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.