San Jose Home Prices Have Dropped a Bit In 2023, Month to Month

For many years, the San Jose real estate market has been one of the most competitive markets in the state of California. This is largely because of all the tech companies located in Santa Clara County, and the high-paid workers they attract.

Combine this with an ongoing shortage of housing inventory, and you have all of the ingredients for rapidly rising home prices.

But given the history of this real estate market, it might surprise you to hear that home prices in the San Jose area have actually declined in recent months. That’s based on data provided by Zillow, as of early March 2023.

This is actually a positive development, as it could help this real estate market return to a more sustainable level of price growth going forward.

San Jose Home Prices Drop a Bit in 2023

According to Zillow, the median home value for San Jose, California peaked at around $1,313,000 back in the summer of 2022. But since then, the median value for this real estate market has posted month-to-month declines. As of February 2023, the median home price in San Jose had dropped to around $1,242,000.

That’s not a huge decline in the grand scheme of things. But it does reflect a trend that we are seeing in many housing markets right now. After two years of frenzied real estate market conditions and skyrocketing home values, price growth is finally starting to cool down a bit.

At first glance, you might think this would suggest weakness within the real estate market. But that’s not really the case. Instead, what’s happening is a gradual return to a more normal rate of home-price appreciation, following 18 months of abnormal gains.

What’s the Future of House Values in San Jose?

No one can predict future home-price trends or real estate market conditions with complete accuracy. There are just too many variables involved, along with unforeseen conditions that can arise.

But from a historical standpoint, it seems likely that home prices in San Jose will bottom out and turn north again later in 2023. And when they do start rising again, it will probably be at a more gradual pace compared to the steep growth we saw through 2020 and 2021.

What Does All of This Mean for Buyers?

Despite the slight drop in home prices within the San Jose real estate market, 2023 could be a good time to buy a house in the area. There are several reasons for this.

For one thing, there are more real estate listings in Santa Clara County today compared to a year ago. According to a March 2023 housing market update from Realtor.com, the total number of active listings for the San Jose-Sunnyvale-Santa Clara metro area increased by 30% over the past year or so.

Inventory is still fairly low by historical standards, but it has improved a bit over the past few months. If this trend continues throughout 2023, the San Jose real estate market could reach the level of inventory it had before the COVID pandemic.

This would be great news for local home buyers, in light of the tight inventory conditions that have plagued this market for well over a year.

Also, as mentioned above, home prices in San Jose have dropped since hitting a peak during the summer of 2022. This means buyers can get a bit more house for the money in the current market, compared to those who purchased a year ago. It could also give buyers a chance to come in at the so-called “bottom” of the market, while enjoying positive equity growth beyond that point.

Lastly, real estate market conditions in San Jose and across California have begun to favor buyers in a way we haven’t seen for quite some time.

According to a recent statement from Danielle Hale, the chief economist for Realtor.com:

“With a smaller pool of buyers today and more competition from other homes on the market, homesellers will likely need to adjust their price expectations in the market this spring.”

The bottom line to all of this is that the San Jose real estate market is in a transitional stage right now. It’s still pretty competitive, but nothing like it was during 2021 and the first part of 2022. Home prices have dropped a bit. The market has cooled. And buyers are starting to enjoy a bit more negotiating leverage.

Need Mortgage Financing?

Located in the Bay Area, Bridgepoint Funding serves home buyers all across the region — including the San Jose area. If you need a mortgage loan to buy a house anywhere in the  Santa Clara Valley, please contact our knowledgeable staff. We can review your current financial situation and help you choose a financing option that aligns with your goals!