Market Slide Continues

August saw the continuation of the Ada County market slide that began in July. Closings in August were 29% lower than closings last August.  Pending contracts, which are the best indicators of the near-term future, were also down 19% compared to the level of pendings at the end of last August.  

As a result of the decrease in sales, inventory has increased by a factor of 322% since the end of last April and by 171% over the last 2 months, increasing from 21 days of inventory to 39, still quite low compared to a “balanced” level of approximately 180 days.

In the week preceding this report, almost 90% of the price changes in the market were decreases.  The chart below shows the number of sales and the average prices for each month’s sales for the last 12 months.

Market Change

Anecdotal evidence from our agents (commenting on fewer showings on listed properties, fewer people attending open houses, etc.) has been backed up by recent results.  Unit sales were down this July compared to last July by 29%, the highest reduction of same month sales in the last 14 years (see the chart below).   Pendings – contracts in escrow at the end of the month – were also down 18% compared to the level of pendings at the end of July 2020. Pendings, of course, are the best predictor of near-term future sales.

Part of the reason for the slowdown is that the average price of properties sold this July ($624,881) was 43% higher than last July.  The median price ($535,000) was 40% higher.  

An aftereffect of lower sales is higher inventory. Ada County housing inventory at the end of this July grew by 19% compared to the level of inventory at the end of July 2020. Despite that increase, we still have only 30 days of available residential properties, far from an over-supplied “buyers’ market”.

What should we do?  Sellers, if this trend continues, future prices may be lower than current prices so, if you’re thinking of selling, now may be the best time.  Buyers, make sure the prices of potential purchases make sense to you.  A professional Group One Sotheby’s agent can help in that regard.

The chart below shows the record of same month July sales for the last 14 years:

6 Month Status Report

Sales down, pendings down, prices up. Sound like 2007?  The question often heard is, will we repeat 2007-2009 again? The number of units sold and the number of pendings during the first 6 months of this year are both down compared to the same statistics for last year.  And yet prices are up.  In 2007, this same pattern led to a major correction in 2008.  Will that happen in 2021?

The chart below shows that the first 6 months in 2021 are similar to 2007 when unit sales were down, pendings were down and prices were up. The same pattern is evidenced in the first 6 months of 2021. Although there are similarities to 2007, there are some major differences.  In 2007, the inventory of available homes was high, while this year inventory is very low.  In addition, the equity in homes today is much higher than 2007 when there were many “no doc” loans which created a risky profile of existing inventory.

Although there are similarities today to what the market was like in 2007, we can witness several trends, such as solid loans and low inventory, that protect us from another downfall.

The chart below presents a deeper dive into the current Ada County real estate market.

Resale Homes Surge

Helped by a 67% increase in inventory compared to the end of April, May 2021 saw a 12% increase in the number of sold properties in Ada County over May 2020.  Properties sold increased despite inventory being less than half of what it was at the end of May 2020.

Even better news, most of the increase in inventory was caused by an increase in the availability of existing, not new, homes. Those can’t be manufactured; an increase in the inventory of existing homes depends upon the willingness of owners to part with their properties and move on.

During the past year, characterized by high demand and low inventory, average home prices sold in Ada County have increased by 21%; good for existing owners, but challenging for buyers. What a great time for sellers of existing homes! The price per square foot for existing homes sold in the past year was $229, roughly 6% higher than that of new homes ($216). Is this a once-in-a-lifetime opportunity for those who own homes in Ada County?

It might be.

To find out what your home is worth, contact your Group One Sotheby’s Realtor.

Spring Forward

The first 3 months of the year saw a reduction in same month sales; April changed that trend. Even though we had 74% fewer properties available, we sold 14% more units in April 2021 than we did in April 2020.  Pending contracts – contracts that are executed but not yet closed – were also up 16% over the end of last April, promising the continuation of a strong market.

Although the number of properties sold in the first 4 months this year were 3% lower than the comparable period of last year, the average price was an astounding 31% higher and the median price was 28% higher for sales during that period.

One surprising continuing trend is that the price per square foot of resale homes is about 6% higher than the price per square foot of new homes. Historically, new homes have sold for much more than resale homes.

As a reminder, our data includes sales not only of detached single-family homes, but also of condominiums, townhomes and homes on acreages, covering all the expanded choices buyers enjoy in our modern market.

