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.