Months of Inventory explained with an hourglassIs it a good time to sell a home in Silicon Valley? One of the best ways to get a pulse on the real estate market with an eye to selling or buying is with the months of inventory (MOI), also known as the absorption rate. This is the months of supply of housing for sale.

The months of inventory tells us how fast the current inventory of properties will be sold off if sales were to continue at the same rate with no new inventory were to come on the market.

The easiest analogy is with a bathtub full of water. If we added no more water to the tub, and the drain were opened, how much time would it take for the water to be depleted if it continued to empty at the same rate? That’s the question being answered with the absorption rate of inventory.

Or, simpler still, if you have an hourglass that you turn over, how long does it take for the sand to empty from the top (since you cannot add more sand to that end)?

How to calculate the months of inventory or MOI

The way to calculate the months of inventory is simple:  find the current available inventory of homes for sale (not under contract or sale pending), then find the number of homes with that exact criteria which have closed escrow in the last 30 days.  Divide the first by the second and you get the months of inventory. Or, I can just use the stats program on the MLS to generate that number, as I did today.

Earlier I pulled this data from MLSListings.com, our local MLS association (of which I am a member) and I ran the numbers for single family homes (houses and duet homes) in Cupertino, Los Altos, Los Gatos, Monte Sereno, Mountain View, Palo Alto, San Jose (all areas combined), Santa Clara, Saratoga, Sunnyvale. Separately, I also ran this same query for the City of San Jose by district.

The months of inventory by city or town in Santa Clara County

A balanced market for our area is 2-3 months of inventory (for most of the US it’s 4-6 months). Two months or less is a seller’s market, and one month or less is a very hot seller’s market.

Here’s a look at the months of inventory by city or town in SCC in April 2023 for single family homes.  As you can see, the vast majority of the county is a strong seller’s market, with the only exception being Los Altos Hills.

 

Santa Clara County months of inventory by city in Santa Clara County - single family homes for April 2023

 

Which are the hottest markets?  They’re the ones with the smallest months of inventory -Sunnyvale, Santa Clara, Cupertino, Milpitas and many more are well under the 2 month market. A few are a tad higher and in the “balanced market” area, and only one is in a deep buyer’s market.

The months of inventory by area within the City of San Jose

San Jose is so large that it has many distinct markets within it. Here’s a look at the various districts and border areas. When you see Campbell, this graph means the part of San Jose close to Campbell, such as zip code 95117.  The same is true where it says Santa Clara and Cupertino.

 

Santa Clara County MOI - in San Jose by District for April 2023

 

None of these areas is in a buyer’s market or even a balanced market – each one is either a seller’s market or a strong seller’s market! Schools and short commute times are often anchors that buyers care about most. The first few areas with the lowest months of inventory are certainly strong in those departments.

Is it a good time to sell a house in San Jose? Generally, yes!

What is normal for our MOI?

Someone out there is thinking “it’s ALWAYS good for sellers in Silicon Valley, isn’t it?” Most of the time, that’s true, as we have a chronic shortage of homes for sale. But what does the data say?   Here’s a historical look at what we’re used to here. I pulled this from MLS Listings just now, exported it to excel and let excel do the math on the averages.

 

Santa Clara County months of inventory for SFH from January 2003 - April 2023

 

Some of our hottest years for selling homes in the last decade were in 2022 (first half), 2021, and 2018. The MOI bears it out.

Months of inventory for condominiums and townhouses

To dig into the issue of pricing tiers a little more, I pulled the numbers for townhouses and condos by city in this county. (I tried it for San Jose by area, but there were not enough sales to make for reliable numbers.) A few areas are cooler than they were for houses and duet homes, but the big surprise was Los Altos, where it appears to be a deep buyer’s market.  I double checked it on our RE Report for Los Altos condos and sure enough, this is the case.

 

Santa Clara County months of inventory by city for condos and townhomes

 

 

Then, nuance

Nothing’s every 100% simple, so when listing a property for sale it’s best to try to pinpoint the market and what’s moving and what’s not moving now. If your kitchen is 30 years old or even 20, some buyers may not put the home in their top tier of properties they want to buy.  Talk to your real estate agent (or if you are interviewing several, ask them what’s selling and what’s not right now).

Consider non major updates to make your home appeal to more buyers. Think lipstick and rouge, not cosmetic surgery!

Also, you’ll want to find the probable buyer’s value from a few angles.  One of those angles, at least for much of Santa Clara County, is school districts.  The process offered above could be repeated for any number of criteria, such as with or without pools, the number of bedrooms, corner lots, etc.

In broad strokes…

Overall, it is a great time to sell a Silicon Valley house.  Some areas, some pricing levels may not be equally good.  But if you’re thinking about getting your property on the market because this is the year for moving, I’d encourage you to act quickly, during the spring home buying season, which is often the best time of year to sell.

 

Related reading

The Santa Clara County Real Estate Market (statistics, data, trends, unique content, updated monthly)

Seller rent back after close of escrow: what do you need to know? (on this site)

Why is that house so cheap? (on this site)

What nickname will your house get? (on popehandy.com)

Lighten up your dark home and sell for more! (on popehandy.com)

 

 

Author

  • Mary Pope-Handy

    Silicon Valley Realtor, selling homes in Los Gatos, Saratoga, San Jose, Silicon Valley, and nearby since 1993. Prolific blogger with a network of sites.

    View all posts