Santa Clara County’s inventory crisis has had a few encouraging months here and there, but it’s a far cry from “normal” levels! Today we’ll check the data and see how our current levels of homes for sale compares to the last 10 or 25 year period. Is it really so bad? And when will it rise?

This afternoon I ran the statistics on MLSListings, and here’s what I see for available listings of single family homes in Santa Clara County (the greater San Jose area). In summary, inventory of available homes for sale is about one-third of the average of the last 25 years and it’s far lower than even the last 10 years overall. For more, keep reading below. Please note that Dec 2024 is recorded for today, and the number at the end of the month is likely to be lower than this one:

Santa Clara County’s inventory tables (two versions)

First, all data side by side. This is small to fit the blog formatting, but if you click on it, a larger version will pop up in a new tab or window for better reading. OR, keep scrolling and the same data will be provided stacked rather than side by side later in this article. Also further below the 10 year average inventory by month is included along with the 25 year average.

 

Here’s the same info, but not as wide across (so hopefully it won’t be necessary to click to view a larger version).

 

 

Usually the data is taken from the last day of the month, and obviously doing this on the 18th will skew it a little for this month. But check out the year over year figures – what do you see as typical for November or December going back as far as 2000?  The 25 year average figure includes the financial collapse years. But if we go to a 10 year average, well past when the recovery began in 2012, what we see is that Santa Clara County’s inventory of homes for sale is critically low. This is driving prices up and making our Silicon Valley area one of the most unaffordable anywhere in the U.S.

 

Santa  Clara County’s inventory shortage root causes

We have been experiencing an inventory crisis for a very long time, as the tables above demonstrate. Here are a few quick points on why it’s so bad:

• rapidly appreciating prices make home owners not want to move up as they don’t want higher property taxes
• many home owners who sell after being in their home 5 or more years may decide not to sell in order to avoid capital gains taxes (both state and federal)
• home owners with mortgage rates in the 2-3% range do not want to give those rates, and many aren’t selling unless it’s a “have to sell” situation
• when home owners do “move up”, they often opt to keep their prior home and turn it into a rental since they have that lower interest rates

Scarcity and multiple offers

Houses priced aggressively (lower than what the sellers and listing agent think it’s truly worth) to attract multiple offers are getting huge results and overbids. Not every property is selling fast, but on average, homes are going for more than 100% of list price in this area and doing so in under 3 weeks in most cases. With multiple offer situations, buyers who succeed in winning are those with larger down payments (more than 20%), few or no contingencies, a high price, and of course offer an As Is sale. Some also offer free rent backs to the sellers, if the homes are occupied.

If you are a home buyer trying to compete in this challenging real estate market, please take a look at this article summarizing multiple offer tips on this site.

If you are a home owner thinking of selling, now is a great time! The lower the inventory the better your odds are of selling. If you tried selling your property without success this year, please read this article on why some houses or condos don’t sell. Another article on that same topic is on my popehandy.com site: Things which will make a home buyer RUN from purchasing your home.

And back to the first question about Santa Clara County’s inventory: when will it rise? As you study the chart, above, you’ll notice that inventory normally rises in spring and peaks in the summer most years. So, buyers, continue looking and hang on. There will be some new offerings in the new year, and by March we should see a significant uptick. If not, look out – prices will go up even faster. So if you find a home you love now, don’t wait.

Other than seasonality, I believe that there will need to be lower interest rates to loosen up the inventory, and beyond that, some tax reform that will encourage “right sizing” seniors to sell. The huge chunk of cash lost to capital gains taxes (both state and federal) eat into what could be used to buy the move down home and it disinclines folks from selling.