The table below shows a breakdown of units sold as well as the percentage increase in average and median prices for each type of residential property sold during the first 4 months of 2021 compared to the same months in 2020:

Low Inventory Shapes Market

Repeating the pattern that began this January, sales in March were lower than last March because of severely limited inventory. With only a 9-day supply of available homes, buyers are competing with each other, pushing average prices up 16.6% over the last 12 months. Multiple buyers, escalation clauses and audacious offers have become regular stories in our residential market.

The supply of resale or existing properties is so limited that the price per square foot of existing properties has risen above the price per square foot of new homes, a phenomenon not seen in my 40 years in this market.

Anecdotal data reveals that many owners are holding on to their properties for fear of not being able to find a replacement property. 

The data below compares first-quarter results for the last 4 years of limited inventory during which time the average sold price has increased 49%.

Same Month Sales are Down

Same month sales – meaning sales this February compared to sales last February – are down once again, continuing the trend started last month. And it’s all due to lack of inventory.  

As you can see from the chart below, Ada County housing inventory at the end of last February was more than three times the amount of inventory at the end of this February, thereby limiting buyers’ choices, increasing competition among buyers,  and causing prices to increase more dramatically (the median sold price increased 14.8% over the last 12 months).

Another unusual recent trend that has continued is that the price per square foot of existing (resale) properties has exceeded the price per square foot of new homes, $211 compared to $205. We don’t remember this happening before.  This could create the opportunity to sell your 2500 square foot home and buy a 2500 square foot new home for a lower price!

Be sure to contact your Group One Sotheby’s International Realty agent to help you guide your decisions in this most unusual market.

A MARKET TURN?

The story of Ada County real estate for the last five years has been consistent: Increased sales (from 11,316 units in 2016 to 12,710 units in 2020) in the face of decreased inventory (starting at 1,784 units at the beginning of 2016 to only 379 units at the end of 2020).

January of this year began with 379 housing units available for sale and ended with 323 units, still consistent with the recent past.  However, unit sales during the month of January decreased by 24% over those of last January, the first decrease in same month sales in many years. 

For the future: Let’s keep an eye on inventory and sales in the next several months to see if this trend continues.

For the past: Ask your Group One Sotheby’s International Realty agent for our 2020 annual housing report to be issued February 15.

What A Year It has Been

And what questions it leaves us.

First, a reminder about what we cover. Our statistics are from our database constructed from MLS statistics, covering single family homes and homes with acreages up to 2 acres of land, townhomes and condominiums. Some services that cover only detached single family homes will have slightly different statistics. We believe it is more informative to include all the main choices that buyers have, especially as housing forms change over time.

The year ended with only 379 such properties on the market, the lowest number we can remember. Inventory at the end of 2019 was 3.3 times more than it was at the end of 2020 and gives us approximately 12 days of available homes.

Despite the low inventory, sales during the month of December were 6% higher than they were in December, 2019. Perhaps even more astounding is that pending contracts were up 21% over the last year. Demand is rising, sales are rising and prices are up. The average and median prices of residential properties sold in 2020 increased by 15% over properties sold in 2019.

Perhaps the most surprising statistic, however, is that the price per square foot for resale properties, at $205, was higher than the price per square foot of new homes, at $201. We don’t remember that ever happening.

The charts below show the relationships between sales, prices and inventory every year since 2002.

A Boise Inversion

Last year at this time we had 320% more inventory than we had in Ada County at the end of this November and yet we had 7% more sales this November than last November and 18% more pending transactions at the end of the month.  That has been a major part of the real estate story for the last half of the year: increased sales despite a drastically lower supply of property available for sale.  We discussed this in our report last month (“The Answer is Velocity”).

Multiple offers are occurring at every price range and buyers have learned to act aggressively and quickly. A market like this requires some strategic thinking. Some sellers are moving into rentals then putting their properties on the market so they can look for replacement properties in a leisurely manner with cash in hand. Whether you are a buyer or a seller, be sure to check in with your Group One Sotheby’s agent to develop a strategy for this market.

The lack of inventory combined with the acceleration of buying activity has pushed prices up 14% over the last 12 months, roughly double the national price increases reflected in the Case-Shiller index.

The charts below show how this year has been different from last year.  The first chart shows pendings and inventory from last year as they occurred in a strong but fairly normal pattern. The second chart shows what has happened this year and, in particular, how pendings and inventory have inverted.