Something quietly shifted in the mortgage market this week, and it matters a lot in a place like the South Bay, where loan amounts routinely top a million dollars. On November 4, 2026, the Mortgage Bankers Association reported that adjustable-rate mortgages made up 11.4 percent of all mortgage applications, the highest share since September 2025. At the same time, the average contract rate on a 5/1 ARM fell to 6.29 percent, about a full point below the 7.3 percent average on a 30-year fixed loan in the same survey.
For buyers in San Jose, Santa Clara County, and across Silicon Valley, that gap can mean roughly a thousand dollars a month on a typical loan. It also comes with real risk. In this post I walk through the latest numbers, what an ARM actually costs and saves on a Bay Area-sized loan, who it fits and who it does not, and what the shift means for sellers heading into the holidays.
The numbers behind this week’s ARM headline
The MBA’s Weekly Mortgage Applications Survey, covering about 75 percent of U.S. retail residential mortgage applications, gave us the clearest picture of how borrowers are reacting to rates this fall. According to the MBA data as reported by RISMedia:
- ARM share of applications: 11.4 percent, the highest since September 2025.
- 5/1 ARM average contract rate: 6.29 percent, down from 6.41 percent the week before, with points falling to 1.00 from 1.20.
- 30-year fixed average contract rate: about 7.3 percent, which MBA described as the lowest level since September.
- Purchase applications: down 2 percent from the prior week on a seasonally adjusted basis, and 19 percent lower than the same week a year ago on an unadjusted basis.
- Refinance applications: essentially flat week over week, and 60 percent below a year ago.
MBA chief economist Mike Fratantoni summed it up this way: “While the 30-year rate declined to 7.3 percent, activity is still quite slow,” adding that “more borrowers are choosing ARMs in this environment to lower their initial payments.”
Freddie Mac’s Primary Mortgage Market Survey tells a similar story. Its most recent reading, released October 29, 2026, put the average 30-year fixed rate at 7.24 percent, 8 basis points lower than the week before, according to Mortgage Daily’s weekly rate forecast. Optimal Blue data cited there had the 30-year fixed at 7.15 percent and the 15-year fixed at 6.47 percent as of October 30. Freddie Mac’s next weekly survey comes out Thursday, November 5, and the October jobs report follows on Friday, November 6, so rates could move again before the weekend.
Why ARMs matter more in Santa Clara County than almost anywhere
National ARM headlines are about averages. Here, loan size changes the math. The Santa Clara County Association of Realtors reported a September 2026 single-family median price of $1,880,000 for the county, down 4 percent from a year earlier and up 1.6 percent from August. Single-family sales totaled 726, up 3.7 percent from a year ago, and homes averaged 27 days on market, up from 25 in August.
The California Association of Realtors, in its September 2026 sales and price report, put the Santa Clara County median at $1,920,000 (the two groups count sales slightly differently), and reported active listings in the county up 26.4 percent from a year earlier. Around the region, C.A.R. put San Mateo County at $2,327,500, San Francisco at $2,054,000, and Alameda County at $1,265,000. The Bay Area regional median was $1,325,000, up 4.2 percent from August and 1.9 percent from a year earlier.
Now compare those prices with loan limits. For 2026, the Federal Housing Finance Agency set the baseline conforming limit for a one-unit home at $832,750 and the high-cost ceiling at $1,249,125, which applies in high-cost counties like Santa Clara. A buyer putting 20 percent down on a $1,880,000 home would borrow about $1,504,000, well into jumbo territory. When the loan is that large, every percentage point on the rate translates into far more dollars than it does in most of the country.
What a one-point gap looks like on a South Bay loan
Here is a simple illustration using this week’s MBA average contract rates: 7.3 percent for a 30-year fixed and 6.29 percent for a 5/1 ARM, both calculated on a 30-year amortization for principal and interest only. These are my own calculations for illustration, not a loan quote. Your actual rate will depend on your credit, down payment, loan type, points, and lender, and jumbo pricing can differ from these national averages.
- $1,249,125 loan (the 2026 high-cost conforming ceiling): about $8,564 a month at 7.3 percent fixed versus about $7,724 at 6.29 percent, a difference of roughly $840 a month, or about $50,400 over the five-year fixed period.
- $1,504,000 loan (20 percent down on the $1.88 million county median): about $10,311 a month fixed versus about $9,300 on the ARM, roughly $1,011 a month, or about $60,700 over five years.
Those savings explain the jump in ARM applications. But the ARM rate in that survey carried 1.00 point, so part of the savings can be offset by upfront cost, and the bigger question is what happens after year five.
The other side: what happens when the rate adjusts
On that same $1,504,000 loan at 6.29 percent, the balance after five years of payments would be roughly $1,404,000. If the rate then reset to 7.29 percent, the payment over the remaining 25 years would be about $10,188, still a bit below the fixed payment. At 8.29 percent it would be about $11,111, and at 9.29 percent about $12,066, which is around $1,750 a month more than the fixed loan would have cost. How high and how fast a loan can adjust depends on its index, margin, and caps, so read those terms carefully.
What this means for Bay Area buyers
An ARM is a tool, not a shortcut. Buyers it can make sense for usually share a few traits:
- A shorter expected stay. If you realistically expect to move, upsize, or relocate for work within five to seven years, you may never see an adjustment.
- Room in the budget. You can comfortably afford the payment at a higher rate, not just at the starting rate. Stress-test your budget at a higher rate before you write an offer.
- Rising or variable income. Many Silicon Valley households expect income growth or receive equity compensation. Plan around cash you can count on, not stock you hope will vest at a certain price.
