Q3 2022 South Bay Real Estate Market Recap

It’s human nature to want to know the future, to know what’s coming around the bend.  And there are plenty of people out there that make a living trying to predict it.  But the reality is, no one really knows.  Now more than ever, there’s lots of anticipation, maybe even anxiety, built into the economy, the stock market, and the real estate market.  It makes sense.  When things are going well and it seems impossible to fail – call it euphoric – people become less afraid of the future and become more risk tolerant.  But when change happens, risk aversion and uncertainty creeps into the marketplace and most people become more focused on what might happen than what is happening.  My goal with this post, and the majority of what gets recorded here, is to help my audience understand what is happening, and from there, we can hopefully spot trends and make educated decisions on what may happen if trends continue.  

Let’s take a look at Q3 2022….


  • Quarterly Closed sales are in line with typical early spring numbers But down 44% yoy
  • Prices are holding at 100% of asking, down from highs of 7% over asking in June
  • Active listings are about 50-70% of typical levels for Early Fall

After being cooped up for the past 2 years due to Covid restrictions, many would-be buyers took to the road and air and traveled this summer.  As a result, and coupled with rising interest rates, sales activity dropped off in July and August and slowly returned in September.  Overall, the number of sales in the South Bay dropped to levels not seen since the Global Financial Crisis. At the risk of sounding cliche…. but this time it’s different.  How? The real estate market that led to the GFC, was the result of oversupply.  Today, the market suffers from chronic under supply.  While rising mortgage rates has put a damper on buyer’s appetites, demand hasn’t just gone away, instead it’s sitting on the sidelines waiting for an opportunity to get into the market.  You can pick sides on this one.  If you believe that real estate is an essential need and buyers will have to bite the bullet of higher mortgage rates, then you should be looking for opportunities while others sit on the sidelines.  If you believe that the fundamentals of real estate have changed and prices are in for a correction, then you may want to cash in while you can.  I am in the first camp, as long as you are in it for the long run, I believe we are headed for a time of limited price growth, but once the economy stabilizes, human needs will prevail and growth will return.


Inventory remains a challenge as more sellers decide to wait and see instead of list and sell. New listings are down approximately 30% across the South Bay and active listings are about 50-70% of typical levels for early Fall.  While supply levels improved by 20% from Q2, in terms of months supply, most neighborhoods still remain in seller’s market territory with 3 months supply or less of available homes for sale (6 months is considered a balanced market).  

Months Supply

  • SBay – 2.0 MOS (up 33% yoy)
  • PVE – 2.7 MOS (up 28% yoy)
  • RB – 1.9 MOS (up 36% yoy)
  • MB –  2.6 MOS (up 37% yoy)


Price growth is moderating but prices aren’t necessarily falling.  After an amazing start to the year, buyer demand has pulled back but not entirely, and with limited inventory, prices are holding their ground.  You can’t discount what’s not for sale, and instead of selling, many sellers are putting their plans on hold.  Median prices are leveling off, but still up significantly year-over-year.  Homes on average are selling at 100% of asking, down from June highs of 107% of the list price as bidding wars fall to about 30% of all listings compared to 70% earlier this year.

Median prices on a 12 month rolling average:

  • SBay – $1.3M (up 10% yoy)
  • PVE – $2.8M (up 26% yoy)
  • RB – $1.4M (up 9% yoy)
  • MB – $3.17M (up 8% yoy) 

Pending Sales

Quarterly Pending Sales are down year-over-year and resemble numbers typically seen in February during the past 10 years.  Compared to Q3 2021, pending sales have dropped on average nearly 40%.

Pending Sales

  • SBay – down 38% yoy
  • PVE – down 36% yoy
  • RB – down 41% yoy
  • MB –  down 53% you

Q4 2022 and Beyond – You can’t discount what’s not for sale

With housing affordability at all time lows, it comes at no surprise that buyers are pumping the brakes on their home purchase plans.  But it’s a double edged sword.  Sellers more than ever can afford to take a wait and see approach to selling and as a result, are holding on to their homes longer.  These two factors are directly related to rising interest rates and until rates show signs of stabilizing or dropping, discretionary buyers and sellers can be expected to stay on the sidelines.  However, interest rates don’t tell the whole story.  Rising rents and new household formations nudge buyers to shop, and will help keep upward pressure on home prices until supply levels increase to meet the demand.  As indicated in the latest Housing Forecast by Mark Fleming at First American Title, “History has shown that rising mortgage rates may take the steam out of rising house prices, but they don’t necessarily trigger a decline. In today’s housing market, demand for homes continues to outpace supply, which is keeping the pressure on house prices, so don’t expect house prices to decline.”


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