Lack of Inventory Takes a Bite Out of Sales—Not Prices
It was easy to blame slow sales in February and March on the weather in December and January, but weather should not really have affected April sales. Most contracts that closed in April were probably written in late February or March, long after the severe winter weather had abated. But for the third straight month sales in April were either down or virtually flat from a year ago. 894 residential sales closed in April, an 8.2% drop from a year ago. I believe the culprit at least in April was the continuing drop in inventory especially of pre-existing homes. Of the 1697 total homes for sale in Ada County 47.6% were new construction. And while total inventory was 13.9% lower than a year ago, the inventory of pre-existing homes was off 24%. At the current rate of sales overall inventory stands at just 1.9 months, indicator of a strong seller’s market. And what homes do come on the market are selling more quickly. The average days on market dropped 12% to 44 days.
So this issue is not demand, it is supply. Current homeowners are reluctant to sell when they see prices continuing to rise while a relatively strong economy and continued low interest rates is prompting buyers to act now before prices and or rates price them out of the market. Add the continued strong in-migration to Idaho from not only the west coast but nationwide and you have the recipe for strong competition between buyers and rising prices. Especially in the lower price points, multiple offers and price escalations have become the norm. And while the rate at which prices are rising has remained fairly moderate, the length of time that they have been rising has pushed us into record territory. You may have seen the story on KTVB this week reporting that Boise was one of only 6 metro areas nationwide that hit record high real estate prices in February. That in and of itself is unusual, as prices typically reach highs in the most active time of the year for the market: summer. And February of this year saw sales drop significantly at least partly due to the weather in the two months preceding. In April the average price per square foot reached $140 a 6.1% increase over 2016 while the average sales price was up 7.9% to $288,000. Oddly enough the average sales price of new construction, while at a $50K higher price point than resale, dropped slightly in April. I believe some builders are adjusting their floor plans to appeal to buyers who are finding little to buy in the way of resale under $300,000.
SUMMARY BOISE (ADA COUNTY) MARKET STATS FOR APRIL 2017
*Does not include manufactured homes **see detailed graphs below for more information.
|Type||# Sold||% +/-||% of Total Sold||# For Sale||% +/-||% of Total For Sale||$/SF||% +/-||Average Sold Price||% +/-||Days on Market||% +/-||Months Inventory|
Many economists continue to predict that we are a year or less away from the latest peak and that while there should not be a wholesale collapse of the market like we saw from 2008-2010, there will at least be a change in direction for the market. Once current owners suspect the peak is near expect inventory to increase quickly while at the same time rising prices and more significantly, rising interest rates, force some buyers to drop out of the market. Couple rising inventory with a steady or slowly shrinking buyer pool and prices may begin to respond. Nothing is for certain of course! Please feel to contact me with your questions and comments and have a great summer.
Windermere Real Estate/Boise Valley
1412 W Idaho St.
Boise, ID 83702
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*All reports are published May 2017, based on data available at the end of April 2017, except for the today stats. All reports presented are based on data supplied by the Intermountain MLS. Intermountain MLS does not guarantee or is not in anyway responsible for its accuracy. Data maintained by the Intermountain MLS may not reflect all real estate activities in the market. Information deemed reliable but not guaranteed.