The Local Lowdown: August 2024

Michelle Kim | August 28, 2024

The Local Lowdown

Quick Take:

The median single-family home prices are still near their record highs. We expected price contraction after peaking in the second quarter, which is the seasonal norm. Prices will likely decline for the rest of the year.
Total sales in the Bay Area fell slightly month over month, which is the seasonal norm. We expect inventory to decline and the overall market to slow as we make our way through the second half of the year.
Months of Supply Inventory has remained below three months of supply for single-family homes, indicating a sellers’ market, with the exception of Napa. For condos, MSI has risen and now shows more balanced markets in the Bay Area.

Note: You can find the charts/graphs for the Local Lowdown at the end of this section.

The median single-family home in Napa reached an all-time high

In the Bay Area, low inventory and high demand have more than offset the downward price pressure from higher mortgage rates. Prices in the Bay Area generally haven’t experienced larger drops due to higher mortgage rates, and as mentioned in the Big Story, higher mortgage rates are contributing to prices staying high. Year to date, in July, the median single-family home and condo prices rose across the Bay Area with the exception of condo prices in the North Bay, which are slightly lower. Year over year, prices increased most significantly for single-family homes in Napa and San Francisco, up 23% and 10%, respectively. Prices typically peak in the summer months, so we don’t expect new all-time highs for the rest of this year. However, we do expect some minor price contraction in the coming months. Additionally, demand is high enough that it will create price support as supply declines in the second half of the year.

High mortgage rates soften both supply and demand, but home buyers and sellers seemed to tolerate rates near 6%. Now that rates are declining again, sales could get a little boost, but the housing market typically begins to slow this time of year.

Sales fell slightly month over month — the seasonal norm

In most of the Bay Area, the housing market has looked progressively healthier with each passing month of 2024. We’re far enough into the year to know that inventory levels are about as good as we could’ve hoped in the North Bay, East Bay, and Silicon Valley. In 2023, single-family home inventory followed fairly typical seasonal trends, but at significantly depressed levels. Low inventory and fewer new listings slowed the market considerably last year. Even though sales volume this year was similar to last, far more new listings have come to the market, which has allowed inventory to grow. San Francisco is the major exception, with inventory reaching record lows in July. New listings in San Francisco have plummeted the last two months, and sales have far surpassed them.

Typically, inventory begins to increase in January or February, peaking in July or August before declining once again from the summer months to the winter. It’s looking like 2024 inventory, sales, and new listings will resemble historically seasonal patterns, and at more normal levels. Now that we’re more than halfway through the year, we expect inventory, sales, and new listings to decline through the rest of the year.

Months of Supply Inventory indicated a sellers’ market in most of the Bay Area

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 markets tend to favor sellers, which is reflected in their low MSIs. San Francisco MSI is notable for its variability over the past year, oscillating from buyers’ to sellers’ markets twice over the course of 12 months. Currently, MSI is below three months of supply (a sellers’ market) in every Bay Area county, except for single-family homes in Napa, which favor buyers, and condos in the North Bay, East Bay, and San Francisco, which are now balanced.