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Year in Review for 2023 and What to Expect in 2024
2024 has arrived! I experienced this 2023 housing market first-hand, but sitting down to reflect and research last year’s local housing market, I recognized how unique it was.
First, a little overview for context.
Then let’s look at stats for our local market so we know the true numbers.
Next I’ll share some stories from the trenches to put some flesh on these housing market bones.
Finally, let’s look at what we should expect in 2024.
We saw the highest interest rates we have experienced in 20 years. We saw the fewest number of sales in at least two decades. There was uncertainty and volatility.
There was also significant price appreciation in the 2nd half of the year, due largely to the lack of inventory. That was the most significant factor.
There also started to be a certain amount of acceptance of market conditions, rates, and an increased focus on the future, instead of focusing on the past.
The major difference I saw between the first half of 2022 and 2023 is that buyers became much more selective.
In 2022, it didn’t much matter the location or condition of a property; it was going to sell, and there was going to be competition.
In 2023, buyers generally had the mindset that if they were going to have such a high mortgage payment, they wanted a home that was right for them and were willing to wait, instead of feeling the pressure to compete.
Because of that, properties sat on the market longer. But that did not always impact the sales price. One of the most interesting things I noted about the market is that homes would sometimes sit on the market for 4-6 weeks with few to no offers. Then, suddenly, a buyer or multiple buyers would step in and make an offer at or above the asking price.
My own experience with my listings was that I had a ton of activity, they would sell within a week, usually well over the asking price, but with much fewer offers than the year before. Still, very happy sellers.
For my buyer clients, the homes we ended up winning on were against multiple offers. In some cases, we had to write with no contingencies to compete, but for the first time in a long time, buyers have been able to keep contingencies going into the transaction, which gives them a way to back out if problems arise.
Now for some Stats!
Let’s first focus on what most buyers and sellers want to know; PRICES.
The median sales price of single family homes, townhouses and condos in Santa Clara County in 2023 was $1,480,000. For context, that is the 2nd highest year on record. In 2022, prices were higher...by a mere $5,000.
The second half of 2023 was able to make up the difference with the incredible price appreciation we saw in the first half of 2022.
Certain areas fared better than others over the course of the year. Here is a breakdown for each city in the South Bay, and what prices looked like year over year:
San Jose: 2023, median sales price of $1,310,000. Increase of 0.4% from 2022
Los Gatos: 2023, median sales price of $2,274,000. Decrease of 2.3% from 2022
Cupertino: 2023, median sales price of $2,760,000. Increase of 10.4% from 2022
Sunnyvale: 2023, median sales price of $1,815,000. Increase of 3.1% from 2022
Santa Clara: 2023, median sales price of $1,510,000. Decrease of 1.2% from 2022
Campbell: 2023, median sales price of $1,669,000. Decrease of 0.4% from 2022
Saratoga: 2023, median sales price of $3,675,000. Increase of 2% from 2022
Palo Alto: 2023, median sales price of $3,055,000. Decrease of 7.4% from 2022
Mountain View: 2023, median sales price of $1,776,500. Decrease of 1.3% from 2022
Los Altos: 2023, median sales price of $3,859,000. Decrease of 3.5% from 2022
Los Altos Hills: 2023, median sales price of $5,230,000. Decrease of 5.3% from 2022
Morgan Hill: 2023, median sales price of $1,240,000. Decrease of 8.1% from 2022
Gilroy: 2023, median sales price of $1,240,000. Decrease of 5.5% from 2022
Milpitas: 2023, median sales price of $1,310,000. Decrease of 1.5% from 2022
In terms of how much prices vary, San Jose is the most diverse. That is why the city is split up into many different areas on the Multiple List Service. Let’s see how each area within San Jose did on price:
Central San Jose: 2023, median sales price of $960,000. Decrease of 4% from 2022
Cambrian: 2023, median sales price of $1,600,000. Decrease of 1.2% from 2022
Blossom Valley: 2023, median sales price of $1,275,000. Decrease of 0.8% from 2022
South San Jose: 2023, median sales price of $1,020,000. No change from 2022
Santa Teresa: 2023, median sales price of $1,255,250. Decrease of 2.7% from 2022
Evergreen: 2023, median sales price of $1,260,000. No change from 2022
Berryessa: 2023, median sales price of $1,250,000. Decrease of 2.3% from 2022
Alum Rock: 2023, median sales price of $950,000. Decrease of 1.8% from 2022
Alviso: 2023, median sales price of $1,190,000. Increase of 18.4% from 2022
Willow Glen: 2023, median sales price of $1,775,000. Decrease of 4.1% from 2022
Almaden: 2023, median sales price of $2,080,500. Decrease of 3.2% from 2022
We definitely need to do a deep dive on that Alviso area, because it is a weird place with some pretty interesting history. It’s not a large area and there are much fewer homes that sell there than these other areas, so that could skew the data. But year-over-year Alviso saw some solid appreciation!
INVENTORY AND THE NUMBER OF SALES
2023 had the fewest number of sales since 2000, which is how far my MLS data goes back.
The next year in that time period with the fewest sales was in 2008, when the market began to crash. The huge distinction there is the number of available properties.
In 2008, the number of properties for sale peaked in June at nearly 9200 properties. The most we ever saw in a single month in 2023 was 1,316.
