San Jose California Housing Market – Trends for 2023-2024

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The San Jose housing market is hot and competitive. Learn everything you need to know from San Jose realtor and FastExpert partner, Seb Frey.

Home of Silicon Valley, the San Jose housing market has thrived with the growth of the technology sector. Those fortunate enough to buy a house before home prices soared now sit on a golden egg. Strong demand for homes combined with low inventory and cash buyers have propelled home prices to astronomical levels over the past several decades.

While the San Jose housing market has experienced a few bumps over the past year, trends indicate that demand for homes in San Jose, CA, will remain strong, pushing up the average sales price. In addition, the San Jose housing supply will remain in a shortage, further bolstering home prices.

Let’s dive deeper into the San Jose, CA housing market.

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The Outlook for the San Jose Housing Market

The real estate landscape in Santa Clara County has witnessed notable shifts in 2023. Following a period of cooling throughout much of the previous year, the housing market in the South Bay region is now showing signs of renewed vigor. Nowhere is this resurgence more pronounced than in San Jose, the county’s central hub and its largest city, with home prices once again on the rise in San Jose and Santa Clara county after nine months of decline.

Throughout the latter part of 2023 and as we enter 2024, it is likely that the San Jose housing market will persist in facing exceptionally low inventory levels, coupled with a consistent demand from prospective buyers. This persistent disparity may heighten rivalry and exert an upward force on the average sale price in the foreseeable future.

There’s a Continuous Housing Shortage 

The San Jose housing market, as of 2023, is indeed facing a significant housing shortage characterized by extremely low inventory levels. This situation is not unique to San Jose; it mirrors trends in major metropolitan areas nationwide. 

The housing supply declined during the COVID-19 pandemic due to increased homebuying activity. While it briefly rebounded in the second half of 2022, it has fallen significantly since the beginning of 2023. This shortage is evident by late summer 2023, with the market having less than a one-month supply of homes for sale, far from what is considered a balanced market.

Compared to other major cities in California, San Jose has experienced the most significant decline in inventory levels in the last two years. There simply are not enough homes available to meet the needs of potential buyers. At present, there is no sign of this downward trend in inventory reversing itself. San Jose real estate has experienced significant year-over-year declines in new listing activity, therefore, severely restricting the inventory of homes for sale.

This housing shortage is predicted to persist for the foreseeable future, aligning with the national trend of a widespread housing shortage, with no immediate relief in sight. Thus, the local real estate market continues to be a seller’s market due to inadequate inventory to meet the high demand from buyers in the area.

Homes Sell at Breakneck Speed Amid Housing Shortage

In addition to the housing shortage, the San Jose real estate market is characterized by its fast pace. Homes in the area sell in approximately 11 days, much quicker than the national average. This is largely influenced by the declining inventory levels and not enough supply to meet the demand.

San Jose Housing Market Rebounds with Soaring Home Prices and Bidding Wars in 2023

Despite the fact that San Jose’s median sale price is 221% higher than the national average and the cost of living in San Jose is 75% higher than the national average, people are still flocking to San Jose.

The percentage of homes selling above the original list price has surged, leading to multiple-offer scenarios and bidding wars. Overall, home prices are up 12.5% year-over-year, and the average home receives an average of 6 offers.

Furthermore, the market is anticipated to experience steadily rising home prices. After declining home values in the past year, home prices in San Jose and Santa Clara County continue to increase.

Over time, these trends will likely push list price and the median home value in San Jose even higher, possibly surpassing the record high reached during the summer of 2022.

Is it a Good Time to Sell a House in San Jose?  

It appears to be a favorable time to sell a home in San Jose. The median price of existing single-family homes in San Jose has increased significantly by +10.2% year-over-year, reaching a median price of $1.62 million in July 2023. This price appreciation suggests that sellers can potentially fetch a higher sales price for their house.

The number of active listings in San Jose has decreased substantially by -61.7% year-over-year, indicating a limited supply of homes.

