That Predicted Market Shift? I Think It Has Started…
For the last few months I have been describing subtle signs of storm clouds on the horizon that might lead to a much predicted shift in the market. In September some big drops from those clouds started hitting my windshield. Closed sales in September in Ada County (931) dropped 18.1% from a year ago, the biggest such drop since the market bottomed out in 2010-11. Furthermore sales dropped 21% in one month from August to September 2018, a much larger drop than would be expected due to normal seasonal slowdown. Pending sales dropped 3.8% while the number of homes for sales also dropped 7.3%. The drop in the number of homes for sale, while significant, is much smaller than the 15-25% drops we have become used to. As a result inventory at the current rate of sales rose to 2.1 months. While this is still historically very low it is actually the highest it has been in the Boise real estate market in 18 months. Blame for the sharp drop in sales lies with the usual suspects: lack of available inventory, rising interest rates, and prices outpacing wage growth. Lack of affordability is continuing to force some buyers out of the market despite strong demand from out of state and repeat buyers.
Despite the drop in sales prices are still barreling ahead, but have moderated their upward spiral slightly and typically we would expect a real flattening in the price curve to lag several months behind the turning point in sales. The average price per square foot actually did drop slightly from August to $167 but was still 12.1% ahead of September 2017. The average sales price dropped a significant $19K from August but managed a 15.9% increase over last year.
SUMMARY BOISE (ADA COUNTY) MARKET STATS FOR SEPTEMBER 2018
*Does not include manufactured homes **see detailed graphs below for more information.
|Type||# Sold||% +/-||% of Total Sold||# For Sale||% +/-||% of Total For Sale||$/SF||% +/-||Average Sold Price||% +/-||Days on Market||% +/-||Months Inventory|
New construction sales continue to grow despite the overall decline in the market although in September sales were only up a modest 2% from 2017. 26.7% of all homes sold in Ada County were new in September a slight uptick from August (25.8%). More significantly, the number of new homes for sale rose 8.8% from a year ago and represented 45.3% of all available homes. These figures do no include custom build jobs which are not typically reported in the MLS, but suffice it to say that new construction is a driving force in the market right now. If you back out new construction from the number of homes sold in September, sales of pre-existing homes dropped 23.6% compared to a year ago. Not surprisingly with the high demand for construction labor and materials, the average sale price of a new home runs about 18% higher than for a re-sale home. The difference is actually probably larger than that if you try to compare “Apples to Apples” as far as size, condition, etc.. New construction tends to be on average larger and in better condition than older homes in established and historic neighborhoods.
Looking forward, most “experts” are predicting that current trends will continue although the pricing curve should slowly start to flatten. It remains to be seen whether we will actually see prices drop in the next 6-12 months or merely stabilize at a more sustainable growth pace more in tune with overall inflation.
Please feel free to contact me with your comments and questions. Also for those interested in hearing Windermere’s Chief Economist, Matthew Gardner, give his economic analysis and forecast for the Treasure Valley please plan to join us Thursday, October 25 from 10:00-11:30AM at JUMP in downtown Boise. You can register for this free event here: https://www.eventbrite.com/e/presentation-by-matthew-gardner-windermeres-chief-economist-tickets-49746412860.
You can also just show up but be aware seating may be limited. This was a great event last year and hope you can make it this year!
Windermere Real Estate/Boise Valley
1412 W Idaho St.
Boise, ID 83702