Single-family home and condo inventory has trended higher into the fall of 2023, which is far from the seasonal norm. Typically, inventory peaks in July or August and declines through December or January. Even though inventory has increased, it’s still historically low, moving higher primarily due to softening demand (fewer sales) caused by higher interest rates and normal seasonality. Overall, new listings have been exceptionally low this year. The number of home sales is, in part, a function of the number of active listings and new listings coming to market. Comparing new listings from January through September 2023 to the same time period in 2022, new listings are down 26%, which has directly impacted both inventory and sales. Sales are down 22% year over year.
Even as demand slows, sellers are maintaining more negotiating power and receiving more than asking price on average. The average seller received 94% of list in January, which grew to 101% by April. From April to September, the average seller received 101% of list in every month. That being said, the percentage of list price received tends to contract in the winter when fewer buyers are in the market.
Months of Supply Inventory indicates the market is trending toward balance but 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 Silicon Valley market tends to favor sellers, which is reflected in its low MSI. MSI fell sharply in the first five months of 2023 before gently trending higher from May to September. MSI remained below three months of supply, indicating the market still favors sellers.
