Silicon Valley Real Estate Market Still Highly Competitive in 2023

A recent report from the California Association of Realtors (C.A.R.) showed that the South Bay and Silicon Valley real estate market remains highly competitive in 2023. This is largely due to a persistent supply shortage that has been going on for quite some time.

Despite this supply-and-demand imbalance, home prices within the Silicon Valley housing market have come down a bit in recent months. Prices will likely level off later in 2023 and subsequently turn north again.

Here are the latest trends relating to the South Bay and Silicon Valley real estate market, as of spring 2023.

Silicon Valley Housing Market Warms Up

On April 18, the California Association of Realtors published an updated housing market report with data for the state as a whole along with major metro areas. Among other things, this report showed that the Silicon Valley area experienced a sharp rise in home prices from February to March of this year.

According to C.A.R. data, home sales within Santa Clara County increased by 97% from February to March of this year. That was one of the largest month-to-month increases among all California counties.

When measured annually, however, home sales in Santa Clara County posted a -32% decline. The same trend applies for almost every county in California and elsewhere across the country. Home sales have declined over the past year due to a rise in mortgage rates and other factors.

But the month-to-month data mentioned above shows that the Silicon Valley real estate market is still highly competitive. So things could get pretty active during the summer months.

Tight Inventory Conditions Remain

Inventory conditions have a lot to do with the competition level in this market. The South Bay region, including Santa Clara County, has suffered from a real estate supply shortage for a couple of years now. And the latest C.A.R. report showed that this remains a challenge for local buyers.

According to the state’s realtor association, Santa Clara County had about a 1.4-month supply of homes for sale in March 2023. That’s almost exactly where it was a year ago. This shows that the tight inventory conditions within the South Bay and Silicon Valley real estate market haven’t eased much in recent months.

Despite a general cooling trend within the California real estate market, home buyers continue to grapple with tight inventory conditions in some markets. And Silicon Valley is clearly one of them.

Home Prices Dip, but Probably Not for Long

Based on these recent trends, you might be surprised to know that home prices across Santa Clara County have actually declined over the past few months. We touched on this earlier, so let’s follow it up with some numbers.

According to recent data from Zillow, the median home value for the county was around $1,462,000 as of early April 2023. The median price point has declined over the past few months, after reaching a peak of $1,593,000 back in the summer of 2022.

In normal times, strong demand and limited inventory would put upward pressure on home prices. But we are coming out of a two-year period of abnormal real estate market conditions.

During the early days of the COVID pandemic, home prices within the Silicon Valley real estate market surged like never before. Now, as we move further into the spring of 2023, real estate markets across the state of California are beginning to “reset” in terms of home prices.

It’s a pattern we are seeing in many housing markets right now, from SoCal to NorCal and beyond. The most likely scenario is that home prices will decline a bit further before leveling off. Later this year, house values across much of the state will probably begin to climb again, as more buyers into the market.

Despite this short-term correction in prices, the Silicon Valley real estate market remains a good investment for buyers. As we’ve seen in past years, homeowners in this region tend to enjoy significant equity growth over time.

What Does All of This Mean for Buyers?

History shows that homes located in the South Bay region tend to hold their value well over the long term. So while we are seeing a temporary dip in prices right now, house values will likely begin to climb again in the near future.

This is good news for Santa Clara County home buyers, because it gives them a chance to purchase a property at the so-called “bottom” of the real estate market.

But don’t let this short-term dip in prices fool you. The Silicon Valley real estate market remains highly competitive due to tight inventory conditions. So home buyers will still have to bring their “A” game when entering the market.

According to C.A.R. President Jennifer Branchini:

“Despite a dip in March home sales, the competitiveness in the housing market continues to heat up, as homes are selling faster, and the sales-to-list-price ratio is improving, all the while when the number of homes available for sale continues to tighten. All signs point to a market with solid demand, which should help bolster sales through the homebuying season.”

When house hunting in a place like Santa Clara County, buyers need to be open-minded and flexible when it comes to the features they’re seeking. In a competitive market with constrained inventory, it’s rare to get everything you want in a house.