South Bay Has Lowest Housing Market Inventory in California

The South Bay continues to experience a major housing market shortage in 2025.

Jan 31, 2025

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Santa Clara County (a.k.a., the South Bay) currently has the lowest level of housing market inventory in the state of California, when compared to other counties.

Additionally, inventory levels in Santa Clara have declined over the past year. This means that an already tight housing market has become even tighter, with fewer homes listed for sale.

In this report: An update on the housing market inventory situation across the South Bay in 2025, and how it could affect home buyers for the rest of the year.

Terminology: What Is the 'South Bay' Exactly?

The "South Bay" is a sub-region in the southern part of the San Francisco Bay Area. It generally refers to the area encompassing Santa Clara County. But the exact boundaries can be a bit fuzzy and sometimes include parts of neighboring counties as well.

Santa Clara County is the heart and most populous part of the South Bay. It's where you'll find major cities like San Jose, Sunnyvale, Santa Clara, Mountain View, and Palo Alto.

Santa Clara County is the world-renowned center of Silicon Valley, the hub of technological innovation and home to numerous tech giants. This association is so strong that the terms "South Bay" and "Silicon Valley" are often used interchangeably.

For the rest of this report, South Bay and Santa Clara County are synonymous.

South Bay Housing Market Inventory Sinks in 2025

According to a January 2025 report from the California Association of Realtors (C.A.R.), housing market inventory within the South Bay has declined over the past year.

Among the state's 58 counties, Santa Clara County had the lowest level of real estate inventory. But that's probably not surprising to those who are familiar with Bay Area real estate trends.

The C.A.R. report included the "Unsold Inventory Index," which measures the number of months needed to sell all homes on the market at the current sales pace.

Here's the UII for all Bay Area counties as of January 2025:

Alameda: 1.2 (months)
Contra Costa: 1.8
Marin: 1.5
Napa: 3.3
San Francisco: 1.5
San Mateo: 1.1
Santa Clara: 0.9
Solano: 2.7
Sonoma: 2.8

Statewide, the Unsold Inventory Index was sitting at 2.7 months, at the start of 2025.

This report confirms that the South Bay sub-region in Santa Clara County currently has the least amount of housing market inventory in the state of California. This scarcity has increased competition among buyers and boosted home prices in the area.

Why Are Inventory Levels So Low?

Santa Clara County's exceptionally tight inventory situation affects other aspects of the housing market as well.

Low supply puts upward pressure on home prices, creates a competitive market for buyers, gives sellers the upper hand in negotiations, and often results in offers above the asking price.

But why is housing market inventory so low in the South Bay / Silicon Valley region? Why does this market frequently deal with supply shortages, more than other parts of the U.S.?

Here are some of the main influencing factors:

1. Tech Industry Lure

The presence of major tech companies in Silicon Valley (such as Google, Apple, and Facebook) attracts a large number of employees. This increases the demand for housing overall.

Many of those tech workers have salaries that far exceed the national average, which enables them to afford the high home prices found in the South Bay.

2. Limited Space for Development

You can't build a home wherever you want in Santa Clara County. The county has limited space for new developments due to geographic constraints and existing urbanization.

Additionally, strict zoning regulations and expensive land make it difficult to increase housing density and build new developments.

According to the nonprofit news publisher CalMatters:

"But many of those same coveted locales place additional limits on where — and when and how and how much — construction can take place. That all makes it that much harder for housing to keep up with demand. And for decades, it has not."

3. Real Estate Investors

Many investors buy and hold properties in the South Bay for their long-term value. This reduces the number of homes available for purchase. Both individual and institutional investors have contributed to the housing shortage in Santa Clara County.

4. Reluctance to Sell

Homeowners may be hesitant to sell due to the high cost and difficulty of finding a new home in the same area.

Additionally, many homeowners in the South Bay have mortgage rates that are well below today's averages. This so-called "lock-in effect" gives homeowners another reason not to sell their homes.

These are not the only factors contributing to the real estate inventory shortage in the South Bay. But they do have the biggest impact, when it comes to creating long-term supply constraints.

How It Affects Home Buyer Behavior

Tight inventory in Santa Clara County influences home buyer behavior in a number of ways. Buyers have to go above and beyond to outfox one another, if they hope to find and purchase a property in this market.

Here's how low supply affects home buyers in the South Bay Area:

Sight unseen: Buyers in Silicon Valley often feel pressured to make offers on properties they haven't personally visited, relying on virtual tours or agent walkthroughs.
Above asking: Bidding wars are common in Santa Clara County. They often lead to a scenario where buyers offer more than the list price to increase their chances.
Waiving contingencies: To make their offers more attractive, buyers in the South Bay sometimes waive common purchase contingencies, such as financing or appraisal.
Quick offers: Properties in desirable locations can receive multiple offers within hours of listing, forcing buyers to make quick decisions and submit offers immediately.
Shorter escrow: Buyers might compress the time frame for inspections and other due diligence to expedite the closing process and beat out other offers.
As-is: In a competitive market like the South Bay, buyers are often willing to accept properties in their current condition without requesting any repairs.
All cash: Home buyers with the financial capacity to make all-cash offers can gain a major advantage in bidding wars (though most buyers cannot afford this).

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