California sees housing inventory jump double-digits for the first time in 19 months

by Silicon Valley Association of Realtors February 28, 2024 3:12 pm

California home sales and inventory made a strong rebound at the start of this year following months of sluggish activity, according to new sales data from the California Association of Realtors.

The number of homes sold statewide in January jumped 14.4% compared to the previous month of December, marking the highest level of activity in six months. In addition, the number of new homes listed for sale increased for the first time in 19 months. The California Association of Realtors attributed January’s rebound to the sharp drop in mortgage rates at the end of 2023. 

“It’s encouraging to see California’s housing market kick off the year with positive sales growth in January,” Melanie Barker, president of the California Association of Realtors, said. “While we’ll likely experience some ups and downs in home sales in the coming months as (mortgage) rates continue to fluctuate, the lending environment is expected to be more favorable in 2024, so the market should see more pent-up demand translate into sales.”

Sales activity & prices

Sales in all major regions in the state rose in January on a year-over-year basis, with the San Francisco Bay Area recording 6.2% sales growth from the prior year. Statewide, sales of single-family homes jumped 5.9%. The state recorded 256,160 home sales this past January compared to 241,920 in January 2023.

In addition, all major regions, except for the far north (Butte, Lassen, Plumas, Shasta, Siskiyou, Tehama, Trinity counties), recorded an annual increase in their median prices. Statewide, the median home price jumped 5% from $751,700 in January 2023 to $788,940. The San Francisco Bay Area posted a 10.6% year-over-year jump with a median price of $1.1 million.   

San Mateo & Santa Clara counties

In Santa Clara County, home sales dropped 22.8% from the previous month of December, but jumped 19.7% compared to January 2023. Its median sales price for a single-family home increased 11.8% year-over-year from $1.53 million in January 2023 to $1.71 million. 

San Mateo County, on the other hand,  reflected the opposite of the statewide sales trend: The market saw its sales activity drop. The county recorded 7% fewer sales than the previous year and a 45.7% drop compared to the previous month of December. The county’s median sales price, however, jumped. The county began the year with a median sales price of $1.97 million, up 21.5% from $1.62 million in January 2023 and up 9.7% from $1.8 million recorded the previous month of December. 

Both counties showed a bump in the number of new houses listed on the market.  

“This is great news for the housing market. Inventory is still very limited in both San Mateo and Santa Clara County markets, but the good news according to MLSListings is new listings were up across the board for single-family homes and condos/townhomes in both counties in January,” Eileen Giorgi, president of the Silicon Valley Association of Realtors, said. “Though rates continue to fluctuate due to ongoing inflation, the expectation is that rates will decline later this year. As rates ease, we expect more sellers will be willing to put their homes in the market.”

The data also revealed that despite high prices and interest rates, homes that are for sale aren’t staying on the market for very long. The median days on market in Santa Clara County in January was 11 days and 19 in San Mateo County. 

“This shows buyers are getting comfortable with higher interest rates and are ready to purchase when the right home comes along. The market could certainly see more pent-up demand turn into sales in the spring,” Giorgi said.

2024 forecast

According to Jordan Levine, chief economist at the California Association of Realtors, “With rates climbing back up to a two-month high earlier this week due to the latest inflation concerns, potential home sellers could hit the pause button on listing their house on the market and wait until rates begin to ease again. In general, rates are expected to decline later this year, and available inventory should slowly improve throughout 2024.”

The average 30-year, fixed-rate mortgage was 6.9% as of Feb. 22, according to Freddie Mac.

Elliott Eisenberg, partner economist of MLSListings agrees. Eisenberg said with inflation still in question, it may take the Federal Reserve a few more months before it lowers mortgage rates, but it is very likely that the Federal Reserve would eventually lower rates later this year.

 “They’re willing to be late; they don’t want to be too early. They don’t want to lower rates and then raise them again. Inflation is their guiding star,” he explained.

Eisenberg noted that this year, consumers should pay attention to rates and inventory, which is still very low despite more new listings showing up in January. While recession is important to the real estate industry, he said “it doesn’t matter if we do or don’t (have a recession).” 

He explained that the market has already been experiencing a recession with fewer sales and hesitant buyers and sellers. Eisenberg pointed out that since 2021, nationwide sales have dropped 33% to about 4 million units, and even in the toughest times, the sales volume has not dropped much lower than this figure because life changes such as divorce, births, marriages and job relocations consistently force sales.

 “This year will be better. Rates will come down either way, and 2024 will be better in the real estate market recession or not,” Eisenberg said.

Silicon Valley Association of Realtors (SILVAR) is a professional trade organization representing 5,000 Realtors and affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.

The term Realtor is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of Realtors and who subscribes to its strict Code of Ethics.