Mortgage rates have creeped above 7%, and the inflation data released this month gives the Federal Reserve little reason to ease. The 30-year fixed rate averaged 7.40% in Freddie Mac’s October 15 survey. My October 2026 Berkeley Real Estate Market Update explains what that means for Berkeley buyers and sellers heading into the holidays.

The Economic Backdrop

Prices rose faster in September. The Consumer Price Index increased 0.6% for the month and 3.7% over the past year, up from 3.4% in August. Gasoline rose 9.1% in the month and 34.2% over the year, which accounts for much of the jump. Excluding food and energy, core inflation was 2.6% year over year, up from 2.4%.

The Producer Price Index for final demand rose 1.3% in September, the largest monthly gain since March 2022, and is up 6.3% from a year ago. Shelter, the largest part of the index for most households, rose 0.4% in the month and 3.2% over the year.

Hiring has slowed. Employers added 29,000 jobs in September and the unemployment rate was 4.2%. The same report revised July and August down by a combined 60,000 jobs, and average hourly earnings rose 3.0% over the year, which is below the pace of inflation.

The Fed and Mortgage Rates

On September 16, the Fed raised the federal funds target range by a quarter point to 3.75% to 4.00%, a unanimous vote and the first increase since 2023. The committee’s median projection for the end of 2026 is 4.1%, which points to one more increase. The minutes released October 7 show most participants judged another increase likely appropriate by year end, and a few noted that housing is where elevated mortgage rates are weighing most.

The October meeting is less certain. Axios reports that Chair Warsh gave no explicit signal and that several Fed officials indicated the Fed could hold, with market odds of an October increase swinging sharply after the inflation report. I would treat any forecast as uncertain.

Mortgage rates moved up through the fall. The 30-year rate was 6.95% on September 17, 7.03% on September 24, the first reading above 7% since January 2025, and 7.40% on October 15. A year ago it was 6.27%. On a $1.4 million home with 20% down ($280,000), the loan is $1,120,000. At 7.40%, principal and interest is $7,755 per month. At 6.27%, it was $6,911. That is $844 more each month, for the same home, and this excludes taxes and insurance.

National and California Housing

Higher rates are weighing on sales. Existing-home sales ran at a 3.99 million annual rate in September, up 1.5% from August but down 2.2% from a year ago. The national median price was $417,500, up 1.3% over the year, and inventory was 1.60 million homes, a 4.8-month supply. NAR’s chief economist noted that August and September were “the two slowest months for home sales this year.”

California shows the same pattern. The California Association of Realtors reported statewide sales down 6.5% from a year ago in September, with a median price of $899,720, up 1.7%. Statewide, the Unsold Inventory Index was 3.7 months and the median time on market was 29 days. In the San Francisco Bay Area, the median price was $1,325,000, up 1.9% over the year, with 2.6 months of inventory and homes selling in a median of 19 days.

Berkeley: A Different Market

Berkeley continues to perform more strongly than the region around it. In Alameda County, September’s median price was $1,265,000, up 1.2% from a year ago, with just 2.2 months of inventory and a median of 13 days on market. County sales were down 4.4% from last September, which suggests fewer buyers are qualifying at current rates, not that homes are sitting.

The city itself is higher priced. Redfin’s data for the three months ending in August showed a median sale price of $1,469,028, up 8.8% from a year earlier, with homes selling in about 15 days and roughly 80% closing above list price. Well-priced homes in neighborhoods such as Elmwood, North Berkeley and Thousand Oaks may continue to draw multiple offers, though higher rates could narrow the pool of buyers who can compete.

Guidance for Buyers and Sellers

If you are buying, the monthly payment is what really matters, not the published mortgage interest rate. Run your own numbers with my Mortgage Calculator and Buyer Net Sheet so you see the full cost of purchasing before you write an offer. A larger down payment, a rate buydown or a different loan structure can each change the payment, and a lender can show you how. Because inventory is limited, waiting for a lower rate carries its own risk, since prices may rise if rates fall and more buyers return. Also, given the macroeconomic climate of AI build out investments crowding out government bonds, I’m of the opinion that we’re going to see elevated interest rates for quite some time.

If you are selling, price to the market as it is now. Buyers are qualifying with higher payments, and the best-prepared homes still attract strong interest. Homes that are priced above what recent sales support may sit longer, while those that are priced accurately and presented well tend to draw the most offers. My Seller Net Sheet shows what you would keep after costs, and the Opportunity Cost Calculator shows what waiting may cost you. Berkeley sellers should also review the BESO Compliance Guide before listing.

Looking Ahead

Several releases will shape the next few weeks. The Fed meets October 27 and 28, then again December 8 and 9 with new projections. The October jobs report is due November 6, and the October CPI follows on November 10. Mortgage rates could stay near current levels if inflation stays elevated, or ease if the data softens.

If you are thinking about buying or selling in Berkeley, I am happy to go over your numbers with you. You can reach me at [email protected], call or text (510) 708-9952, or contact me here.