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The Local Lowdown: November 2023

The Local Lowdown: November 2023

The Local Lowdown

Quick Take:
  • Year to date, home prices are up across the Greater Bay Area, and Napa County single-family home and condo prices even reached all-time highs in October. We expect home prices to remain fairly stable in the fourth quarter.
  • Active listings declined from September to October, breaking an eight-month upward trend. Year over year, inventory is down 32%, 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.
 

Price growth slows across most of the Bay Area

In the Greater Bay Area, home prices haven’t been largely affected by rising mortgage rates after the initial period of price correction from April 2022 to January 2023. In October, the median prices across most Bay Area counties were only slightly below their record highs. Increasing demand and low, but rising inventory helped drive the rapid home price appreciation that the Bay Area housing market experienced in the first half of the year. Although price growth has slowed across most of the Bay Area, Napa single-family home and condo prices reached new all-time highs in October 2023. Year to date, prices have risen significantly across every county, and we expect prices to remain fairly stable for the rest of the 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.
 

Home sales rose in October after a surge of new listings in September

Single-family home and condo inventory barely increased at all this year, which is far from the seasonal norm. Inventory declined in October as sales increased and new listings declined sharply. 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 5%, and in October, sales increased by 8%. Year over year, sales and new listings are down 13% and 33%, respectively.
 
Even as demand slows, sellers are maintaining their negotiating power and receiving more than asking price on average. The average seller received 95% of list in January, which grew to 102% by May. From May to October, the average seller received around 101%. Inventory will almost certainly remain historically low for the rest of the year, and will likely remain low in 2024, which will favor sellers.
 

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 Bay Area market tends to favor sellers, especially for single-family homes, which is reflected in its low MSI. San Francisco MSI is notable for its variability this year, oscillating from buyers’ to sellers’ markets and back to buyers in the course of 10 months. Currently, MSI is below three months of supply (sellers’ market) in every Bay Area county except for Napa, which is more balanced. The condo markets are a little more mixed but still mostly a sellers’ market. Condo MSI in Monterey, Napa, and San Mateo indicate balanced markets, and in San Francisco, a buyers’ market.
 

Local Lowdown Data


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