May 2023 Newsletter - Silicon Valley Local Lowdown

Unlike many other California markets, Silicon Valley is notable this year due to its rapid single-family home price appreciation after a sharp decline from last year's March and April peaks. Last year, single-family home prices peaked in the beginning of the year as buyers rushed to lock in a lower mortgage rate. The Fed announced rate hikes at the end of 2021 that would swiftly affect rates in 2022. The average 30-year mortgage rate rose 2% in the first four months of 2022, crossing 5% for the first time since 2011. That 2% jump caused the monthly cost of financing to increase 27%, so buyers rightly rushed to the market. As rates rose higher, the market cooled and home prices fell in large part to accommodate the higher cost of a mortgage. Both supply and demand were lower than normal in the second half of 2022. In 2023, demand started to rise again despite elevated mortgage rates and was met by a high number of new listings. Price increases this year have been largely a function of more homes coming to market and inventory growth, which is counterintuitive to supply and demand. Supply was so low that more homes were able to better match buyers to a desirable property, giving sellers more pricing power. Year to date, single-family home prices have increased 16% in San Mateo and Santa Cruz and 22% in Santa Clara.

 

Inventory grew as new listings came to the market