Sales Continue to Slide but Prices at Record Level
The Boise Real Estate Market in December was marked by sharply falling sales and sharply rising prices. An odd couple to say the least. December’s 14.8% decline was the fourth in the last five months and sales for the most recent quarter combined are off 10.5% versus last year. Also for the 2nd straight month, after literally years of declines, the number of homes for sale was up 5.7% and pending sales, an indicator of future market activity were off 5.1%. Normally this would be bad news for sellers and at some point this will likely be the case, but for now prices seem unaffected by the drop in sales and are at record or near record levels. The average price per square foot was up 17% to $172/sf., a new record. Meanwhile the average sales price was $363,000 (+16% )second only to the $368,000 recorded in August. Even as the trend of declining sales has deepened the rate at which prices are rising has accelerated. In November the average price per square foot and average sales price were up 12.3% and 13.6% respectively.
Conventional wisdom would say that a drop in sales is somehow a result of a drop in demand and that at some point prices should reflect that. Until recently though it seemed a lack of supply was the primary market force keeping sales in check. The demand was there but there was nothing to buy. Now although inventory is still very low by historical standards we are seeing the number of homes for sale rise compared to a year ago with no apparent effects on the upward march of prices…so far. Current inventory based on the rates of homes selling stands at 2.2 months the highest in almost a year, while the average days on market is 41 a 4.7% decline from last year. As a reminder, 6 months of inventory and 60 days on market are widely seen as indicative of a stable or “neutral” market as far as how much leverage buyers and sellers have. So we are still in a strong seller’s market despite the sharp drop in sales. Continued in migration, stabilizing interest rates, and a generally strong local economy and job market seem to be enough to keep the party going.
SUMMARY BOISE (ADA COUNTY) MARKET STATS FOR DECEMBER 2018
*Does not include manufactured homes **see detailed graphs below for more information.
|Type||# Sold||% +/-||% of Total Sold||# For Sale||% +/-||% of Total For Sale||$/SF||% +/-||Average Sold Price||% +/-||Days on Market||% +/-||Months Inventory|
One other area in the latest Boise real estate market numbers worth pointing out is the role of new construction in the current mix of homes for sale and being sold. While overall sales were down 14.8%, sales of new homes ( not including custom build jobs) were up 11.3% and the number of new homes for sale jumped 14% versus last year. The 256 new homes sold in December was 34.1% of all homes sold while the 1019 new homes for sale represented 62.1% of all homes listed. Without new construction the market would be in serious trouble on the supply side. For example, sales of pre-owned homes were off 24% in December and 10.5% for the most recent quarter. This may be helping boost prices as newly constructed homes tend to be priced above the overall market average. Currently the average price per square foot for new construction is $175 (vs $170 for re-sale homes), while the average sales price for a newly built home is $413,000 (vs. $337,000 for re-sale).
Based on what is happening in other markets around the country and predictions for a nationwide economic slowdown and possible recession in the coming months, I still believe that the current double digit price increases are unsustainable and we will see a gradual flattening of the price curve in the coming months. Supply for the time being will likely stay pretty tight even with all the new construction occurring because there hasn’t been a strong enough trigger to get existing homeowners to sell. Many who would like to sell and take a profit are worried that they won’t be able to find a replacement home that meets their needs and their budget. Until sellers feel like they may be missing out on peak pricing if they don’t sell we will continue to see very few existing homes on the market compared to historical averages.
Please feel free to contact me with you comments and questions.
Windermere Real Estate/Boise Valley
1412 W Idaho St.
Boise, ID 83702