2024 California Housing Supply: Inventory Shortage Improves

Published:
April 11, 2024
Last updated:
April 11, 2024
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Home buyers in California have struggled with housing market supply shortages for years, with inventory levels dropping to record lows. Now, in the spring of 2024, California’s real estate inventory shortage appears to be easing a bit.

In a promising turn of events for prospective home buyers, the California housing market experienced a significant uptick in supply during February. That’s based on a recent report from the California Association of REALTORS (C.A.R.).

Given current conditions and market forecasts, it appears that the 2024 California housing supply has improved and may continue improving into the year.

California Housing Supply Shortage Easing in 2024

Earlier this month, California’s REALTOR Association published a detailed housing market report with data for the state as a whole along with individual metro areas.

Among other things, their report showed that the housing market supply shortage in California (that’s been dragging on for years) is showing signs of improvement.

Active listings saw a remarkable increase on a year-over-year basis for the first time in 11 months. This surge, the largest in a year, suggests a positive trend toward addressing the longstanding housing shortage in California that has plagued the market.

According to current C.A.R. President Melanie Barker:

“Housing supply conditions in California continued to improve in February with new active listings rising more than 10 percent for the second straight month.”

Barker is hopeful that this inventory growth will “build further as we enter the spring home buying season.” That would be a big help for home buyers in the Golden State.

Inventory Levels Vary Widely By County

Overall, the Golden State seems to be moving in the right direction when it comes to the 2024 California housing supply situation. But we have to remember that real estate market conditions can vary widely from one city or county to the next.

For context, the entire state of California currently has a roughly 2-month supply of homes available for sale. That’s much lower than the 5- to 6-month supply that is considered the industry standard for a balanced market. That said, the situation is more dire in some parts, yet much better in others.

For instance, the Bay Area’s Alameda County had a 1.5-month supply of homes for sale last month, the lowest in the state. Mendocino County, on the other hand, had more than an 8-month supply of homes for sale last month.

That’s a pretty broad spectrum when it comes to California housing market inventory levels, and it underscores the importance of local market research for home buyers.

To measure supply levels, C.A.R. researchers use what’s known as the “unsold inventory index.” This metric measures the number of months it would take to sell the current supply of homes on the market at the current sales rate.

In short: The lower the index, the fewer homes there are for sale.

Here are the unsold inventory indexes for California’s major regions in February 2024:

  • Central Coast: 3.4
  • Central Valley: 2.9
  • Far North: 4.4
  • Inland Empire: 3.6
  • San Francisco Bay Area: 2.1
  • Southern California: 3.0

Some of the tightest housing market inventory conditions in California can be found in the San Francisco Bay Area. Specifically, the East Bay counties of Alameda and Contra Costa currently have very low supply levels.

In 2024, Bay Area home buyers should be prepared for stiff competition intensified by an ongoing California housing market supply shortage.

How Supply Growth Affects the California Housing Market

It’s too soon to say if February’s jump in real estate listings is the start of a sustained trend or just a blip on the radar. If this supply growth momentum continues into the spring and summer, it could change the California real estate market in several ways.

Here are some of the changes that can occur due to housing market supply growth:

  • More options for buyers: When supply increases, buyers have a wider pool of homes to choose from. This puts less pressure on each individual listing and reduces the chances of frantic bidding wars.
  • Less urgency: Buyers don’t feel compelled to rush into a decision when there are plenty of properties to consider. They have time to compare and avoid settling for a less-than-ideal home.
  • Price reductions: Higher supply can lead to sellers adjusting their asking prices downward to stay competitive.
  • Negotiating ability: Buyers can make offers below the asking price in some markets, with a higher chance of success. They may also have more leverage to negotiate repairs, closing costs, or other concessions.
  • Price stabilization: Increased supply can help prevent the rapid home price increases often seen in markets with limited inventory. This creates a more balanced market and improves affordability overall.

But It’s Still Not a Buyer’s Market

As you probably already know, inventory is a key factor that determines whether a housing market favors buyers or sellers.

When there’s a low supply of homes for sale relative to buyer demand, it can lead to a seller’s market. Homes sell quickly, often above asking price, and buyers may have to waive contingencies like inspections to be competitive.

Conversely, a high supply of homes creates a buyer’s market. Buyers have more options to choose from and can negotiate for better deals, including lower prices and seller-paid closing costs.

As of spring 2024, most of the major real estate markets across California could still be considered seller’s markets. While supply levels have improved in many cities, there’s still a relative shortage of homes compared to the number of buyers seeking them.

So, while the C.A.R. report mentioned above brings some good news for home buyers, the market continues to be challenging.

(Challenging, but not impossible.)

Last month alone, there were roughly 290,000 single-family home sales across the state of California, according to C.A.R. That means nearly 300,000 home buyers succeeded in their mission, despite the ongoing inventory shortage.

Ultimately, the 2024 California housing supply situation continues to be tight, but seems to have lightened somewhat over the recent past. Buying a home in California during a supply shortage is possible. It just requires some proactive steps on your part.

Start by researching your local market, so you know what to expect. Get pre-approved for a mortgage loan to identify your price range. Work with an experienced agent, and make a strong offer with as few “strings attached” as possible.

Need Financing?

If you’re looking to buy a home in California, we’re here to help. Reach out to Sammamish Mortgage today to help you get the ball rolling. Our team of seasoned mortgage specialists will help you get your finances in order and start the mortgage application and approval process so you’re ready to make a deal when you find your dream home. Call us today!

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