California’s Housing Market Outlook: Why 2024 is Prime Time for Sellers and Buyers

“For both buyers and sellers, now may really be the time to get off the fence,” says Rebecca Jepsen, one of the top realtors with Golden Gate Sotheby’s International Realty in Los Gatos.

“As I predicted last year in July, we are seeing pent-up demand for homes of all sizes and price points that are in decent shape and good locations as we begin 2024,” she adds. “Silicon Valley buyers are an intelligent and resilient bunch,” she says. “They assess and absorb current data and then move on with their plans and goals, which often includes home ownership. Even when mortgage rates peaked at 8% last October, the highest rate in nearly 23 years, buyers were still buying.”

With rates so high, why are we still seeing multiple offers and soaring home prices?

“It still comes down to inventory, or truly the lack thereof,” says Jepsen.

A majority of homeowners have lots of equity and very low rates. In December, Realtor.com reported that more than two-thirds of existing mortgages have rates at or below 4%, which is contributing to the “locked-in effect.”

Current homeowners who would like to sell are still a bit hesitant to abandon their historically low interest rates, but they are starting to feel more “tethered” to their home loans versus completely handcuffed or “locked in.” Because of this, we are starting to see an increase in inventory. In January 2024, Santa Clara County saw a 27% increase in inventory versus December 2023. Experts expect a 20 to 30% increase in supply this year.

Nationwide the median price of a single-family home hit an all-time high of $414,800 in June of 2022 before dropping steadily through the end of the year. However by the end 2023 prices were up 7% year-over-year.

“The housing recession is essentially over,” says Lawrence Yun, Chief Economist for the National Association of Realtors. Nationally, prices remained steady even when the mortgage rates topped at 8%. Rates, although up in the last week or two, were recently hovering just above the 6% mark. And if the Fed starts to lower rates, as recently promised, that will certainly help get people moving. Per Yun, 2023 was likely this cycle’s sales trough. He expects sales volume to rise approximately 14% this year.

Statewide, 266,200 single family homes sold in 2023. The California Association of Realtors (C.A.R.) recently released its 2024 California Housing Market Forecast. According to the forecast, existing single-family home sales are expected to total 327,100 units in 2024, an increase of 22.9% over 2023. And, they expect the median home price to hit $860,300, a rise of 6.2% versus 2023.

In Santa Clara County, the average sales price of a singlefamily home was $2,091,691 last year, down about 1% from the prior year. The number of homes sold was down 20% versus 2022. Days on the market was 21, an increase of 14.5%. Single family sales volume in 2023 amounted to 6,425 units, the lowest in decades. In 2022 8,050 units sold and in 2021 it was 11,385.

“Our Bay Area housing market is tied at the hip to the NASDAQ,” says Jepsen, a high-tech executive and entrepreneur for more than 20 years before starting her real estate career. She still keeps her finger on the pulse of what’s happening in Silicon Valley, which directly affects the Bay Area housing market.

Even though the cost of financing is up significantly, due to current interest rate levels, most of our buyers are invested in the stock market and doing quite well financially. The NASDAQ hit its all-time high of 16,080 on February 12th, up 42% over the last year. Apple is up 20%. Meta is up 163%, and Netflix is up 61%. If you’re lucky enough to have Nvidia stock, your stock has soared a whopping 221% in just the last 12 months.

“Both multiple and preemptive offers are back, resulting in sales well above most list prices,” says Jepsen.

Case in point, she listed a threebedroom, two-bath home on a busy street in Campbell last week. The home had been on the market a year ago and didn’t sell. Jepsen came up with easy ideas on how to completely transform the home’s curb appeal. She designed a landscape plan, had shutters, trim work, and a bit of painting done in less than a week. Within 24 hours of being listed, the seller received a preemptive offer nearly $200K over the list price and it was sold.

Looking forward to 2024. . .

“Experts and analysts are literally all over the map when asked where we are heading this year,” says Jepsen.

The California Association of Realtors predicts a 23% jump in sales volume in 2024. And even if that happens, we will still see a lower number of transactions than when Ronald Reagan was running for reelection in 1984. They also expect the median home price to hit an all-time high of $840K this year.

“We have been hearing about a recession coming around the corner for quite some time, but, on the other hand, some are predicting that a ‘Goldilocks’ scenario is highly likely,” she says.

A Goldilocks economy, explains Jepsen, “is where economic indicators are neither too hot nor too cold; they are just about right.”

Solita Marcelli, U.S. Bank’s CIO for global wealth management in the Americas, says, “In a Goldilocks’ scenario, US growth would be stronger than expected, inflation would continue to slow smoothly, and the Fed would feel able to cut rates more aggressively through 2024, with perhaps six 25-basispoint-cuts.”

So, is a recession just around the corner?

“While no one has that proverbial crystal ball, the economic ball could drop in the next year or so,” says Jepsen. The Federal Reserve Bank uses a ‘probability tool’ that measures the difference in yield for the 10-year Treasury bond and the three-month Treasury bill. When bonds that are set to mature in 10 years or more have higher yields than Treasury bills that mature in a year or less, it is shown with an upward curve. When Treasury bills are outperforming the bonds, an inverted curve takes place. In the past year, we have seen one of the steepest inversions in nearly 40 years. Per the Fed’s probability tool, this equates to a 60% chance of a recession heading our way within the next 12 months.

Says Jepsen, “I predict that if we do start to see a decline in housing prices, the decline won’t be anything like what we saw in 2007.”

“I always say, the only thing I know about the market is what I know right now,” says Jepsen. “With inventory still historically low and buyer demand high, it is unlikely that we will see prices pull back in the immediate future.”

“So, if you are thinking about selling in the next few years, now really is the time,” says Jepsen.

Home prices are at or near their all-time highs. If you have been in your home for at least ten years, not to mention those that have owned a home for 20-30 years, you have doubled, tripled, and maybe even quadrupled your money.

For Both Buyers & Sellers It‛s Time To Get OFF The Fence!

“Many of my sellers have downsized to smaller homes, townhomes, or senior communities of their choice,” she says. “They have been able to make cash purchases and didn’t need to worry about interest rates. And remember, thanks to Prop 19, you can take your property tax with you anywhere in California.”

Buyers are still out there.

Even though California’s population declined for the third year in a row, the so-called exodus is slowing down. A recent Census Bureau report showed that just over 75,000 people left the state last year. Popular destinations were Texas, Arizona, Florida, Washington, and Nevada. However, California still has the highest population, with nearly 39 million people calling the Golden State home. As folks return to the office, and with the emergence of new technology, especially AI, many analysts are predicting a growth spurt for our local population over the next couple of years.

For those looking to buy, Jepsen says, “If you find a home that lights you up and works for you and your family, buy it. Interest rates will come down, and you can refinance at a later date.

“Marry the house and date the rate,” she adds. “When rates decline, that will send those buyers, who have been sitting on the fence, flooding back into the market, creating even more competition.

“We are very lucky to live in the ‘bubble’ known as Silicon Valley. It is always the last housing market to go down and the first to come back,” says Jepsen. “We will get to a more balanced market, but no one knows when… so why wait?” she adds.

People still want to live in the Bay Area.

“Not only do we have some of the best weather (well, normally) on the planet, but we also have some of the most creative, innovative people from all over the world living here. I believe Silicon Valley will remain a magnet for many generations of entrepreneurs, and therefore many home buyers to come,” she predicts.

“If you have a question about the market, want to chat about a potential move, or just need a great referral for a home improvement project,” says Jepsen, “Call Me… I am here to help!