The reSolve Group October Market Update

We sit writing with the sound of rain falling on the roof, which for early November seems out of season compared to the drier years of recent past. Similarly the housing market has slowed earlier than our typical year-end cycle.

Unlike surprise rain, the forecast of a more subdued market has been with us for several months marked primarily by the increase in mortgage rates and a cooling equities market.

While it is easy to point out the dramatic change in the market, it is prudent to remember our Silicon Valley real estate market has been so exceptional for years fueled by a number of factors: constrained supply, highly skilled job creation, artificially low interest rates and a booming equities market. Prices are starting to go down and a number of indicators that defined our markets - low days on market (DOM), sales prices greater than list price and multiple offers - are changing, requiring a strategy shift for sellers and buyers alike. We could be moving to a more stable and balanced market which we believe is better for all sides.

Before you go searching for your rain boots and umbrellas to handle this weather, take a look at the most recent data to understand the changes and better prepare yourself for these current market conditions. We’ll leave you with a quote we heard last week that seems fitting for knowledgeable buyers in our market: “You make most of your money in a bear market, you just don’t realize it at the time.” - Shelby Cullom Davis

Thank you,

Adam, Wendy and Kat

Brief Summary

Months Supply of Inventory (MSI)
Days on Market (DOM)
Pricing

1. Months Supply of Inventory

The month's supply of inventory is a metric we look at to determine how quickly the inventory that is available or active is moving in our market, meaning “how long would it take all the houses that are active in our market to sell based on the current rate of sales.” For most of 2021 through spring of this year, that was around 7 months or 21 days in Silicon Valley. In both counties the current months supply of inventory is nearing 2 months. A balanced market, equally favorable for buyers and sellers, is 3 months of inventory.

Santa Clara County inventory chart, with a pale green line showing a sharp rise in listings during summer 2022.

Chart of San Mateo County housing inventory from 2017 to 2022, showing supply rising to two months by October 2022.

This month we’re able to look a little deeper into this metric by analyzing the supply by price point. For both counties homes under $4 million are less than 2 months, while it shows significantly higher MSI on higher priced homes. Several factors affect this, namely a smaller buyer pool for higher priced homes and the fact that sellers at that price point might not have to sell if they’re not getting the price they want. In the first time buyer price points (under $2.5m) inventory in SCC at 1.2 and in SMC at 1.7 months.

Santa Clara County inventory-supply chart by price segment, ranging from 1.2 to 5.3 months.

San Mateo County inventory-supply chart: months range from 1.5 in the $2.5–$3.999 million segment to 9.0 for $10 million-plus listings.

2. Days on Market

The average days on market is a metric we look at to help understand the velocity of our market. This starts the day it goes active in MLS and stops the day the property goes into contract. In March of this year the average DOM in SMC was 13 and SCC was 12. That number is now around 30 DOM in SMC and 27 in SCC. While this extra time might feel nerve wracking to a seller, it does provide buyers more time to perform diligence and make a decision.

Bar chart of Santa Clara County days on market, January 2019–October 2022, with a spring 2022 low and sharp rise by fall.

Instead of looking back at this metric, this DOM chart looks at the current inventory by price point. This generally correlates with the MSI breakdown by pricepoint as well. Once again DOM is less at the lower price points.

Bar chart of average active-listing market days by price: 45, 49, 57, 57, and 89 days. Bar chart of San Mateo County active listings, showing average days on market by price segment.

3. Pricing

Evaluating the median price of sales over time is one of the best ways we have to track how prices are moving. This month we’re looking at median price over the long term (see our October update for monthly Year over Year analysis). Based on this rolling 3 month average on a year to year perspective in SCC prices are roughly the same as this time last year, and in SMC median price is down 4% from same time last year.

Chart of Santa Clara County median house sale prices from 1990 through October 2022, with an orange area graph. San Mateo County home price chart, 1991–2022, showing October 2022 median at $1.91 million, down 4% year over year.