Inventory Insights | Where It Stands & Why You Should Care

We know that you have a lot on your mind this time of year…and hopefully it revolves around flip-flops, kids out of school, some relaxation and maybe even a little vacation. You are likely seeing headlines related to housing, inventory, the labor market and honestly wondering what is happening in the reality of Silicon Valley, and why it matters when there are so many other things to think about.

We understand, and that’s why we live and breathe market data – so you don’t have to! In this week’s edition of the HOSV blog, we are providing some inventory insights and the impact on pricing, competition and the labor market. And since it’s summer, we’ll keep it simple so you can get back to the pool!

It’s no secret that inventory levels have been a challenge for a while, and that there are variances across the country, and regionally within each state. Wondering what’s the norm and where things are at today? The California Association of Realtors® (CAR) just released its latest ‘Home Sales & Housing Report’ on June 17, 2016. The data revealed the following:

- The CAR Unsold Inventory Index (which indicates the number of months needed to sell the supply of homes on the market at the current sales rate) dipped to 3.4 months in May. An average unsold inventory index level is 6.1.

- The median number of days it takes to sell a single family home is 27 days.

- Tight inventories are driving sales prices closer to list price ratios (people are essentially getting what they are asking).

- San Francisco County had the highest price per square foot across California at $856/sq ft. (We know, no one’s shocked).

- Median SOLD price in Santa Clara County is $1,100,000, with the highest median home prices in San Mateo and San Francisco counties at $1,385,000 and $1,409,370, respectively.

The local supply within the nine Bay Area counties is even more telling of current market inventory conditions.

Clearly, Santa Clara County is well below the state average unsold inventory level of 3.4 months and aggregating a median days on market measure of 10 days less 27 vs. 17 days). The impact is evident to buyers and sellers, with implications for all of us regardless of imminent moving plans.

For buyers, it means that competition is tight, negotiating power is minimal, and a quick close is essential. Does it mean that achieving home ownership in this market is impossible – absolutely not (just ask our buyers!). But it does mean that lender pre-qualification, offer strategy and agent expertise are paramount. Efficiency in financing, home shopping and decision making is required.

For sellers (and potential ones), the state of the local market creates an ideal time to obtain a potentially sizeable return on your investment, a likelihood of achieving at or above your asking price, and working with serious buyers ready to act. You typically retain greater control of the timeline, if you have multiple offers and can narrow by offer price and closing time.

What does all of this mean to the rest of us? It’s definitely a throwback to the Economics 101 concept of supply and demand. Limited supply means prices are rising. If you own a home, it’s a great reminder to take a look at your equity and determine if the opportunity exists to make improvements, send kids to college or consider moving-up. If you are a first-time home buyer, it means that you are likely deciding between skyrocketing rents or strategizing a sizeable down payment to purchase a home. For those in the workforce, it means your employer may be facing labor challenges. The immense gap between job and housing creation has placed a considerable strain on employers – who must provide wages high enough for workers to afford housing…IF they can find it. The Bay Area Council has even dedicated an entire initiative to solving the workforce housing crisis. Learn more at: http://www.bayareacouncil.org/issues-initiatives/housing/

Before you head back to the beach…mark your calendar for next week as we share ‘7 Questions To Ask Yourself Now’, to help you assess if inventory or any other driving market forces are creating an opportunity that knocks (or splashes!) this summer.

Cheers to friends, flip-flops & fun,

Mark & Jason

Data courtesy of:

California Association of Realtors: http://www.car.org/newsstand/newsreleases/2016releases/May2016sales?view=Standard

Bay Area Council: http://www.bayareacouncil.org/issues-initiatives/housing/