Double Digit Price Increases Despite Falling Sales and Rising Inventory
In what is threatening to become a trend, in January the Boise real estate market witnessed the counterintuitive combination of sharply dropping sales, rising inventory and strong price increases. Closed sales for the month (604) were off 8.8% versus 2018 and the number of homes for sale shot up 17.5% to 1494. At the current rate of sales this represents 2.5 months of inventory, still very low, but the highest in two years. The average days on market at 51 was up 8.5%, also indicating the market is slowing somewhat. Given modestly rising interest rates, uncertainty over the effects of the tax “reform” passed in 2017 and relative lack of affordability caused by higher prices the slowdown is not a surprise.
Neither is the fact that prices are often slow to react to market shifts, but in this case the percentage increase in prices has remained in double digits despite several months of declining market volume. In fact the average price per square foot in the Boise real estate market hit a new record high in January of $173, 13.1% above a year ago. Meanwhile the average sales price was up 11.7% to $363,000, the second highest ever. Most experts feel that gradually prices will fall more into step with market activity but it could take several more months.
In the meantime people are wondering if we are experiencing a price bubble. Certainly double digit price increases in the face of dropping market volume and rising inventory are unsustainable but that doesn’t necessarily mean the bottom will drop out as it did in the last recession. The foundation of the market is much more solid than it was then with stricter lending practices, a generally healthy economy and job market and continued in-migration to the Boise area. For another look at the outlook for Idaho, please review the latest report prepared by Windermere’s chief economist Matthew Gardner. As we all know real estate is local and while the general outlook for Boise is relatively strong despite the recent slowdown in sales, the national picture may be less rosy. A recent article in Business Insider paints a much bleaker picture of doom and gloom for the housing and mortgage industries. It is worth a read even if it doesn’t directly apply to our market.
SUMMARY BOISE (ADA COUNTY) MARKET STATS FOR JANUARY 2019
*Does not include manufactured homes **see detailed graphs below for more information.
|Type||# Sold||% +/-||% of Total Sold||# For Sale||% +/-||% of Total For Sale||$/SF||% +/-||Average Sold Price||% +/-||Days on Market||% +/-||Months Inventory|
As mentioned last month, new construction continues to buck the trend and is in some ways the “saving grace” for the market right now. Despite the slowdown in the overall market sales of newly built homes (not including custom build jobs) surged 20.6% in January and represented almost 35% of all homes sold. The number of new homes for sale was also up sharply (+18.3%) and made up 63.9% of the total available inventory. Prices for new homes were increasing at a similar pace to existing homes. The average price per square foot ($178) was up 11.3% while the average sales price was $414,000 up 8.4%.
While the current stats offer a glimmer of hope for buyer we remain in a strong seller’s market. Even though the multiple offers and bidding wars are not as common as they were last summer buyers are still generally dealing with lower than average inventory and decreasing affordability in the face of ever increasing prices. Please feel free to contact me with your questions and comments.
Windermere Real Estate/Boise Valley
1412 W Idaho St.
Boise, ID 83702