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What Will the San Jose Housing Market Be Like in 2023?

The real estate market in an around San Jose, California has always marched to the beat of its own drum. And 2023 could bring more of the same.

As housing markets elsewhere across the country continue to cool down, the San Jose real estate market could remain fairly competitive during 2023. That’s mainly due to tight inventory conditions that continue to frustrate home buyers.

Here are some San Jose real estate market trends and predictions for 2023.

What the San Jose Housing Market Might Do in 2023

This housing market in San Jose, California is often marked by extremes. It has some of the highest home prices of any metro area in the country, along with an intensely competitive real estate scene.

This is true for the rest of Santa Clara County, as well. Highly paid tech workers pay top dollar for houses in cities like Cupertino, Mountain View, Sunnyvale and San Jose. And those homes are often in short supply.

While the San Jose real estate market remains competitive, 2023 could bring cooler conditions. The same is true for many cities across the U.S. Rising mortgage rates, higher house prices, and other factors have caused a general slowdown for home sales.

But the forecast for the San Jose housing market might be a bit different from the nation as a whole. Across San Jose and the rest of Santa Clara County, homes are still in high demand. Even so, we could see some significant changes over the coming months.

1. Home prices will rise more slowly, and possibly decline.

The median home value for the San Jose metro area peaked in April of this year. But prices have declined steadily since then. This is a common pattern in red-hot real estate markets like San Jose, Austin and Boise.

We recently exited a home-buying surge that pushed prices to record highs nationwide. Now, as we near the end of 2022, there is less demand for homes and therefore less upward pressure on prices. Even in the highly competitive San Jose housing market, home values have begun to dip.

So that’s one¬†forecast for the San Jose housing market in 2023. Home prices across the metro area will likely rise more slowly in 2023 than they have over the past couple of years. They might even continue to decline over the next few months, as the market resets into a new normal.

2. Buyers could have more properties to choose from.

Real estate supply levels within the San Jose area sank to an all-time low at the end of 2021. Back then, this real estate market had about a 0.4-month supply of homes for sale, which is mile below what’s considered to be a balanced market.

But things have improved a bit since then. As of October 2022, the San Jose housing market had about a 1.7-month supply of homes for sale. That’s an improvement from the tight supply conditions seen last year, but still below the statewide average for inventory.

Translation: It’s still a very tight market, as far as supply goes. But things have improved and could continue to do so.

So our second San Jose housing market prediction for 2023 has to do with supply levels. Next year, home buyers across this metro area should have more properties to choose from due to inventory growth. This could help ease the level of competition among buyers, while giving them a bit more negotiating leverage as well.

3. Buyers could enjoy more bargaining power in 2023.

As we approach the end of 2022, the San Jose housing market continues to decelerate. And that could benefit buyers going forward.

At the start of this year, homes listed for sale in the area spent a median of just eight days on market. But by October, the median number of “days on market” had increased to nearly 30. So it’s taking longer to sell a house in the San Jose area today, compared to last year.

As a result of this trend, home buyers in the San Jose area could enjoy more bargaining power and negotiating leverage in 2023. They might not feel as rushed as those who purchased homes last year.

For more evidence of this ongoing shift, we can look at sale prices. Last year, most homes sold across the San Jose metro area ended up selling for more than the original list price. But over the past few months, the percentage of homes sold above list price declined steadily — and continues to do so.

If the San Jose area experiences more inventory growth going forward, home buyers could enjoy even more negotiating leverage. They might even be able to convince sellers to pay some of their closing costs, something that’s been lacking over the past couple of years.

The Bottom Line to All of This

As we move into 2023, the San Jose real estate market will probably remain more competitive than most other U.S. cities and metros. Even so, there are significant changes taking place on both the supply and demand side of the equation. And these changes could bode well for buyers.

The general forecast and outlook for the San Jose real estate scene can be summed up in a single sentence. This housing market will remain competitive in 2023 due to limited supply, but it could also shift in a more buyer-friendly direction.

Mike Trejo

Mike Trejo is a Bay Area mortgage broker with 20+ years of knowledge and experience.

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