Single-family home inventory trended higher into the fall of 2023, peaking in September. Inventory declined in October as sales increased and new listings declined. Typically, inventory peaks in July or August and declines through December or January. Even though inventory increased this year, it’s still historically low, moving higher primarily due to softening demand (fewer sales) caused by higher interest rates, normal seasonality, and an atypical increase in new listings in September. The number of new listings coming to market is a significant predictor of sales. In September, new listings rose 10%, and in October, sales increased by 16%. Year over year, sales and new listings are down 3% and 13%, respectively.
Demand spiked in October after a surge of new listings came to market, giving sellers slightly more negotiating power, and buyers paid more than asking price on average. The average seller received 94% of list in January, which grew to 99% by July. The amount sellers received fell steadily to 97% in September but rose to 98% in October 2023.
Months of Supply Inventory indicates the market is trending toward balance, but it is still 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 this year before gently trending higher starting in May. In October, MSI remained below three months of supply, indicating the market still favors sellers. The only exceptions are single-family homes and condos in Napa, which are closer to a balanced market.
