San Jose Real Estate Market Outlook October 2022
San Jose, CA Real Estate Market Trends
San Jose, CA follows a traditional spring-to-fall sales cycle with peak closed sales in early to mid-summer (May- July). San Jose’s 10-year average is about 450 sales per month, with the summer peak month near 600 homes.
How has the San Jose market recently performed?
With the extremely low, unprecedented inventory levels experienced in all areas of San Jose in late 2017 and early 2018 (see yellow line in the below chart), most areas and properties for sale experienced multiple offers. The competitive buying environment spurred a quick increase in home prices. PRICES in San Jose peaked in May 2018 and then softened quickly in the later part of 2018 due to the return of more normal inventory levels and an increase in interest rates.
Spring 2019 in San Jose started off as a typical sales season with ramping inventory, sales and increasing prices. In April 2019, inventory continued to increase as usual, but sales slowed down to the lowest number for April since 2008! As a result of the market changes in 2019 and a rebalancing of the unusual activity from 2017/18, prices returned back to levels similar to those seen in the Fall of 2017.
2020 started off as an extremely healthy market with low inventory and a strong number of home sale closings in February, March and April. But the effect of Shelter-in-place (which started locally on March 17, 2020) showed up in the April pending sales numbers and then May closings. May 2020 pending sales were back to normal seasonal levels and actually continued strong through the rest of 2020.
The strong demand seen in the Summer of 2020 continued through 2021. In 2020 there was a total of 4529 single-family home sales. In 2021, sales were up to 5672 (25.2% higher!). While San Jose experienced more sales than usual, the inventory in 2020 and 2021 was at a record low, similar to the market of 2017, where more sales occurred than the inventory is available at a time (reverse of yellow line and green bars on the chart).
2022 started off with very low supply but no demand- largely fueled by record-low interest rates making affordability easier. Many homes sold after multiple offers, some over 10 offers! As interest rates increased midyear, overbidding quickly disappeared (from the peak in March of 18% over asking on average to 0% in August 2022), and home prices softened. September 2022 closed with 374 sales, similar to the pre-pandemic closed sales in September 2019 of 364 units. Inventory through remains lower than pre-pandemic values.
What are the current San Jose prices?
The average PRICE in September 2022 for San Jose was $1,556,090. The median price in September 2022 was $1,450,000, with an average sales price to list price ratio of 100.4% of the asking price. Compared to the San Jose pre-pandemic market, home prices in September 2022 have maintained a 13% appreciation (Median price $1,277,500 in March 2020)
Which direction is the market trending?
Young Millennial homebuyers are aging into homebuying and ready to find their own place, yet low inventory continues to be a challenge in the San Jose area.
With rising interest rates making home prices unaffordable for many buyers, there are still some buyers who can make a move, as sales numbers prove. The local market has always been fueled by tight inventory, and today this still applies. While buyer demand is not as strong as in Spring 2022, prices and other market metrics are showing signs that the market has settled into a new normal.
Days of Inventory (DOI) is a monthly metric I follow to understand the speed and direction of the market. As of September 2022, the DOI in San Jose is at 34 days, still considered a strong seller’s market. Until there is a significant increase in inventory, I expect prices to continue to hold strong despite rising interest rates.
My prediction for 2022 is price appreciation of about 3%, which year-over-year September numbers currently track at. I expect this delta to hold through Q4 2022.
What is the market outlook?
The overall trend of the San Jose market is positive moving forward. San Jose is still one of the most affordable areas of Silicon Valley and is home to a revamping downtown. The market is currently fueled by a high demand by young buyers, a lack of inventory and various options for programs to make interest rates more palatable such as 7-year ARMs. The single-family home inventory in September 2022 was 441, a low number for the area which will continue to keep the San Jose market moving at a good pace (Sept 2022 inventory is 36.5% increase from 2021, but still 20% lower than Sept 2019, 10-year San Jose average inventory of 568).
Will the inventory increase in Q4 2022? Stay tuned with monthly updates by watching my San Jose Market update videos, signing up to be emailed a monthly update or visiting the current month’s market metrics below.
This article is updated once a quarter (the next update is mid-January 2022, with data through the end of December 2022).