The impact of low home inventory on housing prices in the Silicon Valley

When housing prices are at an all time high, it may seem like it's because sellers are greedy and unwilling to lower their price. Sure, if you're a seller you want to get top dollar for your home, but its not greediness at play -- it's economics 101: supply and demand.

The Silicon Valley housing market has been grappling with a shortage of available homes for years, resulting in a highly competitive environment for homebuyers. The imbalance between housing supply and demand has been a significant driver behind skyrocketing prices and an increasingly unaffordable market - even when interest rates were at an all time low.

3 reasons why

1. Limited supply, surging demand: The rapid growth of technology companies and other industries in the greater Bay Area has attracted a surge of people looking for housing. This influx of residents has outpaced the construction of new homes, exacerbating the supply shortage. The demand-supply gap has created intense competition among buyers, leading to bidding wars and inflated prices.
2. Reluctant sellers: Many homeowners in the Silicon Valley are hesitant to sell their properties due to the fear of being unable to find suitable replacement housing. This "seller gridlock" further reduces the number of homes available on the market, intensifying the competition among buyers and driving prices upward. Homeowners are simply unwilling to sell. 
3. Pressure on the rental market: The shortage of homes for sale has created a ripple effect, putting pressure on the rental market. With fewer options to purchase, some individuals are forced to remain in the rental market, increasing demand and driving up rental prices, further straining affordability for tenants.

Bottom line - there are more buyers than sellers. Buyers are buying homes at these increased prices, even if they have to reeeallly stretch, meaning, we're in a supply-constrained market. Increasing interest rates makes affordability even more challenging, especially in high cost of living areas like San Jose and the surrounding areas (see salary needed to buy a home).