Boise Real Estate Market Report For September 2020

As Prices Skyrocket Affordability Becomes Bigger Concern 

Record low inventory and very high demand continued to send Boise real estate prices soaring in September with no short term changes in sight.  But affordability is also suffering and may spell trouble down the road.  Closed sales in the Boise real estate market in September (1307) were up 34.3% vs September 2019 while the number of homes for sale was almost 70% lower than at this time last year.  Average days on market dropped to a record low of 26 days and based on the current rate of sales we have just 0.4 months of inventory.  While new construction sales were up 41.6% this was not enough to significantly relieve the pressure on inventory, although if you exclude new construction the average days on market drops to 16 and the available inventory is only 0.3 months.  To put it in perspective average days on market of 60 days and 4-6 months of inventory is considered a stable market. No matter how you slice it we are in an unprecedented seller’s market. Another example of this was highlighted in an article in The Idaho Statesman earlier this week describing how desperate buyers are forgoing home inspections and appraisal contingencies in order to compete with multiple offers on virtually every house available. Both these strategies carry enormous risk for buyers—risks they are forced to take to be successful in the current market.

The average price per square foot jumped 15.2% to a record high $212 while the average sales price jumped 19% year over year to $470K, also a record.  The combination of record low interest rates and an continued influx of cash rich out of state buyers has kept demand very high despite the lack of inventory.  A couple of factors may be discouraging existing homeowners from selling exacerbating the inventory shortage.  First with record low interest rates, many existing homeowners have been able to re-finance and drop their rates 25% or more and have chosen to do so rather than sell.  Also many homeowners (myself included) have come to realize that with prices as high as they are they literally couldn’t afford to by a comparable home in the market today, let alone trade up.  Even those looking to downsize are finding that their options are both few and more expensive than they can afford. As Windermere’s Chief Economist Matthew Gardner warns in a recent report, this may be leading us closer to an affordability crisis.  In the Boise real estate market, this is already starting to happen.  As shown above, the average sales price is up 19% in the last year while wages are growing in the 3-4% range.  While this doesn’t necessarily affect cash buyers, it is putting the pinch on those buyers trying to qualify for a mortgage.  If they can’t afford to pay more they look for other ways to stay in the game like waiving contingencies ,as mentioned above. Matthew also points out that if interest rates begin to rise (they can’t go much lower) then the buying power of those seeking financing will diminish even more quickly.  He says a rate increase of 1% roughly equates to a 10% drop in the price a typical buyer can afford.  As long as the rates stay low and there are lots of cash buyers out there the demand for homes in our market may not be affected that much but when rates inevitably rise we may see a real shift in the market dynamics.  Something to keep an eye out for—similar to a bubble but with different root causes than the one we saw in 2006-2007. Of course, other “macro” factors such as COVID may also have an impact but as we saw this spring, at least in our market, the initial reaction to the pandemic was no more than a short lived blip on the radar.

SUMMARY BOISE (ADA COUNTY) MARKET STATS FOR SEPTEMBER 2020

*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
All 1307 +34.3 100 573 -69.2 100 $212 +15.2 $470K +19.0 26 -27.8 0.4
New Construction 395 +41.6 30.2 338 -63.1 60.0 $204 +9.7 $458 +8.3 50 -18.0 0.9

 

Canyon County 563 +19.5 100 199 -77.5 100 $171 +15.5 $343K +21.6 24 -20.0 0.4

 

Please feel free to contact me with your questions and comments and thanks for reading! 

Cam Johnson

Realtor®

Windermere Real Estate/Boise Valley

1412 W Idaho St.

Suite 120

Boise, ID 83702

208-258-2222 Office

208-283-3664 Cell

camjohnson@windermere.com

http://IdahoWindermere.com

Posted on October 14, 2020 at 1:10 pm
Cam Johnson | Category: Monthly Real Estate Market Reports | Tagged , , , , , , , , , ,

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