South Bay Housing Market Gains Much-Needed Inventory in 2022

The South Bay real estate market continues to evolve in 2022, with conditions starting to favor buyers for a change. For the most part, it’s still a seller’s market in the South Bay region, due to tight inventory conditions. But that’s gradually starting to change, as more homes become available and sellers ease back on their list prices.

Here are the latest trends and developments you should know about within the South Bay housing market, fully updated for summer 2022.

South Bay Real Estate Market Gains Inventory in 2022

Over the past two years, inventory has been one of the biggest challenges for home buyers in the South Bay region. Or rather, a lack of inventory. Tight supply conditions have fueled fierce competition among buyers, while pushing the median home price toward the $1.5 million threshold.

But a number of recent reports have shown that the South Bay real estate market is gaining some much-needed inventory in 2022. According to one report, for example, the San Jose metro area had about a 2-month supply of homes for sale in July. That was up from a record-low 0.4-month supply at the end of 2021. Progress!

That same report showed a steady increase in the median number of “days on market,” over the past few months. This means it’s taking longer for homes to sell today (on average) than at the start of 2022.

Similarly, an August 2022 report from Realtor.com showed a 42.8 % increase in property listings within the San Jose-Sunnyvale-Santa Clara metro area, compared to a year earlier.

The bottom line here is that the South Bay real estate market is finally starting to see some supply growth. Over the coming months, it could transition from being a strong seller’s market to something a bit more “balanced.” (Especially if the inventory growth trend continues.)

This is good news for those who are planning to buy a home in the South Bay later in 2022, or into 2023. Supply gains could make the house-hunting process a bit less stressful, while giving buyers more options to choose from.

More Sellers Are Reducing Their Asking Prices

Here’s another South Bay real estate market trend that might give buyers more confidence. The percentage of property listings with a price reduction has increased in recent months. That’s based on the August 2022 Realtor.com report mentioned above.

According to that report, the “price reduced share” of homes rose to 21% during the month of July. This means 21% of sellers within the San Jose-Sunnyvale-Santa Clara metro area lowered their asking prices that month, after initially coming onto the market at a higher price.

When measured year over year, the “price reduced share” increased by 15%. This tells us that more sellers are slashing their asking prices today, when compared to a year ago.

Both of these trends suggest that the San Jose (and broader South Bay) housing market is cooling down in 2022. They also show that the market is gradually moving in a more buyer-friendly direction, compared to what we’ve seen over the past 18 months.

Home Prices Drop in a Cooler San Jose Market

The South Bay housing market has also shown some price slowing within the past couple of months. In fact, a report from the mortgage data company Black Knight showed that San Jose had the steepest drop in home prices this past spring, when measured against the nation’s largest cities.

According to Black Knight’s “Mortgage Monitor Report” for June 2022:

“While modest pullbacks are commonplace … prices are typically on a seasonal upswing in June and the markets pictured here are worth watching in coming months for signs of additional downward pricing pressure. Among those seeing the strongest pullbacks in prices so far, San Jose tops the list with the average price now down 5.1% ($75.3K) from $1.56M in April to $1.49M in June.”

These and other South Bay real estate market trends for 2022 show that the local housing scene has entered a kind of transition phase. You might think of it as a return to normalcy (or something resembling normalcy) after two years of frenzied activity.

A Good Time to Buy a House in 2022 – 2023?

Let’s move on to the million-dollar question (literally). Is 2022 still a good time to buy a house in the San Jose or South Bay housing market? And what about 2023? Could the market be more favorable toward buyers next year?

With inventory levels rising and sellers showing more flexibility, now could be a great time to buy a home in the South Bay region. In fact, a recent report showed that buyers now have more “bargaining power” than they’ve had in two years.

To quote that August 30th Realtor.com report:

“The days of frenzied sales with waived inspections might be behind us, as buyers regain a bit of bargaining power. According to a new Realtor.com® survey, 92% of people who sold their home within the last year accepted some buyer-friendly terms and 41% accepted some contingencies in the contract.”

So in many respects, yes, now could be a good time to buy a house in the South Bay — or elsewhere in California for that matter.