It's been a heck of a year so far. Sales activity continues at a frenzied pace, multiple offers are once again the norm, and median prices across the core Silicon Valley-Mid Peninsula markets are up almost 20% YoY. Lack of inventory is consistently held out as the culprit for the current market dynamic. This is certainly true on a national level, but we need to look at the other side of our local economic teeter-totter. (Remember teeter-totters?)
The Real Story
Looking at the chart below we see that YTD monthly active inventory has actually been running ahead of last year. Even if we go back two years, pre-pandemic, we see the same thing. The real story is the red line: absorption.
Absorption is the % of monthly inventory sold in that month. The spike beginning in February correlates perfectly to the beginning of our current market environment. Over the past 4 months, demand has surged to where almost every home that comes to market is sold immediately. So yes, inventory is low relative to demand, but it is the demand side of the equation that has shifted.
With the country reopening and summertime upon us, it will be interesting to see how demand holds up as people look to take those long overdue vacations!