Good News for Bay Area Home Buyers: There’s More Inventory in 2021

For months, home buyers in the San Francisco Bay Area have heard one news story after another about the ongoing supply shortage within the local housing market.

The general theme is always the same: Good luck finding a home to buy in the San Francisco Bay Area.

Now, we actually have some good inventory news to share with home buyers. According to a recent housing market report, the number of homes listed for sale in the San Francisco Bay Area increased over the last year or so.

In fact, out of the 50 U.S. metropolitan areas included in this report, only two experienced a year-over-year increase in the number of active real estate listings. And both were located within California. They were San Jose and San Francisco.

More Homes for Sale in the Bay Area: 2021 Update

During the first week of February 2021, Realtor.com published a report showing the latest housing market trends in metro areas across the U.S. It also showed how the number of real estate listings had changed over the past year, in cities across the country.

The San Francisco Bay Area was one of only two metro areas where the total number of active listings (i.e., homes for sale) increased from January 2020 to January 2021.

That’s worth repeating: Out of the 50 metropolitan areas included in this housing market update, 48 of them experienced a decline in the total number of homes for sale. Only two of them — the San Francisco and San Jose metro areas — saw an increase in housing market supply levels.

This is a big deal for home buyers in the Bay Area, in 2021. It means that buyers will have more properties to choose from over the coming months, compared to those who purchased a year ago. And after years of tight inventory conditions within the Bay Area real estate market, it’s nice to have some good news for a change.

Inventory Gains in San Jose and San Francisco

After years of dealing with record-low housing inventory and supply levels, Bay Area home buyers might be happy read the following statistics.

To quote the February 2021 Realtor.com report:

“Housing inventory in the 50 largest U.S. metros overall declined by 41.8% over last year in January … Of the 50 largest metros, two Northern California markets — San Jose and San Francisco — and Denver saw an increase in the number of newly listed homes at 24.8%, 14.4%, and 1.8%, respectively.”

Denver is included in the above quote because it had an increase in the number of newly listed homes. But when you zoom out and look at all active real estate listings, only the San Francisco and San Jose metro areas experienced a year-over-year increase in January.

• In the San Francisco-Oakland-Hayward metro area, the “active listing count” rose by 18.2% from January 2020 to January 2021.
• In the San Jose-Sunnyvale-Santa Clara metro area, total listings rose by 19.0% during that same 12-month period.

The bottom line here is that people who are planning to buy a home in the Bay Area in 2021 should have more properties to choose from today than in the past. That’s good news, from a buyer’s perspective. But overall, the housing market is still pretty tight. So buyer beware.

It’s Still a Tight Housing Market, Overall

It’s nice to see a much-needed increase in housing market inventory within the San Francisco Bay Area. But don’t let that fool you. Overall, supply levels are still well below what’s considered to be a “balanced” real estate market. In fact, it seems that “balance” doesn’t even exist anymore.

Tight inventory conditions persist all across the nine-county Bay Area, but especially within the East Bay counties of Alameda and Contra Costa.

In a January 15th report from the California Association of Realtors, Alameda and Contra Costa had the lowest “unsold inventory index” of the nine Bay Area counties. Those two counties also had the lowest number of “median days on market,” which means homes are selling fast in those areas. (Low inventory tends to go hand-in-hand with fast home sales.)

Our Advice for Bay Area Buyers in 2021

Bay Area housing market inventory has increased over the past year, when measured by the number of homes for sale. That’s good news for buyers who are planning to enter the market in 2021. But there still aren’t enough homes listed for sale in the Bay Area to meet the strong demand from buyers.

Here are some timely tips for those who are planning to buy in 2021:

• Start sooner rather than later. Depending on where you live — and where you’re planning to buy — the house hunting process might take longer than expected. This is especially true in those Bay Area communities where housing inventory levels are lowest (like the East Bay).
• Broaden your search area. Real estate conditions can vary a lot from one Bay Area market to the next. So you might have a better chance of finding the right home at the right price if you expand your search box to include neighboring areas. It’s okay to have a first-choice location. Just have some backup choices in case that doesn’t work out.
• Make a strong initial offer. In a sluggish real estate market with an abundance of supply, home buyers might be able to “lowball” a seller and negotiate the price downward. But the Bay Area is currently the opposite. There’s a shortage of housing market supply, despite the year-over-year increase mentioned above. So take care when making your initial purchase offer.
• Get a real estate agent. An experienced agent can help you find a home at a time when they’re in short supply. Your agent can also help you create a strong offer backed by recent sales data — an important step in a highly competitive real estate market.