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The Local Lowdown: February 2024

The Local Lowdown: February 2024

The Local Lowdown

Quick Take:
  • Year over year, the median single-family home and condo prices rose across most Bay Area counties in January. Low inventory and high mortgage rates have been the market’s driving factors, and we expect more buyers and sellers to come to the market in the spring as mortgage rates decline further.
  • Active listings in the Greater Bay Area fell 3% month over month, even as new listings jumped 124%. As mortgage rates drop, we will likely see more new listings in the first quarter, which should help drive more sales.
  • Months of Supply Inventory rose slightly from December 2023 to January 2024, as new listings outpaced sales. However, MSI still indicates a sellers’ market for single-family homes.
Note: You can find the charts/graphs for the Local Lowdown at the end of this section.
 

Year over year, median prices rose in January 2024 for single-family homes and condos

In the Greater Bay Area, low inventory has more than offset the downward price pressure from higher mortgage rates, and prices generally haven’t experienced larger price drops from higher mortgage rates since the initial period of price correction from April 2022 to January 2023. In January, the median prices across most Bay Area counties were only slightly below their record highs with the exception of Marin and San Francisco, which peaked incredibly high in 2022. We expect prices to remain fairly stable in the winter months, but as interest rates decline and more sellers come to the market, prices will almost certainly rise in the first half of 2024. However, more homes must come to the market in the spring and summer to get anything close to a healthy market.
 
High mortgage rates soften both supply and demand, so ideally, as rates fall, far more sellers will come to the market. Rising demand can only do so much for the market if there isn’t supply to meet it. Unlike 2023 inventory, 2024 inventory has a much better chance of following more typical seasonal patterns.
 

New listings rose 124% month over month

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. In December, inventory, sales, and new listings dropped across Bay Area markets. However, in January, new listings rose 124% month over month, and homes coming under contract increased 22%. Year over year, inventory is down 9%, but sales and new listings are up 4% and 12%, respectively.
 

Months of Supply Inventory in January 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 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 10 months. Currently, single-family home MSI is below three months of supply (a sellers’ market) in every Bay Area county except for single-family homes in Napa, which now favors buyers. The condo markets are a little more mixed, but mostly balanced.
 
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. January tends 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 2024 SP/LP was higher than last year across most of the Bay Area, meaning we expect sellers overall to receive a higher percentage of the list price in 2024 than they did in 2023.
 

Local Lowdown Data


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