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South Bay Peninsula April '24 Real Estate Update Ascend RE

Ascend RE April 18, 2024

South Bay

South Bay Peninsula April '24 Real Estate Update Ascend RE

The Local Lowdown

  • Single-family home prices appreciated year over year in Santa Clara and Santa Cruz, up 20% and 4%, respectively. We expect prices to remain fairly stable until interest rates drop further and more sellers come to the market.
  • Active listings, sales, and new listings rose in Silicon Valley month over month, which are all beneficial for the housing market. We expect inventory to increase in the first half of the year and possibly return to a more normal market after the slowdown experienced over the past year and a half.
  • Months of Supply Inventory fell from January to February 2024, indicating buyer competition is ramping up. MSI implies a sellers’ market in Silicon Valley across counties.

 

Median price movements were mixed across Silicon Valley in February 2024

Single-family home and condo inventory barely increased at all last year, which is far from the seasonal norm. In 2023, inventory didn’t have anything resembling the typical sine wave, since far fewer sellers came to the market, especially in the first half of the year, and the low inventory and fewer new listings slowed the market considerably. New listings were exceptionally low, so the little inventory growth last year was driven by softening demand. Typically, inventory peaks in July or August and declines through December or January. However, in 2023, inventory peaked in September, further highlighting the atypical supply trend. During Q4 2023, inventory, sales, and new listings dropped.

 

Inventory and new listings increased significantly in the first two months of 2024. With the current low inventory levels, the number of new listings coming to market is a significant predictor of sales. New listings increased 22% month over month, and sales increased 36%. Year over year, inventory is down 1%; however, sales and new listings are up 29% and 19%, respectively. The next three months will be critical to our understanding of the market. More supply will mean a healthier market and a more normal housing market in 2024.

 

Months of Supply Inventory in February 2024 indicated a 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, which is reflected in its low MSI. MSI fell sharply in the first quarter of 2023 before gently trending higher from May to November. In December, MSI declined sharply, but rose again in January. MSI contracted once again in February and currently indicates a sellers’ market for both single-family homes and condos.

 

We can also use percent of list price received as another indicator for supply and demand. Typically, in a calendar year, sellers receive the lowest percentage of list price during the winter months, when demand is lowest. Winter months tend to have the lowest average sale price (SP) to list price (LP), and the summer months tend to have the highest SP/LP. The January and February 2024 SP/LP were 5% and 6% higher than last year, respectively, meaning we expect sellers overall to receive a higher percentage of the list price throughout all of 2024 than they did in 2023.

 

Median Home Sale Price - Santa Clara County

Median Days on Market - Santa Clara County

Median Home Sale Price - San Mateo County

Median Days on Market - San Mateo County

 


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