- A plan to pay down principal. Extra payments during the fixed period shrink the balance that later adjusts.
A fixed rate is usually the better fit if this is your long-term home, if your budget is already tight at today’s payment, or if the idea of a payment increase would keep you up at night. Peace of mind has real value.
Use this fall’s extra inventory to your advantage
Whatever loan you choose, the market is giving buyers more breathing room than a year ago. C.A.R. noted active listings in Santa Clara County up 26.4 percent from last year, and county days on market edged up to 27 in September. C.A.R. President Tamara Suminski said the market “feels a little less rushed, giving buyers more time to carefully consider their options.” That extra time is the perfect moment to compare a fixed loan and an ARM side by side with your lender, including points, caps, and the worst-case payment. If you are new to buying here, my First-Time Homebuyer’s Guide to San Jose walks through the full process, and our recent breakdown of what it takes to afford a home in Santa Clara County puts the income side in context.
What this means for Bay Area sellers
Sellers should care about the ARM trend because it shapes who can buy your home and at what price. When buyers can lower their starting payment by several hundred dollars a month, some who were priced out at 7.3 percent fixed come back into range. That can widen the pool for well-priced homes, especially in the price bands just above the conforming limit.
At the same time, the broader numbers ask for realism. C.A.R. reported statewide sales down 6.5 percent from a year earlier in September, and chief economist Jordan Levine noted that falling pending sales “suggests that California could see further softening in closed transactions.” In Santa Clara County, more listings mean buyers can compare. A few practical steps:
- Price from recent sold comps, not last spring’s peak. The county median was 4 percent below a year ago in September.
- Make your home easy to finance. Clean disclosures, pre-inspections, and a well-prepared appraisal package help jumbo and ARM buyers close smoothly.
- Consider buyer incentives. A credit toward points or closing costs can be worth more to a buyer than an equal price cut, because it lowers their monthly payment.
- Launch strong. With more competition, the first two weeks on market matter most.
For more on positioning a home this season, see my San Jose November 2026 Seller Guide.
City and neighborhood notes
The fixed-versus-adjustable question plays out differently by city.
San Jose
San Jose has the widest range of price points in the county. Many condo and townhome buyers fall within conforming or high-balance limits, where the fixed-versus-ARM gap is smaller in dollars and a fixed rate is often the comfortable choice. For single-family homes in neighborhoods like Willow Glen, Rose Garden, and Almaden Valley, loans frequently exceed the conforming ceiling, and the ARM math becomes more meaningful.
Cupertino, Palo Alto, Los Gatos, and Saratoga
In the county’s premium cities, loan sizes often exceed $2 million, so a one-point rate difference can be worth well over $1,000 a month. Buyers here often have strong balance sheets and plan for future refinancing or equity events, which is why ARMs have long been common at the high end. Still, run the reset scenarios before you commit.
Milpitas, Campbell, Morgan Hill, and Gilroy
Areas like Milpitas offer some of the most approachable entry points in or near Santa Clara County, and more buyers can stay closer to the conforming limit. For many families here, a fixed rate provides the stability they want for a long-term home, while an ARM can help a move-up buyer bridge into a larger home.
Frequently asked questions
What is a 5/1 ARM?
It is an adjustable-rate mortgage with a fixed rate for the first five years. After that, the rate adjusts periodically based on a market index plus a margin, within limits set by the loan’s caps. A 7/1 or 10/1 ARM works the same way with a longer fixed period.
How much lower are ARM rates right now?
In the MBA survey released November 4, 2026, the 5/1 ARM averaged 6.29 percent with 1.00 point, versus about 7.3 percent for a 30-year fixed. Freddie Mac’s latest 30-year fixed average was 7.24 percent for the week of October 29. Lender quotes vary, especially for jumbo loans.
Is an ARM risky?
It carries payment risk after the fixed period. On a $1.5 million loan, a reset two percentage points higher could cost far more each month than a fixed loan would have. ARMs work best for buyers who expect to move or refinance, or who can comfortably absorb a higher payment.
What is the median home price in Santa Clara County?
SCCAOR reported a September 2026 single-family median of $1,880,000, down 4 percent year over year. C.A.R. reported $1,920,000 for the same month. October figures are expected in mid-November.
Can I refinance out of an ARM later?
Often, yes, but it is not guaranteed. Refinancing depends on future rates, your income, credit, and home value at the time. Never choose an ARM based only on the hope of refinancing.
The bottom line for November 2026
Buyers are responding to 7 percent fixed rates by reaching for adjustable loans, and in Santa Clara County, where 20 percent down on a median-priced single-family home still leaves a jumbo loan, the savings during the first five years can be substantial. The right choice depends on how long you plan to stay, how much payment risk you can carry, and how the specific loan’s caps are written. With more listings to choose from and a slightly less rushed pace this fall, there is time to make that decision carefully.
Thinking about buying or selling in San Jose, Santa Clara County, or anywhere in the Bay Area? I would love to help you compare your options, connect you with trusted local lenders, and build a plan around the latest numbers. Call or text me at 408-477-6262, or reach out through NajwaRealEstate.com to get started.
Najwa Khoury, Real Brokerage, DRE #02026194
Sources: Mortgage Bankers Association Weekly Mortgage Applications Survey via RISMedia (Nov. 4, 2026); Freddie Mac PMMS and Optimal Blue via Mortgage Daily; Santa Clara County Association of Realtors; California Association of Realtors; FHFA. Payment examples are illustrative principal-and-interest calculations, not loan offers. This article is general information, not financial or lending advice; consult a licensed mortgage professional.