Low inventory often leads to increased competition among buyers, potentially resulting in higher offers for sellers and multiple bids. Also, properties in San Jose are selling quickly. This swift pace suggests that sellers may receive offers promptly.

Is it a Good Time to Buy a House in San Jose?

For home buyers, while sale prices have increased, trends indicate that home prices will continue to appreciate in the long run. However, buyers should consider their budget and affordability in the context of these rising prices.

Additionally, the reduced number of active listings (-61.7% year-over-year) means buyers will surely face increased competition. This could lead to multiple-offer scenarios and bidding wars, potentially making it challenging to secure a property.

Meanwhile, higher interest rates, currently around 7%, have significantly impacted the San Jose housing market by making mortgages less affordable. Purchase applications have decreased by 27%, and sellers are hesitant to sell, contributing to low housing inventory.

Builders are also cautious due to interest rates, exacerbating the supply problem. This scarcity has driven up rent prices. Despite tech-related layoffs, overall employment has slightly increased, with optimism for future artificial intelligence and robotics growth. Builder confidence has improved, resulting in more construction jobs. 

The market is expected to remain strong and stable until after the 2024 election, primarily due to low inventory, unless significant legislative or financial changes occur.

Who is the Typical Seller and Buyer? 

In the San Jose real estate market, millennials are taking the lead in homebuying, with 63.6% of mortgages going to this generation, according to a report by Lending Tree. While Baby Boomers play a significant role, they don’t dominate the market locally as reported nationally.

The typical homebuyer in San Jose is mainly millennials, although they face challenges due to the region’s high living costs. The average down payment is steep, around $145,000, reflecting the expensive housing market. Nevertheless, millennials are actively entering the market, driven by starting families and increasing earning potential.

Home sellers in San Jose come from various age groups, reflecting diverse reasons for selling, such as job changes, downsizing, or lifestyle shifts. It’s a dynamic market where sellers range from Baby Boomers looking to downsize to millennials seeking larger homes as their families grow. Personal circumstances and market conditions influence the decision to sell, but millennials seem to be the driving force among homebuyers in our local market.

Moving to Bay Area: Why is Everyone Moving to/From the Bay Area?

People are drawn to San Jose and the broader California region for various reasons. The state’s diverse job opportunities, particularly in the tech sector, have historically attracted professionals seeking high-paying positions and career growth. 

The average income of a San Jose resident is about $43,000 per year, while the US average is $31,000. The median household income in San Jose is $117,000 yearly, while the US average is $71,000.

You can make twice that or more if you have suitable technological expertise. The biggest factor driving the San Jose real estate market is the high-tech sector, including giant companies such as Adobe, Apple, Facebook, Nvidia, Intel, Google, and hundreds more.

Housing Market Predictions for San Jose, California 

The U.S. News Housing Market Index predicts a decline in permits for single- and multifamily projects in the upcoming fall. This will only further contribute to the current housing market shortage in San Jose.

Nevertheless, with improving employment and consumer confidence, along with the current low housing inventory, the local real estate market will likely remain strong and steady for the foreseeable future. 

The limited housing inventory has contributed to price stabilization. Unless substantial changes occur in existing laws and financial markets, major shifts are not expected until after the 2024 election.

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Collaborate with a Real Estate Agent 

The San Jose housing market is undergoing distinctive changes shaped by various factors, chief among them being the low inventory, high interest rates, and high income levels of local residents.

However, despite issues like affordability and heightened buyer competition, the region continues to draw interest. That’s especially true for tech sector workers, who are now playing a central role in the home-buying landscape.

Thus, collaborating with a seasoned real estate agent cannot be overstated. A skilled agent has the expertise you need to navigate the intricacies of the San Jose market. These professionals can help you understand invaluable insights. They also have adept negotiation skills and guidance that empower buyers and sellers to make well-informed choices. 

Whether you’re a first-time homebuyer, a seller looking to capitalize on market conditions, or anyone, having a trusted real estate professional by your side is essential in achieving your real estate goals.