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August 2023 Newsletter - Bay Area Local Lowdown

August 2023 Newsletter - Bay Area Local Lowdown
Quick Take:
  • Home prices were up year to date through July 2023 across the Bay Area regions, with the exception of North Bay condos. However, single-family home prices in the North Bay are nearing all-time highs, along with condo prices in Silicon Valley.
  • Sales, new listings, and inventory all fell from June to July, likely indicating the start of the typical seasonal decline across supply and demand metrics. Inventory remains depressed but has still grown significantly in 2023, which has helped alleviate some excess demand.
  • Months of Supply Inventory has declined significantly in 2023, homes are selling more quickly, and sellers are receiving a greater percentage of asking price, all of which highlight an increasingly competitive environment for buyers.
Note: You can find the charts/graphs for the Local Lowdown at the end of this section.

Single-family home price growth slows as fewer new listings come to market

In the Greater Bay Area, the housing market is always experiencing high demand, especially in the spring and early summer months. Increasing demand and low, but rising inventory helped drive the rapid home price appreciation that most of the Bay experienced in the first half of the year. Typically, demand begins to decline in July and August, so the consistently low supply may become less of an issue. However, less of an issue doesn’t mean a non-issue. The single-family home market in San Francisco has been significantly impacted by the lack of new listings this year. Quality new listings will certainly be sold quickly, while less desirable homes will sit on the market. This isn’t unusual, but it’s more apparent due to current mortgage rates. Potential homebuyers aren’t nearly as willing to pay a premium for a fixer upper as they were in 2020 and 2021.
Although we don’t expect any new record-high prices in 2023, the median single-family home and condo prices were up across most of the Bay. Year to date, single-family home prices have increased 17% in the North Bay and Silicon Valley and 24% in the East Bay, while prices declined 3% in San Francisco. For condos, prices were up 3% in the East Bay, 17% in Silicon Valley, and 21% in San Francisco, while condo prices fell 10% in the North Bay. As sales and new listings slow in the second half of the year, home prices typically remain stable or decline at the margins.


Inventory, sales, and new listings declined in July

Single-family home and condo inventory, sales, and new listings rose in the first half of the year, although all remain at depressed levels. Typically, inventory peaks in July or August and declines through December or January. Single-family home inventory seems to have peaked in June, so we will likely see fewer transactions in the coming months. Currently, inventory is so low relative to demand that any amount of new listings is good for the market. However, new listings were unusually low from January through July 2023, which has directly impacted both inventory and sales. The number of home sales is, in part, a function of the number of active listings and new listings coming to market. San Francisco inventory has been hit particularly hard by the lack of new listings, falling to the lowest level of active listings for both single-family homes and condos.
As tight inventory levels continue, sellers are gaining negotiating power. In July 2023, the average seller received 6-10% more of their listed price as compared to January. Inventory will almost certainly remain historically low for the year, and the market will remain competitive in the third quarter.

Months of Supply Inventory is under two months in June across the Bay Area, indicating a strong sellers’ market

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). The Bay Area market tends to favor sellers, especially for single-family homes, which is reflected in its low MSI. San Francisco was notable for its substantial rise in MSI from December 2022 to February 2023, but MSI plummeted in the second quarter. With few exceptions, MSI has trended lower this year, indicating the market more strongly favors sellers. Recently, the single-family home and condo markets in Napa transitioned to more of a balanced market, along with the Santa Cruz condo market. The San Francisco condo market favors buyers.

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.
As we all navigate this together, please don’t hesitate to reach out to us with any questions or concerns. We’re here to support you.

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