Single-family home and condo inventory barely increased at all this 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 have slowed the market considerably. New listings have been exceptionally low, so the little inventory growth this year was driven by softening demand. Typically, inventory peaks in July or August and declines through December or January. However, this year, inventory peaked in September, further highlighting the atypical supply trend. In November, inventory, sales, and new listings dropped, which is normal this time of year. With the current low inventory levels, the number of new listings coming to market is a significant predictor of sales. Month over month, new listings fell 32% and sales declined 17%.
As demand slows, buyers are gaining slightly more negotiating power and paying less than asking price on average. The average seller received 95% of list in January, which grew to 101% by May. The average amount received by sellers slowly declined to 100% of list from May to November 2023. Inventory will almost certainly remain historically low for the next few months, and buyer competition will ramp up meaningfully in the spring, which will create price support.
Months of Supply Inventory indicates the single-family home market still strongly favors sellers, while the condo market is trending toward balance
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. Single-family homes continue to strongly favor sellers in San Mateo and Santa Clara. However, the single-family home market in Santa Cruz is more balanced. Condo MSI has increased significantly over the past three months, indicating the market has shifted from a sellers’ market toward more balance in San Mateo and Santa Cruz.