Boise Real Estate Market Keeps on Truckin’
September brought more of the same to the Boise real estate market—strong demand, low inventory, and rising prices. There were 1052 closed sales in Ada County in September, a 15.5% increase from a year ago. Pending sales are also up in double digits suggesting sales should be strong for the next couple months as well. Inventory remains tight with 2355 active listings which at the current rate of sales represents 2.2 months of inventory. This is 8.4% below the inventory at this point last year and indicates that a strong seller’s market continues in Boise. The average days on market rose from 39 in August to 48 last month which is fairly typical heading into the slower fall season. 60 days on market is considered a “normal” market.
Prices responded to the strong demand but haven’t strayed into “bubble” territory at least for now. The average price per square foot at $134 was up 6.3% from a year ago while the average sold price jumped 9.8% to $281,000. That large of an increase in the average sold price is a bit concerning but still below the 10% threshold that I consider a red flag for a market that is possibly overheating. Given that overall inflation remains in the 2-3% range if we see homes prices rising in the 10-15% or higher range there would be a legitimate argument that a bubble is forming especially since we have seen prices rising steadily for the past several years after the collapse of 2008-10. Fortunately, so far we have avoided that scenario.
SUMMARY BOISE (ADA COUNTY) MARKET STATS FOR SEPTEMBER 2016
*Does not include manufactured homes
|Type||# Sold||% +/-||% of Total Sold||# For Sale||% +/-||% of Total For Sale||$/SF||% +/-||Average Sold Price||% +/-||Days on Market||% +/-||Months Inventory|
One other interesting dynamic of the current market has been the explosion in new construction in the last couple of months. After a year over year increase in sales of 81.8% last month, September followed suit with an almost as amazing 61.4% increase. What is particularly interesting is that also for the second straight month the average sold price of new homes listed in the MLS actually fell—not by a lot but still in stark contrast to re-sale home prices that, as discussed, are nearing the bubble zone. I don’t have the answer but I do have a theory. Most of the new construction homes that are listed on the MLS are production and spec homes built by the larger builders in the area. My theory is that they have realized that in order to sell the volume they want they need to adjust their product and price point slightly lower. The gap in the average price per square foot of a new home versus resale is about $16. For much of the last five years the differential was $20 or more and was based on lower price points. As a percentage difference the gap has clearly tightened as builders sharpen their pencils. I would welcome anyone directly in the building trade to comment on this theory either in support or with facts to support a different one.
One last note, as my broker pointed out at our weekly meeting today, despite this being considered a strong Seller’s market this is still a time of great opportunity for Buyers due to one simple fact—interest rates remain near record lows making the relative cost of buying a home very attractive. Furthermore I think we may finally begin to see a shift to higher rates by the end of the year, and while we probably won’t see a dramatic rise, even small fluctuations can have a dramatic effect on a Buyer’s purchasing power. Please feel free to contact me with your comments and questions. Your referrals are also very much appreciated.
Windermere Real Estate/Boise Valley
1412 W Idaho St.
Boise, ID 83702