Since the start of 2023, single-family home inventory has followed fairly typical seasonal trends, but at significantly depressed levels. Low inventory and fewer new listings have slowed the market considerably. Typically, inventory peaks in July or August and declines through December or January, but the lack of new listings prevented meaningful inventory growth. This year, sales and new listings peaked in May, while inventory peaked in September. New listings have been exceptionally low, so the little inventory growth this year was driven by softening demand. 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 30% and sales declined 25%. Year over year, sales and new listings are down 17% and 8%, respectively.
As demand slows, buyers are gaining slightly more negotiating power and paying less than asking price on average. The average seller received 93% of list in January, which grew to 101% by May. The average amount received by sellers slowly declined to 96% 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 market is trending toward balance, but it is still a sellers’ market in most of the North Bay
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 North Bay market tends to favor sellers, which is reflected in its low MSI. MSI fell sharply in the first quarter this year before gently trending higher starting in May. In November, MSI remained below three months of supply, indicating the market still favors sellers. The only exceptions are single-family homes and condos in Napa and condos in Solano, which shifted into a buyers’ market.