For many months now, we've been reporting on the tight supply conditions within the San…
The real estate market in San Jose, California — along with the broader South Bay region — has been running in overdrive for well over a year now. Tight inventory conditions and steady demand from buyers have led to bidding wars and rapidly rising prices.
But what about this year? What’s in store for the San Jose and South Bay real estate market in 2022? Recent housing data and anecdotal reports from real estate agents suggest the South Bay real estate market could continue to sizzle throughout 2022.
In other words, expect more of the same.
Stiff Real Estate Competition in the South Bay
Like much of the San Francisco Bay Area, San Jose and the rest of the South Bay real estate market had a big year in 2021. We’ve seen record-breaking price growth coupled with an unprecedented shortage of homes. And of course, those two things are directly related.
As of early spring 2022, the South Bay housing market appears to be highly competitive this year as well. In March, Santa Clara County Association of Realtors President Doug Goss told Bay Area’s ABC7 News:
“We’ve gone through crazy markets before, this one seems to be a little bit different than others.”
When measured year over year, home prices within the Silicon Vally real estate market continue to climb. For instance, a February 2022 report from the California Association of Realtors (C.A.R.) showed that the median sale price for Santa Clara County rose by nearly 25% over the previous 12 months.
That was the largest year-over-year increase in sale prices of any county in the Bay Area — and one of the larger gains of any county in the entire state. So clearly, the South Bay Area real estate scene continues to sizzle in terms of price growth.
That’s what is happening at the regional and county level. When we drill down to the city level, we can see that the San Jose housing market remains one of the hottest in the state in 2022.
San Jose Housing Market Particularly Hot in 2022
According to a recent report, more than 40% of all homes sold in San Jose, California ended up selling for at least $100,000 above the asking price. This is for the period from January 1 to February 15. What can you say about that statistic, but “wow.”
This says a lot about how hot the San Jose real estate market is right now, in early 2022. It also reinforces something we already knew. There aren’t nearly enough homes for sale in this housing market to meet the demand from buyers — a condition plaguing much of California.
As a result of this imbalance, buyers have resorted to offering well above the asking price, to get ahead of the competition. The word “frenzy” comes to mind. This is the main reason why homes in San Jose (and the broader South Bay Area) have been selling above their list prices. In many cases, buyers have little choice.
The real estate listings and data company Zillow also shows major price growth within the San Jose real estate market in 2022. At the end of March, they reported that the median home value in the city rose by 23% over the past year.
A Counterintuitive Drop in Home Sales
The February C.A.R. report mentioned earlier also showed a surprising drop in home sales within the South Bay housing market. According to their data, existing single-family home sales dropped by -26% from January 2021 to January 2022.
That might seem counterintuitive at first glance, given the stats and reports presented above. How can such a hot housing market, like the South Bay, experience such a significant drop in home sales year-over-year?
The reason probably has more to do with a lack of inventory, rather than a lack of demand. Santa Clara County (which accounts for much of Silicon Valley and the South Bay) currently has one of the lowest levels of real estate inventory of any metro area in the country.
As of February 2022, the South Bay housing market had less than a 1-month supply of homes for sale. Additionally, inventory has declined over the past year or so. So an already tight market has gotten even tighter.
This is arguably the number-one reason why sales have declined across Santa Clara County. There just aren’t enough properties on the market to go around, which limits the number of transactions.