The Local Lowdown: January 2025

Michelle Kim | January 31, 2025

The Local Lowdown

Quick Take:

Median single-family home prices rose in 2024, following historical seasonal trends. Single-family home prices in Santa Cruz saw the largest gain, up 20%. Conversely, Santa Cruz condo prices experienced the largest contraction, down 18%.
Total inventory fell 36.9% month over month, dropping inventory to a record low. We expect inventory to continue to decline in January and the overall market to slow due to lack of supply.
Months of Supply Inventory indicated a sellers’ market for single-family homes and condos with the exception of Santa Cruz condos, which is more balanced.

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

The median single-family home prices are up year over year

In Silicon Valley, home prices haven’t been largely affected by rising mortgage rates after the initial period of price correction from April 2022 to January 2023. Low, but growing inventory and high demand have more than offset the downward price pressure from higher mortgage rates. Year over year, single-family home prices increased 5% in San Mateo, 7% in Santa Clara, and 20% in Santa Cruz. Prices typically peak in the summer months, and the mild contraction after the post-summer peak has fallen in line with expectations. Home prices in Santa Clara may reach new all-time highs in 2025, but it’s unlikely that San Mateo and Santa Cruz will.

High mortgage rates soften both supply and demand, but homebuyers and sellers seemed to tolerate rates near 6% much more than around 7%. Mortgage rates fell significantly from May through September, but rose significantly in the fourth quarter of 2024. Now, rates are far closer to 7% than 6%, so we expect sales to slow further.

Sales far outpaced new listings in December, dropping inventory to all-time lows

The 2024 housing market looked progressively healthier with each passing month until Q4. The promising build in inventory during the first nine months of the year was wiped out, and Silicon Valley inventory fell to record lows in December.

In 2023, single-family home and condo inventory followed fairly typical seasonal trends, but at significantly depressed levels. Low inventory and fewer new listings slowed the market considerably last year. Even though sales volume 2024 was similar to 2023, far more new listings came to the market, which has allowed inventory to grow. Condo inventory even reached a four-year high in September before declining in Q4. For single-family homes, inventory is down 20% year over year, because inventory fell 60% in Q4 as new listings declined at a greater magnitude than sales.

Typically, inventory begins to increase in January or February, peaking in July or August before declining once again from the summer months to the winter. It’s looking like 2024 inventory, sales, and new listings will resemble historically seasonal patterns. However, single-family home inventory is once again near record lows.

Months of Supply Inventory indicated a sellers’ market in December

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. In 2024, Silicon Valley MSI moved higher, particularly in Q2. In Q4, MSI dropped across markets. MSI indicated a sellers’ market for single-family homes and condos with the exception of the Santa Cruz condo market, which is more balanced.