August 16, 2023
Note: You can find the charts/graphs for the Local Lowdown at the end of this section.
Inventory has trended lower over the past 12 months, which is far from the seasonal norm. Single-family home and condo inventory hit an all-time low in July, which further highlights how unusual inventory patterns are this year. Typically, inventory peaks in July or August and declines through December or January. Currently, inventory is so low relative to demand that any amount of new listings is good for the market. However, new listings declined rapidly in June and July, 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. Since January 2023, sales jumped 62% while new listings fell 52%.
As tight inventory levels continue, sellers are gaining negotiating power. In January 2023, the average seller received 96% of list price compared to 99% of list in July. Inventory will almost certainly remain historically low for the year, and the market will remain competitive in the third quarter.
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 Francisco market tends to favor sellers, at least for single-family homes, which is reflected in its low MSI. However, we’ve seen over the past 12 months that this isn’t always the case. MSI indicated that single-family homes and condos began the year in a buyers’ market. MSI has declined sharply since January for both single-family homes and condos, indicating that the climate has shifted from a buyers’ market to a sellers’ market for single-family homes and a balanced market for condos. The sharp drop in MSI occurred due to the higher proportion of sales relative to active listings and less time on the market.
Stay up to date on the latest real estate trends.
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