Single-family home and condo inventory, sales, and new listings rose in the first half of the year, although all remain at depressed levels. Typically, inventory peaks in July or August and declines through December or January. Single-family home inventory seems to have peaked in June, so we will likely see fewer transactions in the coming months. Currently, inventory is so low relative to demand that any amount of new listings is good for the market. However, new listings were unusually low from January through July 2023, which has directly impacted both inventory and sales. The number of home sales is, in part, a function of the number of active listings and new listings coming to market. San Francisco inventory has been hit particularly hard by the lack of new listings, falling to the lowest level of active listings for both single-family homes and condos.
As tight inventory levels continue, sellers are gaining negotiating power. In July 2023, the average seller received 6-10% more of their listed price as compared to January. Inventory will almost certainly remain historically low for the year, and the market will remain competitive in the third quarter.
Months of Supply Inventory is under two months in June across the Bay Area, indicating a strong 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 was notable for its substantial rise in MSI from December 2022 to February 2023, but MSI plummeted in the second quarter. With few exceptions, MSI has trended lower this year, indicating the market more strongly favors sellers. Recently, the single-family home and condo markets in Napa transitioned to more of a balanced market, along with the Santa Cruz condo market. The San Francisco condo market favors buyers.