During July 2021, in Silicon Valley, median single-family home and condo prices fell from the highs reached in June. By county, single-family home prices in San Mateo and Santa Clara both declined month-over-month, while Santa Cruz prices remained the same.
Year-over-year, single-family home prices rose significantly in Silicon Valley.
As you can see in the graph below, median condo prices increased in Santa Cruz and Santa Clara, while San Mateo condo prices declined slightly.
Single-family home inventory began to climb at the start of 2021 in anticipation of the spring season, when more sellers typically come to market, but has begun to decline once again. To gain a full picture of the current market, we must view it in the context of last year. In 2020, fewer people wanted to leave Silicon Valley, while more people wanted to move to the area. This trend drove inventory down to record low levels. New listings, therefore, improve the current market conditions. However, new listings aren’t keeping up with demand. In July 2021, Silicon Valley had 18% fewer homes for sale than it did in July 2020. Furthermore, when we compare the current inventory to July 2019 (pre-pandemic) levels, the number of homes for sale has declined by 26%. The sustained low inventory will likely cause prices to appreciate throughout 2021.
The number of condos on the market declined in July 2021, keeping inventory lower than last year’s levels. Although we’ve seen more condos than usual come to market over the last five months, condo sales have kept pace. Condo demand remains incredibly high in Silicon Valley, and new listings are selling quickly.
Both single-family homes and condos spent far less time on the market in July 2021 than they did in July of last year. As we’ll see, the pace of sales has contributed to the low Months of Supply Inventory (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, which indicates a balanced market. An MSI lower than three means that there are more buyers than sellers on the market (that is, it’s a sellers’ market), while a higher MSI means there are more sellers than buyers (that is, it’s a buyers’ market). In July 2021, single-family home MSI rose slightly above one month of supply, while condo MSI remained below one month of supply. Both condo and single-family home MSI indicate that the market still strongly favors sellers.
In summary, the high demand and low supply in Silicon Valley have driven home prices up over the last year, but the huge price appreciation is slowing. Inventory will likely remain historically low this year with the sustained high demand in the area. Overall, the housing market has shown its value through the pandemic and remains one of the most valuable asset classes. The data show that housing has remained consistently strong throughout this period.
We expect the number of new listings will continue to increase in the remaining summer months. The current market conditions, however, can withstand a high number of new listings, and more sellers may also enter the market to capitalize on the high buyer demand. As we navigate the summer season, we expect the high demand to continue, and new houses on the market to sell quickly.
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.