Increasing Prices & Sales Fueled By Low Inventory
Two metrics have proven to be the most reliable data points for local real estate market trends:
- Month’s Supply of Inventory — the available listing supply compared to the monthly rate of sales
- Percent of Inventory — calculated by dividing the number of pending sales by the active available listings.
A “balanced” market is generally considered 4-6 months of supply and approximately 25% under contract. A seller’s market is characterized by a lower month’s supply and higher percent under contract.
Santa Clara County numbers are exceptionally compressed. The following chart shows these metrics for the month of October for over three years.
A Strong Year-End & 2021 Beginning
We’re entering into the year-end season and new year with immense compression — lower inventory/supply, a higher rate of existing listings that are pending, low mortgage interest rates, and high buyer demand. The following chart plots monthly sales absorption from October 2018 through October 2020.
Single-family home prices, year over year, show appreciation in Santa Clara County. Yet there are metrics to note:
- Closed sales were up from 818 to 1080 despite the pandemic and tumultuous economic markets
- Days on market shortened from 36 to 22 and months to sell from 1.8 to 1.2, indications of a strong appetite for speedy escrows
- The Average % Over List Price is above 100%, indicating that sellers are receiving more than their asking price.
California Economic Forecast
On October 13th, the California Association of Realtors Chief Economist presented an overview of California real estate. Leslie Appleton-Young shared how well her 2020 predictions compared to actual performance. To be fair, the pandemic was not on the horizon when she predicted how real estate would perform in 2020. California’s median price increased 8.1%, from $592,400 to $607,900. That bodes well for the entire state, yet I’m seeing even more appreciation in our local market and specific neighborhoods.
Appleton-Young’s analysis showed:
- Consumer confidence is rising to its highest level since the pandemic began at 101.8 in September.
- Consumer spending hit all-time highs in August.
- The big pandemic winners, Amazon, Netflix, Zoom, Blue Apron, Instacart, Pinterest capitalized on consumers’ need for online buying and streaming.
- “Retail Apocalypse” for brands like Pier1 Imports, Brooks Brothers, Lord & Taylor, and many others.
- A K-Shaped Recovery where professionals bounced back while lower-wage industries continue to struggle.
- Real estate sales momentum continues, the highest in over 10 years. The Bay Area comprised 19% of all California home sales and showed 10.8% sales growth.
- Foreclosures could become a problem — 60K in CA — and impact prices in the single digits because there are not as many fundamental problems in the mortgage market.
Reach Out & Connect
I’m meeting with clients via phone, video conferencing, and by appointment. Whether you’re looking to buy or sell, you need an experienced guide in this complex and fast-paced real estate market. I’ve helped hundreds of individuals like you successfully negotiate the most important financial transaction you’ll ever make.