The Local Lowdown: November 2023

Michelle Kim | December 1, 2023

The Local Lowdown

Quick Take:

The median single-family home and condo prices declined in the East Bay month over month. Year over year, prices in Alameda increased 2% for single-family homes and 1% for condos, while single-family home and condo prices in Contra Costa declined 3% and 11%, respectively.
Active listings declined slightly from September to October, breaking an eight-month upward trend. Year over year, inventory is down 20%, highlighting one of the challenges of buying a home in a desirable market.
Months of Supply Inventory indicates the market is slowly shifting toward balance, but it is still a sellers’ market. It’s common for the market to trend toward balance in the fall and winter, when fewer buyers are in the market and sales slow.

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

Prices remain near record highs

In the East Bay, home prices haven’t been largely affected by rising mortgage rates. Increasing demand and low, but rising inventory helped drive the rapid home price appreciation that the East Bay experienced in the first half of the year. Single-family home and condo prices contracted over the past four months. Year to date, prices have risen significantly across the East Bay counties with the exception of Alameda condo prices, which are down slightly. Notably, single-family home prices rose 17% in Alameda and 7% in Contra Costa this year. In the fourth quarter, we expect prices to remain fairly stable, but slight price contractions are normal this time of year.

Typically, demand begins to decline in the fall and bottoms out in January, so the consistently low supply should be less of an issue. With mortgage rates at a 23-year high, buyers have more incentive to compete over the most desirable homes. Because of the cost of financing, homebuyers aren’t settling for less than the best home they can find.

Single-family home sales rose in October

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.