April 21, 2023
Bank failures and rate hikes
Quick Take:
Tighter credit, at least in the short term
Rising demand still outpaces rising supply
Every year, by at least March, we expect to see inventory rise after a high number of new listings come to market, which easily accommodate the increase in sales we also tend to see in the first half of the year.. Inventory in the East Bay, thankfully, increased in February and March, unlike the inventory in many other major markets, which is continuing to decline. Typically, inventory grows in the first half of the year, peaking in June or July. The East Bay has enough demand that many more homes could come to market before the market would balance between buyers and sellers. Currently, sales are still below last year’s level, but we expect sales to climb higher in the second quarter with more homes coming to market. As demand increases, competition among buyers and housing prices will climb with it. Single-family-home prices in the East Bay are still nearly 20% lower than their all-time highs in Alameda and Contra Costa, but condo prices are only slightly off peak. If active listings unexpectedly plateau or drop in the second quarter, we could easily see single-family-home prices rise significantly, and condo prices potentially reach new record highs in the summer.
Sales jumped 51% from February to March
Higher and faster sales drop Months of Supply Inventory further
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). MSI dropped in February and March for both single-family homes and condos, meaning the market strongly favors sellers. The sharp drop in MSI occurred due to increasing sales and less time on market.
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