February 2021 Newsletter – Housing Market Updates for Silicon Valley
The median single-family home price rose, and condo prices fell slightly month-over-month. Year-over-year, single-family home prices rose considerably while condo prices showed price stability.
Across counties, Silicon Valley single-family home prices rose throughout 2020.
The three counties closed out 2020 up 15% in San Mateo, 12% in Santa Clara, and 20% in Santa Cruz.
As you can see in the graph below, median condo prices were mixed across counties. San Mateo condo prices are significantly lower than last year, while Santa Clara and Santa Cruz condo prices rose.
Single-family home inventory remained at a lower level through 2020 relative to 2019, which speaks to the desirability of Silicon Valley. During the pandemic, fewer people wanted to leave, and more people wanted to move to the area. New listings throughout the year were lower than normal, while sales were higher. By the end of 2020, sales remained steady as new listings declined. With such a consistent level of demand, prices will likely continue to appreciate throughout 2021.
The number of condos on the market declined significantly in December. New condos coming to market outpaced sales every month in 2020 except for December, when sales rose far higher than new supply.
Days on Market (DOM) declined further for single-family homes throughout 2020, but both single-family homes and condos spent far less time on the market in December 2020 than they did in December 2019. As we will see, the pace of sales has contributed to the low MSI over the past several months.
We can use MSI as a metric to judge whether the market favors buyers or sellers. The average MSI is three months in California (far lower than the national average of six months), which indicates a balanced market. An MSI lower than three means that buyers dominate the market, and there are relatively few sellers (i.e., it is a sellers’ market), while a higher MSI means there are more sellers than buyers (i.e., it is a buyers’ market). The MSI dropped further in December 2020 to 0.6 months of supply for single-family homes and 1.4 months of supply for condos, both of which firmly favor sellers.
In summary, the high demand present in the Silicon Valley area has buoyed home prices. Inventory for single-family homes and condos will likely decline further this year, and fewer sellers will likely come to market, potentially lifting prices higher. Overall, the housing market has shown its resilience through the pandemic and remains one of the most valuable asset classes. The data show that housing has remained consistently strong through this period.
We anticipate new listings to slow until around March 2021. While the winter season tends to see a slowdown in activity, December 2020 showed higher-than-normal sales despite lower-than-normal inventory, once again highlighting the desirability of Silicon Valley.
As always, we remain committed to helping our clients achieve their current and future real estate goals. Our team of experienced professionals are happy to discuss the information we’ve shared in this newsletter. We welcome you to contact us with any questions about the current market or to request an evaluation of your home or condo.