What Stagflation Could Mean for the Bay Area Real Estate Market

Hey, have you heard the word? It’s one we haven’t talked about in a long time—stagflation. And yes, it’s back in the news.

Now, as someone who’s been around the Bay Area for decades (I’m 54, so I remember the 1970s and early ’80s), the word “stagflation” brings back memories—and not especially joyful ones. But more importantly, what does stagflation mean for real estate in the Bay Area and Silicon Valley? That’s the big question I want to unpack today.

First Things First: What Is Stagflation?

Let’s break it down. Stagflation is an economic condition where we see a quadruple whammy:

Rising inflation
Rising interest rates
Shrinking GDP
Increasing unemployment

That’s not a fun four pack. And while we’re not fully there yet — unemployment remains relatively low — the signs are worth watching.

What’s Fueling the Stagflation Talk?

There are a few big red flags popping up right now:

1. Rising Inflation

No, we’re not dealing with the double-digit inflation of the 1970s (yet), but inflation today is still above where the Fed wants it—and climbing. That’s always a warning sign, especially given what we’ve just gone through over the past couple of years at least when it comes to rising prices.

2. High Interest Rates

We’ve seen borrowing costs rise sharply. The 10-year Treasury yield, which heavily influences mortgage rates, has shot up from a recent low of around 3.8% to over 4.3% today (mid-April, 2025). And it might keep climbing. That’s unusual during economic slowdowns — normally, we’d expect rates to drop as the economy softens. But here we are, in a strange market where interest rates are going up while the economy slows down. That’s classic stagflation behavior.

3. A Weakening Dollar

We’re also seeing the value of the U.S. dollar drop against other currencies, which usually doesn’t happen in uncertain times. Typically, the dollar acts as a safe haven. This time, it’s not, which is adding more pressure to bond markets and, in turn, driving up mortgage rates even more.

4. Consumer Confidence Is Sliding

In April 2025, the University of Michigan’s Consumer Confidence Index fell to 50.8 — the lowest level since 1952. This matters because consumer confidence tends to track with the housing market. Historically, when confidence drops, real estate prices soften 6–12 months later.

But What About Mortgage Rates?

This is the question I get all the time. “Aren’t mortgage rates going to fall soon?” I wish I had better news. A lot of mortgage pros have been predicting 5% and 6% rates by the end of the year, but I don’t buy it.

Why? For a couple of reasons. First, they’ve been saying this for at least a couple of years now, and we’re still waiting. And second, because rates almost never fall quickly. One rates go up, they often stay there for some time. And as long as the 10-year bond yield stays elevated—and money keeps flowing out of the bond market—mortgage rates will stay high. Right now, we’re sitting around 7%, and I don’t see a lot of downward pressure coming anytime soon.

So, What Does All This Mean for Bay Area Real Estate?

Let’s rewind for a second. The last major stagflation era ran from around 1972 to 1983. What happened to Bay Area home prices during that time?

The Good News:

Nominally, real estate prices here went up. In fact, they went up a lot. Real estate is often seen as a hedge against inflation, and that was true back then. If you looked at just the sticker prices, it seemed like a boom.

The Not-So-Good News:

When adjusted for inflation, home prices in 1983 were actually lower than they were in 1972. So even though values rose on paper, real purchasing power declined. You weren’t necessarily building wealth—you were just keeping pace, at best.

What It Felt Like:

Even though prices rose, the market was slow. Homes took longer to sell. Fewer transactions were happening. It wasn’t the kind of red-hot, multiple-offer market that we saw in 2021. It was sluggish, uncertain, and a bit painful.

Is Silicon Valley Headed There Again?

Right now, we’re in a weird place. The Silicon Valley housing market is still strong by most measures. Inventory is tight, and buyers are still out there. But it feels as though the winds are shifting.

If you’re a Bay Area homeowner who’s been thinking about selling in the next year or two, here’s my take:

You don’t need to panic—but you should pay attention.

I’m not forecasting a major crash, but I do think we’re heading into a market that could be slower, less competitive, and more price-sensitive. If stagflation really takes hold, we could see stagnant or even slightly declining inflation-adjusted home values, longer time on market, and fewer bidding wars.

That’s not to say we’ll see a collapse—but the days of easy wins and red-hot demand may be behind us for a bit.

Should You Sell Now or Wait?

Every seller’s situation is different, but if you’re sitting on equity and have been thinking about a move—whether it’s downsizing, relocating, or just cashing out—I’d recommend looking seriously at your timing. Selling into strength is always better than selling into softness.

No one has a crystal ball, but if I had to bet, I’d say we’ve got more headwinds ahead than tailwinds. Stagflation isn’t guaranteed—but it’s not out of the question, either. Regardless, few economists are predicting strong strong growth in 2025.

Final Thought

The real estate market is always changing, and Bay Area real estate has always been resilient—but that doesn’t mean it’s immune. If you’re thinking of selling in Silicon Valley or anywhere in the Bay Area, let’s talk strategy. I’m here to help you make sense of the data, understand what’s coming, and make the right move at the right time.

And hey—if you found this helpful, be sure to subscribe for more updates like this. I’m always here to break down the numbers, the headlines, and what they really mean for local homeowners.

First Things First: What Is Stagflation?