The Local Lowdown: November 2024

Michelle Kim | December 1, 2024

The Local Lowdown

Quick Take:

Median home prices are slightly below peak levels across Silicon Valley. We expected price contraction after peaking in the second quarter, which is the seasonal norm. Prices will likely decline for the rest of the year.
Total inventory rose 15.0% month over month, as new listings fell and sales of single-family homes increased. However, we expect inventory to decline and the overall market to slow over the next three months.
Months of Supply Inventory indicated a sellers’ market for single-family homes in San Mateo and Santa Clara and a balanced market in Santa Cruz.

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

The median single-family home prices are up year to date and year over year

In Silicon Valley, home prices haven’t been largely affected by rising mortgage rates after the initial period of price correction from April 2022 to January 2023. Low, but growing, inventory and high demand have more than offset the downward price pressure from higher mortgage rates. Year to date, in October, the median single-family home and condo prices rose across counties. Year over year, prices increased most significantly for single-family homes in Santa Clara and Santa Cruz, up 8% and 9%, respectively. Prices typically peak in the summer months, and the mild contraction after the post-summer peak has fallen in line with expectations. Home prices will likely continue to decline slightly for the next three months.

High mortgage rates soften both supply and demand, but home buyers and sellers seemed to tolerate rates near 6% much more than around 7%. Mortgage rates fell significantly from May through September, but rose significantly in October. Now, rates are far closer to 7% than 6%, so we expect sales to slow starting in November.

Single-family home sales rose in October, while new listings and inventory fell

The 2024 housing market has looked progressively healthier with each passing month. We’re far enough into the year to know that inventory levels are about as good as we could’ve hoped, although single-family home inventory is still lower than we would like. In 2023, single-family home and condo inventory followed fairly typical seasonal trends, but at significantly depressed levels. Low inventory and fewer new listings slowed the market considerably last year. Even though sales volume this year was similar to last, far more new listings have come to the market, which has allowed inventory to grow. For single-family homes, even though inventory grew meaningfully in the first half of the year, it’s 11% lower year over year.

Typically, inventory begins to increase in January or February, peaking in July or August before declining once again from the summer months to the winter. It’s looking like 2024 inventory, sales, and new listings will resemble historically seasonal patterns, and at more normal levels than last year. However, inventory still increased in September, which is atypical. Falling mortgage rates have brought buyers and sellers back to the market during the time of year the market tends to slow significantly. Sales and homes under contract rose in October, which is fairly normal from a historical standpoint. We expect sales to slow over the next three months.

Months of Supply Inventory indicated a sellers’ market in San Mateo and Santa Clara

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 Silicon Valley market tends to favor sellers, which is reflected in its low MSI. In 2024, Silicon Valley MSI moved higher, particularly in Q2. In October, MSI dropped across markets. MSI indicated a sellers’ market for single-family homes in San Mateo and Santa Clara and a buyers’ market in Santa Cruz. For condos, San Mateo and Santa Clara favor sellers, and Santa Cruz is more balanced.