The Local Lowdown: January 2024

Michelle Kim | February 1, 2024

The Local Lowdown

Quick Take:

Median home prices are slightly below peak levels across the North Bay with the exceptions of single-family homes in Marin and Napa condos. We expect prices to remain fairly stable in the winter, and to reach new highs in the spring, across most of the North Bay.
Active listings in the North Bay fell 23% month over month, which is typical this time of year when new listings tend to decline significantly. As mortgage rates drop, we will likely see more new listings in the first quarter, which should help alleviate some excess demand.
Months of Supply Inventory declined significantly in December, as sales outpaced new listings, indicating the market firmly favors sellers as we enter the new year.

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

Median prices close 2023 up year over year

In the North Bay, home prices haven’t been largely affected by rising mortgage rates after the initial period of price correction from April 2022 to January 2023. Month over month, in December, the median single-family home price rose 3% in Marin, 12% in Napa, and 3% in Sonoma, while Solano prices declined 4%. However, year over year, prices were up 10% in Marin, 9% in Napa, 5% in Sonoma, and were flat in Solano. We expect prices to remain slightly below peak in the winter months, but as interest rates decline, prices will almost certainly reach new highs in the first half of 2024 with the exception of Marin, where prices are far below their peak. 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.

Inventory, sales, and new listings declined month over month

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. Last year, sales and new listings peaked in May, while inventory peaked in September. New listings have been exceptionally low, so the little inventory growth in 2023 was driven by softening demand. In December, single-family home inventory, sales, and new listings dropped, which is normal this time of year. Condos sales actually rose slightly in December, which isn’t abnormal for the condo market 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 46% and sales declined 9%. Year over year, sales and new listings are down 16% and 5%, respectively. Total inventory is down 7% year over year.

As demand slows, buyers are gaining more negotiating power and paying less than asking price on average. In May 2023, the average seller received 101% of list price, compared to 94% of list in December. Inventory will almost certainly remain historically low for the next few months, and buyer competition will ramp up meaningfully in the spring, which will drive price appreciation.

Months of Supply Inventory in December 2023 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 North Bay market tends to favor sellers, which is reflected in its low MSI. MSI fell sharply in the first quarter of 2023 before gently trending higher from May to November. MSI never quite hit the three-month threshold and declined sharply in December. Broadly, the North Bay market favors sellers. The only exceptions are single-family homes in Napa, which are more balanced between buyers and sellers.