Single-family home and condo inventory rose slightly in April, although sales declined from March to April. However, in this instance, a decline in sales doesn’t indicate softening demand. The number of home sales is, in part, a function of the number of active listings. New listings fell 36% compared to last year, so it’s not surprising that sales declined as well. Even with higher interest rates, which only reduces the number of potential homebuyers, seasonal demand far outpaced available inventory. Over the past three months, sales jumped 74% while new listings increased 71%, both of which indicate a healthier market.
Buyer competition is ramping up with fewer listings coming to the market, and sellers are gaining negotiating power. In January 2023, the average seller received 94% of list price compared to 101% of list in April. Inventory will almost certainly remain historically low for the year and will likely only get more competitive in the summer months.
Months of Supply Inventory remains low, indicating a firm 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 Silicon Valley market tends to favor sellers, and the drop in MSI this year for both single-family homes and condos further emphasizes sellers’ increasing negotiating power.
