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Quick Take:

  • Home prices in Silicon Valley may be hitting a soft ceiling after two years of rapid price increases.
  • 2022 began with huge demand in the first quarter, but that demand has slowly dwindled throughout the year. Housing inventory will likely follow the normal seasonal trends; however, the new normal will include historically low inventory.
  • Home price appreciation is moving toward a more sustainable growth rate: around 6–8% annually.

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


Home prices soften in May and June

The median single-family home and condo prices in Silicon Valley continued to decline from their April peaks, but they’re still historically high. After two years of significant price growth across markets and dwelling types, it’s hard not to think that rate increases have caused prices to creep near a ceiling. Without the aid of super low financing options, fewer potential buyers will participate in the market. So far in 2022, the average 30-year mortgage rate has increased over 2.5%, which equates to an approximately 33% increase in monthly mortgage payments. In other words, the new mortgage rate adds $730 per month on a $500,000 30-year fixed mortgage, for example (double that for a $1 million loan).

Even with the rate hikes, which are only expected to continue this year, home prices aren’t dropping outside of normal month-to-month variability, nor would we expect them to. Supply is still historically low, which will protect prices from experiencing a major downturn. Prices will likely follow a similar trend to last year, with mild growth through the summer and fall months. But, as we mentioned earlier, as rates increase, the same price becomes more expensive, unless you are buying with cash.

It’s so incredibly easy to get wrapped up in the recent past, during which home prices grew quickly. We can’t stress enough how uncommon that price growth was and, most likely, will continue to be. Because homes are not only living spaces but also investments, a steadier growth rate of 6–8% annually is still good for investing purposes.


Sales slowdown

Silicon Valley’s housing inventory continued to rise in June, following historical seasonal trends. Since March 2020, inventory has trended lower and settled at a depressed level. The number of single-family homes and condos on the market in June 2022 is 12% lower than in June 2020. Although the first half of 2022 had one of the lowest inventories on record, we were pleased to see that inventory increased, a trend that usually holds until mid-summer. With June inventory continuing to rise, the next two to three months will likely show us peak inventory levels for 2022, which will undoubtedly be the lowest peak inventory on record.

In June, sales declined along with new listings, potentially indicating that demand is softening. This isn’t to say demand is low, however, especially relative to supply. Sellers can expect multiple offers, and buyers should come with competitive offers.


Months of Supply Inventory increasing, but still 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 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). Although MSI has risen over the last three months, single-family home and condo MSIs are still low, indicating a sellers’ market.


Local Lowdown Data


Our team is committed to continuing to serve all your real estate needs while incorporating safety protocol to protect all of our loved ones.

In addition, as your local real estate experts, we feel it’s our duty to give you, our valued client, all the information you need to better understand our local real estate market. Whether you’re buying or selling, we want to make sure you have the best, most pertinent information, so we put together this monthly analysis breaking down specifics about the market.

As we all navigate this together, please don’t hesitate to reach out to us with any questions or concerns. We’re here to support you.

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