Santa Clara County August 2024 Market Update

As we move through 2024, the real estate market in Santa Clara County continues to exhibit seasonal changes.

Not surprisingly, the summer of 2024 saw a cooling in the Santa Clara County real estate market, following a heated spring season. As is common in the summer, sales activity slowed, homes took longer to go into contract, and there was a noticeable decline in overbidding. Despite this seasonal cooling, there are several notable trends and shifts worth paying attention to as they may influence market activity in the coming months.

Interest Rates and Market Activity

One of the most impactful changes in recent months has been the decline in mortgage rates, which as of early August, had reached their lowest point in over a year. This drop in rates is particularly significant as it could potentially reignite market activity among both buyers and sellers. Many homeowners who had refrained from listing their properties due to the “mortgage lock-in” effect may now reconsider, leading to an increase in available inventory.

Price Trends

House prices in Santa Clara County have shown considerable resilience – the median price of single-family homes for the first half of 2024 was $1,925,000 – versus a median price of $1,700,000 for all of 2023.

The luxury segment of the market remains robust, with sales of high-end properties continuing to show strength.

One interesting observation is the divergence in price trends across different property types. While single-family homes and townhouses have appreciated, condos have not seen the same rate of price growth. This could be indicative of shifting buyer preferences or supply and demand dynamics within these segments. My own theory is that buyers for these less-expensive condos have smaller (or non-existent) stock portfolios to cash in, limiting their down payment size, thereby stifling price increases.

Market Inventory and Sales Volume

Inventory levels have been a key point of focus in the Santa Clara County market. The number of active and coming-soon listings at the beginning of August was 43% higher compared to the same time last year. This increase in inventory is a crucial factor for potential sellers to consider, as more competition in the market could influence pricing strategies and the time it takes to sell a home.

Additionally, the number of homes sold through July has risen by 18.5% compared to the previous year. This uptick in sales volume, fueled by the increase in listings, suggests that buyer demand remains strong, albeit more selective.

Overbidding and Pricing Dynamics

The percentage of homes closing over the list price, a common occurrence during periods of high buyer competition, has decreased from the spring peak. However, the market still demonstrates signs of buyer interest, with homes selling on average at 4% above the original list price in July 2024. This slight cooling in overbidding aligns with the seasonal slowdown but still indicates a competitive market environment.

Luxury Market Performance

The luxury segment of the Santa Clara County market continues to outperform other sectors. Sales of homes priced at $4 million and above have surged, with the first seven months of 2024 showing a 103% increase in sales compared to the same period in 2023. This robust performance highlights the ongoing demand for high-end properties, even in a more tempered market.

Challenges and Opportunities for Sellers

While the market remains generally favorable, there are challenges that sellers should be aware of. One such challenge is the difficulty in obtaining comprehensive and affordable homeowners’ insurance, which has caused nearly 7% of recent real estate transactions in California to fall out of escrow. However, upcoming regulatory reforms in the insurance industry may alleviate some of these challenges by the end of the year.

For sellers, the current market presents both opportunities and considerations. The increase in inventory levels means more competition, making it crucial to price properties strategically and prepare them well for sale. The decline in interest rates, coupled with sustained buyer demand, offers a promising environment for those looking to sell, especially if they act before potential rate increases or economic shifts.

Wrapping it Up

The Santa Clara County real estate market in August 2024 reflects a complex mix of factors that both challenge and create opportunities for homeowners. As the market transitions into the latter half of the year, sellers should stay informed about interest rate trends, inventory levels, and buyer behavior to make well-informed decisions. With the right approach, this market still holds significant potential for those looking to capitalize on their property investments.