Low Inventory Continues to Hurt Sales Volume and Boost Prices
For the second month in a row closed sales were down in Ada County in May primarily due to inventories that continue to dwindle even as demand remains very high. 1076 homes sold in May, 3.3% below last year’s total, while year to date sales are down 1%. Inventories keep dropping however—in May there were 14.8% fewer homes available than last May while year to date inventory is down 16.5%. Based on the current rate of sales there is only 1.7 months of available inventory. Remember 6 months of inventory is considered a stable market and anything 3 or lower is a strong seller’s market. Suffice it to say at 1.7 months we are in a very strong seller’s market. And what inventory does exist is selling faster than ever. Average days on market dropped to 37 (-15.9%), with 60 days being the norm.
Needless to say the combination of low inventory and high demand caused prices to surge in May. While we have been in a fairly similar market situation for over a year now for the most part price increases have been relatively moderate, in 5-8% range annually. In May prices took things up a notch. The average price per square foot at $144, was up 9.1%, while the average sales price jumped 10.3% to $299,000. While these numbers will certainly catch the attention of the “bubble hawks”, I don’t think there is reason to panic at this point. However it does bear watching as the concern is that if homes increases are far out pacing earnings growth then the market becomes imbalanced. Barring a major macroeconomic shift (ie: worldwide recession, war, etc.) I think the continuing job growth and in-migration to the Boise area will keep demand relatively strong even as some buyers are forced out of the market by rising prices and interest rates. I believe the foundation of the market is strong enough to allow for a gentler slow down in the market than we saw 10 years ago. One concern I do have is that first time buyers, who drive the market by allowing many current owners the opportunity to move up when they sell, are the most likely to be forced out of the market due to price and interest rate increases. This is already a problem in some of our larger, higher priced neighboring cities. In migration from wealthier markets to Boise can mask this somewhat, but the market needs first time home buyers to stay healthy in the long run.
Some builders it seems are reworking their floor plans and price points to be more accessible to first time and millennial buyers and as a result prices increases for new construction have recently lagged behind resale. While the average price point for new construction is still significantly higher than for resale the gap has narrowed slightly in recent months. And while the average price per square foot for resale jumped 10.9% in May, for new construction it only rose 2.8%. Similarly, while the average sales price for resale increased 12%, new construction prices were up only 3.4%. This of course only reflects production builders and spec homes and doesn’t take into account the custom build jobs that aren’t reported in the MLS.
SUMMARY BOISE (ADA COUNTY) MARKET STATS FOR MAY 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|
While it is impossible to accurately predict when the market will peak and how dramatically it will adjust itself, one thing is for certain, real estate has and likely always will be cyclical and local. So while the Boise market may not be in lock step with surrounding areas or the country as a whole we will go through up and down cycles just like everywhere else. We have been on a pretty strong run for the last six years, so I wouldn’t be surprised to see the market here in Boise start to shift in the next 6-9 months. A gradual drop in prices and surge of inventory could actually be a good thing in the long run. Please feel free, as always, to contact me with your questions and comments and enjoy your summer once it finally really gets here!
Windermere Real Estate/Boise Valley
1412 W Idaho St.
Boise, ID 83702
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*All reports are published June 2017, based on data available at the end of May 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.