The total number of sales in 2008 was about 12k. In 2023 it was 10k.
2023 had 86% fewer properties available, yet only 17% fewer sales. This huge difference is a matter of demand. Right now, the demand is there. It’s the supply that’s lacking.
Inventory has been so low for so long. You combine people generally staying in their homes longer with higher interest rates with high equity positions with restrictive building policies with investors who have spent the last 12 years buying rental properties, and low inventory is the result.
Once Upon A Time...
Now it’s story-time. I had the chance to work with some awesome people this year. I’ll give you a couple examples of buyers and sellers that I think really captured the spirit of this year’s housing market.
The first home I sold last year was in Sunnyvale. A dated home in an excellent neighborhood, it had incredible potential. We still wanted to present it in the best light without huge expense, so we painted, put in new carpeting and had it professionally staged (I always say these 3 things give you the best return for your investment when preparing a home for sale).
We went on the market in the worst storm of the year. The first day of open houses, I wondered how many people would actually show up. It actually started off very busy!
And then branches started falling from trees...
I looked out the living room window, while in mid-sentence describing the home to a buyer, and saw a large branch land on the hood of my car. Thankfully the leaves and small branches just brushed the front of it, and the sizable branch landed in front of it.
But then the most beautiful thing happened, that I think allowed us to sell the home for the $2,575,000 price that we got.
Three different neighbors immediately came out of their homes, pulled branches away from my car, out of the yards, and with a chain saw started cutting them up to be hauled away. The family that ultimately purchased the home was there and witnessed the neighborhood come together in an instant to help out. It demonstrated what a tight-knit community this neighborhood was.
Another adventure was helping a wonderful couple buy their first home, and it came with more drama than a typical sale (but ultimately worked to their favor). It is also a cautionary tail of why you shouldn’t sell your own home, even if you got your real estate license so you can do a transaction every few years.
This couple and I looked at many different homes in many different areas. There were some good opportunities that came up that we missed. But our time came, and we got into contract on a home in a great San Jose neighborhood. The home was nice, but still needed some work.
Work that was not initially disclosed by the seller...This is why experience and knowledge of the contract and disclosures are so important in the Realtor you hire!
The seller was a licensed real estate agent. But in her inexperience, she was slow in disclosing important details, and then the way she updated the disclosures gave the buyers a way to back out even if they had not had contingencies.
We renegotiated, and this owner/agent’s mistake cost her thousands of dollars. My clients benefited from it, but it is much better for all negotiations to be done prior to the offer being accepted. The way you do this is by having inspections up front and having a complete disclosure packet ready for buyers.
READY OR NOT, HERE WE COME
Back to the present, looking at the future. What can we expect in 2024?
This entire housing market, from prices to inventory to competition and affordability, all depends on interest rates.
Every article I’ve read, analysis I’ve looked at, and conversation I’ve had point toward a competitive housing market in 2024. Rates are expected to be in the 5% range by the 2nd half of the year.
The buyers that had accepted the interest rate hike and could still afford to buy have been buying. When rates drop, we will likely see many more buyers entering the market.
Couple this with limited inventory due to increased demand but lagging supply, prices will rise. Nationally I’ve seen estimates of 5%. I think we will see higher appreciation than that in South Bay Area.
I was speaking with neighbors on the street of a home I sold last year to see if anyone else was considering selling. Three owners on one street said that they would actually like to move to get more space, but simply could not part with their 3% or less 30 year fixed interest rate. They would be buying a more expensive home at more than double the interest rate, and they had decided to remodel and expand their homes instead of selling.
I’ve heard this referred to as the “Golden Handcuffs.” It’s wonderful to have the best interest rate ever, but it definitely limits your options on moving.
Because of this, I expect we will still see limited inventory in 2024. There will be more properties for sale than 2023, but not significantly more.
So in summary, what will we see in 2024?
Lower interest rates
Homes selling quickly
There are always variables that could impact these expectations. It’s an election year. Prices are generally lower than they seasonally are in the months leading up to a presidential election. There are economic considerations. There are wars...
The timing of making a move, either to buy or sell, depends more on your personal situation than any other. 10 years ago, I took the advice I had been told from home owners who had purchased 50+ years ago. In our area, you buy when you can. My wife and I bought in 2014 when we could.
Prices have more than doubled since then. If they had gone down, would we have regretted our decision?
No. Because I knew the prices would go back up eventually. I knew we would be there at least 5 years, and it was my hope to never have to sell and keep it as an investment property.
For now, we love where we are. I love the space we have. I our neighbors and community.
Some people look at the housing market from an opportunity standpoint, of trying to perfectly time the market. Most are usually surprised by being right or surprised by being wrong. Rarely can they say, “Called it!”
Owning real estate has been a bedrock of wealth building. And you need a place to live! Wealth and memories are both built in the homes you own.
Not often are finances and heart-felt emotion so perfectly paired. I have seen homes sell for less than they could have because the buyer recognized the emotional connection the seller had with the property, and was able to connect on that level.
If you’re buying or selling, make sure it’s for the right reasons. I love having those conversations - planning for the future, experiencing change, analyzing to make sure it’s the right financial decision – these are essential conversations to have.
I would love to hear what has made you think of buying or selling, and if there are any questions that, if answered, would change the thought into action.
Excited for 2024!