East Bay October '23 Real Estate Update Ascend RE

Local Lowdown

Since January 2023, single-family home prices rose 28% in Alameda and 21% in Contra Costa. Similarly, condo prices rose 8% and 21%, respectively.
Sales, new listings, and inventory all rose from July to August, but is likely the last push of the summer buying season. Inventory remains depressed but has still grown significantly in 2023, which has helped alleviate some excess demand.
Months of Supply Inventory has risen slightly over the summer, but remains a sellers’ market. Homes are still selling quickly, and sellers are receiving a greater percentage of asking price, all of which highlight a competitive environment for buyers.

Prices slightly contract — the seasonal norm

In the East Bay, 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 the East 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. 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.

In August, the median single-family home prices were up year to date across East Bay counties. 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 rose in August

Single-family home and condo inventory, sales, and new listings trended higher year to date, although all remain at significantly depressed levels. Typically, inventory peaks in July or August and declines through December or January. Single-family home and condo inventory reached new highs for the year in August, but we will likely see fewer transactions in the coming months if normal seasonal trends hold. 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 this year, 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 new listings and sales peaked in May 2023, sales declined 12%, while new listings fell 4%.

As tight inventory levels continue, sellers have gained more negotiating power. In January 2023, the average seller received 95% of list price compared to 103% of list in August. Inventory will almost certainly remain historically low for the rest of the year and likely remain low in 2024.

Months of Supply Inventory remained under two months in August, 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 East Bay market tends to favor sellers, which is reflected in its low MSI. MSI trended lower from January to May 2023 for both single-family homes and condos. Even with the slight increase in MSI over the summer months, the market still firmly favors sellers.

Conclusion

The fall market seems to be highlighted by lower than average prices, higher than normal inventory, and low buyer activity. We’ve told clients the following "if you can afford the higher mortgage, and you have good job security, now is an amazing time to buy.” Not all people are capable of buying at the moment. If you fulfill my two requirements above, now is one of the best opportunities to jump into the market. If you are a seller and ready to sell, it is unfortunately a difficult marketplace. Though change is a constant in this market, experts don't necessarily think prices will rise rapidly. We are hopeful that 2024 will bring positive market changes for homeowners. As always, don’t hesitate to reach out and schedule a consultation to go over your real estate needs!