Single-family home and condo inventory barely increased at all this year, which is far from the seasonal norm. Typically, inventory peaks in July or August and declines through December or January. However, in 2023, new listings were so depressed that inventory remained fairly flat for single-family homes. Despite a lack of inventory, sales increased from September to October, highlighting demand in the area. Even though inventory increased some this year, it’s still historically low, moving higher primarily due to softening demand (fewer sales) caused by higher interest rates and normal seasonality. The number of new listings coming to market is a significant predictor of sales. Year over year, sales and new listings are down 10% and 3%, respectively.
As demand slows, buyers are gaining more negotiating power and paying slightly less than they were four months ago. In June 2023, the average seller received 105% of list price compared to 103% of list in October. That being said, inventory will almost certainly remain historically low for the rest of the year, and will likely remain low in 2024, which will create price support.
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 East 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.
