The Local Lowdown: March 2024

The Local Lowdown

Quick Take:

Median single-family home prices rose substantially month over month. In Alameda, single-family home prices rose 18% from January to February; in Contra Costa, they were up 10%.
Active listings, sales, and new listings rose in the East Bay month over month, which are all beneficial for the housing market. We expect inventory to increase in the first half of the year and possibly return to a more normal market after the slowdown experienced over the past year and a half.
Months of Supply Inventory fell from January to February 2024, indicating buyer competition is ramping up. MSI implies a sellers’ market in the East Bay.

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

Year over year, median prices rose in February 2024 for single-family homes

In the East Bay, low inventory and high demand have more than offset the downward price pressure from higher mortgage rates, and prices generally haven’t experienced larger drops due to higher mortgage rates. Month over month, in February, the median single-family home price rose 18% in Alameda and 10% in Contra Costa. Year over year, prices were up 22% in Alameda and 13% in Contra Costa. Condo prices were up month over month and year over year in Alameda, though they dropped in Contra Costa. We expect prices in the East Bay to remain slightly below peak until late spring, but as interest rates decline, prices will almost certainly reach new highs in the first half of 2024. Additionally, inventory is so low that rising supply will only increase prices as buyers are better able to find the best match.

High mortgage rates soften both supply and demand, but at this point rates have been above 6% for 15 months, and rate cuts will likely occur sometime this year. Potential buyers have had longer to save for a down payment and will have the opportunity to refinance in the next 12-24 months, which makes current rates less of a limiting factor. However, high demand can only do so much for the market if there isn’t supply to meet it.

Single-family home and condo inventory, sales, and new listings increased month over month

In 2023, inventory didn’t have anything resembling the typical sine wave, since far fewer sellers came to the market, especially in the first half of the year, and the low inventory and fewer new listings slowed the market considerably. New listings have been exceptionally low, so the little inventory growth last year was driven by softening demand. Typically, inventory peaks in July or August and declines through December or January. However, in 2023, inventory peaked in October, further highlighting the atypical supply trend. In November and December, inventory, sales, and new listings dropped, reaching all-time low inventory in December 2023.

In January and February 2024, single-family home and condo inventory and new listings increased. With the current low inventory levels, the number of new listings coming to market is a significant predictor of sales. New listings increased 7% month over month, and sales increased 30%. Year over year, inventory is the same as last February; however, sales and new listings are up 10% and 16%, respectively. The next three months will be critical to our understanding of the market. More supply will mean a healthier market and a more normal housing market in 2024.

Months of Supply Inventory in February 2024 indicated a sellers’ market

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 East Bay market tends to favor sellers, which is reflected in its low MSI. MSI fell sharply in the first quarter of 2023 before gently trending higher from May to November. In December, MSI declined sharply, but rose again in January. MSI contracted once again in February and currently indicates a sellers’ market for both single-family homes and condos.

We can also use percent of list price received as another indicator for supply and demand. Typically, in a calendar year, sellers receive the lowest percentage of list price during the winter months, when demand is lowest. Winter months tend to have the lowest average sale price (SP) to list price (LP), and the summer months tend to have the highest SP/LP. The January and February 2024 SP/LP were both 4% higher than last year, meaning we expect sellers overall to receive a higher percentage of the list price throughout all of 2024 than they did in 2023.