The Local Lowdown: October 2023

Michelle Kim | November 1, 2023

The Local Lowdown

Quick Take:

Home prices were up year to date through September 2023 across the Bay Area regions, with the exception of North Bay condos. However, single-family home prices in the North Bay are nearing all-time highs, along with condo prices in the East Bay and Silicon Valley.
Active listings in the Greater Bay Area rose from August to September, continuing the 9-month upward trend. Rising inventory is only good for the undersupplied Bay Area market, which is still 19% below last year’s level.
Months of Supply Inventory rose in September as sales slowed and days on market increased. It’s common for the market to trend toward balance in the fall and winter, when fewer buyers are in the market. Currently, the market still favors sellers, with the exception of San Francisco, which now favors buyers.

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

Luxury markets tend to be affected more acutely by higher interest rates due to the absolute dollar cost of financing. In the Bay Area, the price of housing has appreciated during a period of rapidly rising mortgage rates. Increasing demand and low, but rising inventory helped drive the rapid home price appreciation in the first half of the year. Single-family home and condo prices contracted in the third quarter, which is in line with normal seasonal trends. Typically, demand begins to decline in the fall and bottoms out in January, so the low supply of homes should be less of an issue. With mortgage rates at a 23-year high, quality listings are going to have the most competition. This isn’t unusual, but potential homebuyers aren’t nearly as willing to pay a premium for a fixer upper as they were in 2020 and 2021.

Although we don’t expect any new record-high prices in 2023, the median single-family home and condo prices were up significantly across most of the Bay Area. Year to date, single-family home prices have increased 17% in the North Bay, 24% in the East Bay, 20% in Silicon Valley, and 3% in San Francisco. For condos, prices were up 11% in the East Bay, 13% in Silicon Valley, and 14% in San Francisco, while condo prices fell 15% in the North Bay. As sales and new listings slow in the second half of the year, home prices typically remain stable or decline at the margins.

Inventory continued to trend higher for the ninth month in a row

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 7%, which has directly impacted both inventory and sales. Sales are down 24% 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 95% of list in January, which grew to 101% by May. From May to September, the average seller received approximately 101%. 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 in most of the Bay Area

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, moving from buyers to sellers and back to buyers in the course of nine months. In the rest of the Bay Area, MSI remained below three months of supply even though it’s been trending higher, indicating the market still favors sellers.

Local Lowdown Data

Line chart of Bay Area single-family home median prices by region, September 2021–September 2023. Chart of September 2023 single-family home prices and year-over-year changes across 11 California counties. Bay Area condo median prices by region, charted monthly from September 2021 to September 2023. Chart of September 2023 condo prices and year-over-year changes by county; Napa rose 46.8%, Marin fell 29.2%. North Bay single-family home inventory, new listings, and sales, September 2021–September 2023. Chart of East Bay single-family home inventory and sales from September 2021 to September 2023. Chart of Silicon Valley single-family home inventory, new listings, and sales by month, September 2021–September 2023. Chart of San Francisco single-family home inventory, showing monthly homes for sale, new listings, and sales. Chart comparing Greater Bay Area single-family home days on market across four regions, September 2022–September 2023. September 2023 days-on-market chart comparing single-family homes and condos across 11 Bay Area counties. Chart of Greater Bay Area single-family home inventory by region, September 2022 to September 2023. September 2023 months-of-supply chart by county, comparing single-family homes and condos.