🏡 July 2023 Update: Homes for sale at lowest level in 20 years!
Many folks seemed to be on pause for a while hoping interest rates and prices would come down, however neither has happened – they’ve both been pretty stable over the last year. So for those of you who were waiting for the market to stabilize, it feels like we are finally there. In a recent NY Times article What Is Happening in the Housing Market? it was noted that “Home construction surged in May and prices have ticked up, even with interest rates at a 15-year high” and “The resilience has surprised some economists.”
The San Francisco Chronicle also noted that homes for sale in the Bay Area are at their lowest level in 20 years. In fact, on a 12-month-rolling basis, the number of new listings AND the number of sales are both at their lowest points in well over 20 years! Perhaps the biggest wild card has been severely depressed new-listing activity as potential sellers have held back – ascribed to the “mortgage lock-in effect” – which not only artificially constrained the number of sales, but put upward pressure on prices as buyers, once again, competed for an inadequate supply of homes for sale.
Let's take a closer look as we take a deep dive and review the lastest market data.
The above chart reviews broad, long term trends in new listings and sales: each monthly reading reflects activity over a one year period. One critical factor missing from the above chart is the speed of sale. As a market gets hotter, new listings sell more quickly. After the 2007-08 housing and stock market crash, demand plunged, foreclosures and inventory soared, and home prices cratered. Once the crisis passed, fewer listings came on the market as there was no more flood of foreclosures, homeowners were moving less often, just as buyer demand jumped with tech hiring and the wealth boom, so prices went up. When covid hit, the number of new listings quickly escalated but did not keep pace with the tremendous rise in demand. When we factor in the 2022 market correction we should consider what I mentioned above – the “mortgage lock in effect”, which is a reluctance of homeowners with very low interest rate mortgages to sell – the number of new listings sank, but housing costs increased with rising interest rates, inflation, and stock market declines. So, buyer demand fell, days on market increased, and prices dropped. Now, in 2023, demand has rebounded while new listing activity has remained severely depressed, and buyers have competed again with scarce inventory.
Normally I don’t include data from other counties in the greater Bay Area, however, I wanted to share that San Mateo County continues to have the highest median prices.
Last year, we saw median prices in the county drop as much as 20% from the highest point to the lowest point (early 2022 to mid 2022). However, now that we’ve been in the current cycle longer with a lot more data, we can see that prices have slightly recovered.
While we are still lower in pricing than a year ago, we’ve seen a noticeable increase in median home pricing each quarter since Q4. Will that continue a little bit in Q3 this year? I wouldn’t be surprised.
In this slide and the next one, let’s take a look at some data for the luxury market, which shows a significant increase in high end sales.
Now let’s take a look at the distribution of housing in San Mateo County. We can see that about two thirds of housing units are single family homes. Again,not surprising, but where else in the county do you see pricing this high with such a low percentage of dense housing? I think we see this because we have so little supply, and that is unlikely to change. When we look at NYC for example, where there’s not a lot of land either, you can build up.
As we moved into the Spring market, with not much supply coming on, we saw days on market decrease as the market heated up.
We also saw that around 60% of homes sold over the asking price in the last few months. This reflects my experience that homes in good condition, in good locations with an attractive price, can expect to see a strong outcome.
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