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. Since January 2023, sales jumped 106% while new listings rose 50%, whereas last year, for example, sales rose 40% and new listings increased 33% by July.
As tight inventory levels continue, sellers are gaining negotiating power. In January 2023, the average seller received 93% of list price compared to 100% of list in July. Inventory will almost certainly remain historically low for the year, and the market will remain competitive in the third quarter.
Months of Supply Inventory remained under two months in July, 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 Silicon Valley market tends to favor sellers, especially for single-family homes, which is reflected in its low MSI. MSI has trended even lower over the past six months for single-family homes, meaning the market more strongly favors sellers. The sharp drop in MSI occurred due to the higher proportion of sales relative to active listings and less time on the market. The only exceptions are condos in Santa Cruz, which are closer to a balanced market.
Local Lowdown Data
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