Every year, by at least March, we expect to see inventory rise after a high number of new listings comes to market, which easily accommodate the increase in sales we also tend to see in the first half of the year. Inventory in Silicon Valley, thankfully, increased in February and March, unlike the inventory in many other major markets, which is continuing to decline. Typically, inventory grows in the first half of the year, peaking in June or July. Silicon Valley has enough demand that many more homes could come to market before the market would balance between buyers and sellers. Currently, sales are still below last year’s level, but we expect sales to climb higher in the second quarter with more homes coming to market. As demand increases, competition among buyers and housing prices will climb with it. Home prices in Silicon Valley are still significantly below their all-time highs. However, if active listings unexpectedly plateaus or drop in the second quarter, we could easily see single-family-home and condo prices rise significantly into the summer.
Sales jumped 71% from February to March
Total inventory rose over the past two months, but remains depressed. Higher interest rates and the buying boom from June 2020 to June 2022 created the current market conditions of low inventory, new listings, and sales. Homeowners generally aren’t buying and selling properties year after year; the median homeowner tenure is about 13 years, according to Redfin. It’s reasonable, therefore, to assume that if an outsized number of sales happen in a two year period, far fewer sellers will come to market in the year or two after that event. For homeowners that either bought or refinanced in 2020 or 2021 with historically low rates, the prospect of moving and financing at a much higher rate isn’t appealing.
Interest rates have been elevated for enough time that buyers are more comfortable re-entering desirable markets like Silicon Valley’s. Sales jumped 71.4% from February to March, as more new listings hit the market. Buyers aren’t facing anything similar to the hypercompetitive 2021 market, but competition is certainly ramping up. New listings fell by 40.9% year over year, while sales declined 35.8%. We expect inventory growth in the second quarter of 2023, but inventory will almost certainly remain low relative to demand for the rest of the year.
Higher and faster sales drop Months of Supply Inventory further
Months of Supply Inventory (MSI) quantifies the supply/demand relationship by measuring how many months it would take for all current homes listed on the market to sell at the current rate of sales. The long-term average MSI is around three months in California, which indicates a balanced market. An MSI lower than three indicates that there are more buyers than sellers on the market (meaning it’s a sellers’ market), while a higher MSI indicates there are more sellers than buyers (meaning it’s a buyers’ market). MSI dropped in February and March for both single-family homes and condos, meaning the market now strongly favors sellers. The sharp drop in MSI occurred due to increasing sales and less time on market.
Local Lowdown Data
Our team is committed to continuing to serve all your real estate needs while incorporating safety protocol to protect all of our loved ones.
In addition, as your local real estate experts, we feel it’s our duty to give you, our valued client, all the information you need to better understand our local real estate market. Whether you’re buying or selling, we want to make sure you have the best, most pertinent information, so we put together this monthly analysis breaking down specifics about the market.
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