Two headlines in the Wall Street Journal caught my eye recently. On Friday April 27th the Journal’s front page trumpeted, “Stunned Home Buyers Find The Bidding Wars Are Back” followed 3 days later by a more sober, “Housing Ends Slide but Faces a Long Bottom.” While real estate is local rather than national, and I tend to discount any national media reports on real estate as “not relevant to Boise” in this case there is truth to be found in both these headlines.
Bidding wars are back here in Boise albeit in a fairly narrow segment of the market (mostly under $150K) and they are hardly ubiquitous. Nonetheless many of my colleagues have already declared that the Buyer’s Market is over. In many ways it is, as inventory is very low and prices are rising finally. I certainly am finding that properties the buyers I’m working with are considering are selling much more quickly than even a few months ago. But the relatively positive trends in the last 4 months here in Boise will undoubtedly experience a few bounces along the bottom and it may still be months before we are in full recovery mode. For example even as overall prices increased in April vs 2011 for the 4th straight month, in the new construction segment, where the number of homes sold is surging, prices were actually down 1.3%. Prices also continue to drop for short sales (-2.8 vs 2011) even as the number sold increases (+20.3%) and for non-distressed sales (-2.8%). In fact the only segment where prices increased in April was REO/Bank Owned which rose +25.7%.
So the strong overall price increases in April are somewhat misleading as it is partly due to the product mix of what is selling moving away from the lowest price segments such as REO/Bank Owned and towards the high price segments such as New Construction and non-distressed properties. So while overall the average sales price in Ada County was up 13.4% versus 2011 and 10.5% vs the same qtr last year, I don’t think those percentages would apply to the exact same house if it sold in April 2011 and then again in 2012. In April distressed sales only made up 32.1% of closed sales, down from around 47% in March and above 50% in much of 2011. So while we are selling more high priced oranges than less expensive apples lately, in real estate it is hard to get an accurate read on how the prices of individual apples and oranges are faring over time because in most cases the same house doesn’t sell again for many years in which time both the condition of the property and the desirability of the location may have changed.
|Type||# sold||% change||# pending||%change||Inventory % Change||Avg $/sf||% change||Avg Sold Price||% change|
|All Single Family||659||+8.2||753||+13.7||-29.9||93||+10||186,000||+13.4|
This chart shows the “ false” increase in prices very well. Sales of non distressed properties are surging causing prices overall to increase even though the average price of non-distressed properties dropped, while sales of REO’s are plummeting (due to lack of available inventory) but prices for them are skyrocketing. The much talked about “phantom inventory” that the large banks supposedly have on their desks would come in handy right now as there are loads of buyers, both investors and owner occupants, in the market all competing for a much smaller selection of properties.
A few more quick bullet points of note:
1) Sales of homes priced over $200K were up 41.1% and pendings were up 59.3. 31.2% of all homes sold were over $200K up from 23.9% in 2011. This jives well with the points discussed above. I believe there would be an even stronger trend here if buyers looking to trade up weren’t hindered by being upside down in their current homes and therefore unable to sell.
2) Appraisal issues are becoming more common especially in the higher price brackets. As we know appraisals are based on history not predictions of the future so they can often lag behind a bit when the market turns. Plus as noted above, prices in all categories except REO/Bank owned aren’t actually rising.
3) If you have the flexibility and patience to deal with the process short sales are becoming increasingly attractive. Banks have improved their processes somewhat, seem willing to pre-approve prices in some cases, and are accepting deals more often. At $73/sf average vs $102/sf for non-distressed properties there is a strong financial incentive to consider short sales when buying although they aren’t for everyone.
4) Interest rates are back down below 4%. One lender was offering 3.75% for a conventional 30 year fixed. It seems like most people able to refi have already done so, and the mortgage companies I have talked to say almost all their current business is purchases…because it’s a great time to buy.
5) Inventory at 2123 homes edged up in April after hitting an almost historic low in March. This is probably more due to the usual spring uptick in listings more than a market shift. We still only had 3.2 months of inventory (the lowest in over 5 years) versus 5 months this time last year.
So overall the news continues to be good, with a slight sugar coating that I hope I was able to show above. Sorry for the late date of this report, but I was on vacation in Hawaii last week! As always, I welcome your comments, questions, and above all your referrals. Please feel free to share this information with your friends, families, and colleagues.