The Local Lowdown: September 2024

Michelle Kim | September 26, 2024

The Local Lowdown

Quick Take:

The median single-family home price fell 11.4% month over month, while condo prices declined 0.2%. We expect price contraction for the rest of the year, which is the seasonal norm.
Total inventory fell 10.3% month over month, as sales and homes under contract far outpaced new listings. We expect inventory to decline and the overall market to slow as we make our way through the second half of the year.
Months of Supply Inventory has declined month over month, indicating the market is improving for sellers. Currently, MSI indicates a sellers’ market for single-family homes and a balanced market for condos.

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

Median home prices declined month over month, which is the seasonal norm

In San Mateo, home prices haven’t been largely affected by rising mortgage rates after the initial period of price correction from April 2022 to January 2023. Since January 2023, the median single-family home and condo prices have trended horizontally. Year over year, the median price declined marginally, down 0.3% for both single-family homes and condos. Single-family home prices peaked in April 2022, and condo prices peaked in May 2022; they are currently at 21% and 8% below peak, respectively. Prices are more likely to rise if more sellers come to the market. Inventory is so low that rising supply will only increase prices as buyers are better able to find the best match. More homes must come to the market to get anything close to a healthy market. That said, inventory, sales, and price typically peak in the first half of the year, so we expect contraction across those metrics for the rest of the year. Inventory is still low enough that it should create price support as supply declines in the second half of the year.

High mortgage rates soften both supply and demand, but home buyers and sellers seemed to tolerate rates near 6% much more than around 7%. Now that rates are declining, sales could get a little boost, but the housing market typically begins to slow as we make our way into fall.

Sales and new listings rose, while inventory fell in August

In August, inventory declined, which is normal for this time of year, while sales and new listings rose. Compared to this time last year, inventory has increased slightly, up 3%. Sales are up 3% for single-family homes and 2% for condo. Any amount of new listings are good for the San Mateo market. Inventory still has a long way to go before the market begins to become more balanced. When we take a longer look back and compare the supply of homes in August 2019 (pre-pandemic) to now, active listings have decreased by 30%. With that in mind, it should be no surprise that sales have declined by 25%.

Total inventory has trended lower essentially since 2010, but active listings fell precipitously from October 2020 to December 2021, as sales increased dramatically during that period, before stabilizing from January 2022 to the present at a depressed level — still 20% lower than two years ago. Low inventory and new listings, coupled with high mortgage rates, have led to a substantial drop in sales and a generally slower housing market. 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. In 2023, sales and inventory didn’t resemble the typical seasonal peaks and valleys. It’s looking like 2024 inventory, sales, and new listings will follow historically seasonal patterns, albeit at a depressed level. It’s clear that supply will remain tight until spring 2025 at the earliest.

Months of Supply Inventory in August 2024 indicated a sellers’ market for single-family homes and a balanced market for condos

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 San Mateo housing market tends to favor sellers, which is reflected in its low MSI, especially for single-family homes. MSI has been below three months since April 2012 (2012 is not a typo!) for single-family homes. Over the past two years, MSI has risen meaningfully for condos. In August, condo MSI indicated a balanced market, while single-family home MSI still implied a strong sellers’ market.