Silicon Valley real estate market predictions

Photo of Mary Pope-Handy, crystal ball, Mary's logo and the words "Mary's Predictions" - Silicon Valley real estate market predictionsSilicon Valley real estate market predictions – it’s time for a mid-December 2023 update. As always, this is a best guess based upon the major influences that we see at play.

My Silicon Valley real estate market predictions in brief:

  • Home prices in Silicon Valley have been rising this year. They hit their trough or low point one year ago.
  • Interest rates are down from their peak. That often happens this time of year since rates are also impacted by supply and demand.
  • Inventory remains painfully and increasingly low as sellers do not want to sell. This is likely to remain the case. The bottom line is supply and demand. If demand remains strong and inventory low, prices will go up and only be tempered by the rate issue. That’s what we are seeing now. Many buyers are sitting this market out, but those who are active continue bidding prices up.
  • Many factors could swing the market one way or the other: Covid (new variant is more immune evasive), layoffs, the stock market, how much rates rise, a big quake, weather and disaster related issues, and more.
  • Home prices are up from a year ago but still down a little from the peak. If the current trends continue, though, we’ll surpass that peak in not too long. And that is precisely my prediction.
  • The low point in pricing is usually in January, but sometimes a month earlier, and the contracts for those sales are ratified 30 days before that (so November or December). If you can find a good home to buy, this will probably be the best possible time to do it. (If interest rates go down more in 2024, it would be wise to refinance.)
  • Mike Simonson of Altos Research says that if interest rates go down, inventory will also decline since people are more likely to hold onto their first home when moving up if they can swing it without having to sell the first place. Check out his YouTube page here.
  • Many buyers are waiting this out. I believe that they risk being priced out of the market if the typical pattern continues and we see large price jumps in the new year. I expect home prices will rise in the first half of 2024, which is often the case.

3 minute video on the current market and future predictions

I just re-watched this video from two months ago. It’s still applicable, with one change: the market has heated up a little and I would no longer call it sluggish.  We are often finding homes getting 10+ offers if they are good.

Supply and Demand + Seasonal Patterns

This odd market with home prices rising despite interest rates rising comes down to highly motivated buyers fighting over a scarcity of homes for sale.  Below is a chart from MLS Listings which displays the inventory of active listings of single family homes (houses and duet homes) from January 2004 to today. Since we are close to the end of September, I am including the month to date.

Take a look:

Inventory SFH pre-pandemic and now

 

From about 2006 – 2012 we had the impact of the financial collapse with many foreclosures and short sales inflating the number of listings. Beginning in 2013, though, the market followed more normal seasonal patterns. Since then, most years the peak of inventory came close to 2000 houses on the market (except in 2017, when prices skyrocketed). From 2020 on, meaning the pandemic years, inventory has not gotten close to those levels.

This lack of inventory is the main issue, and the corresponding result is increasing home prices.

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