgage rate drop make Silicon Valley homes more affordable?
Not in most tracked cities. Rates fell from 6.72% to 6.49% over the past year, but in 7 of the 10 cities SVMW tracks, price appreciation outpaced the rate relief, so the median buyer’s monthly payment is still higher than a year ago.
Which cities got more affordable this year?
The 3 cities where the median price fell: Los Altos (down 7.0%), Saratoga (down 5.7%), and San Jose (down 6.9%). In all 3, the price decline plus the rate drop combined to lower the monthly payment on the median home.
Why did Atherton get so much less affordable despite lower rates?
Atherton’s median rose 34.4% year over year, the largest gain of any tracked city. That price increase is far larger than what a 23-basis-point rate drop can offset, so the monthly payment on the median home rose by roughly $13,467 despite cheaper financing.
Mortgage rate data: Freddie Mac Primary Mortgage Market Survey, week of July 9, 2026. City price data: SVMW’s monthly tracked medians for the 10 Silicon Valley cities above.
Silicon Valley Market Watch tracks both rates and city-level prices every month, because neither one alone tells you what changed. Bookmark this page and come back next month.