Single-family home 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, normal seasonality, and an atypical increase in new listings in September. 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 28% year over year.
As demand slows, buyers are gaining slightly more negotiating power and paying less than asking price on average. The average seller received 93% of list in January, which grew to 101% by May. The amount sellers are receiving has started to decline, and by September 2023, the average seller received 97% of list. That being said, inventory will almost certainly remain constrained for the rest of the year, and likely remain low in 2024, which will create price support and at least minor competition among buyers.
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 North Bay market tends to favor sellers, which is reflected in its low MSI. MSI fell sharply in the first quarter this year before trending higher in the second and third quarters. MSI remained below three months of supply, indicating the market still favors sellers. The only exceptions are single-family homes in Napa, which shifted to a buyers’ market, and Marin condos, which are closer to a balanced market.
