September was another good month for residential real estate sales in Ada County. Closings increased by 3% over last September and pending sales increased by 10%, signaling a good fall. Inventory is down 10% from the end of last September, leaving us with only 42 days of resale homes and new homes that have been completed and are ready for occupancy. (Only 18% of all new home inventory in MLS is actually finished construction, ready for occupancy.)
Through three quarters of the year, sales are very slightly (2%) ahead of last year despite lower inventory. Higher demand despite lower supply should produce significant price increases.
The chart below shows the average price and the percentage change in average price from 2002 through the third quarter of this year. As you can see, the percentage of price increase (red line) has leveled of at about 6% in the last four years.
This market is every builder’s dream. There is virtually no inventory (20 days of finished new homes and 48 days of resale homes). But there is plenty of demand. And the market is set up to almost guarantee success for any competent builder – except perhaps for the availability of reasonably priced building lots. (There’s always a catch, right?)
New home sales comprise almost 30% of the market, compared to 20% three years ago. Builders have done well and continue to play an important role in this market.
The overall market continues to have healthy demand and is held back only because of limited inventory. Year-to-date sales are up only 2% compared to last year but August’s sales were 12% higher than last August and pending sales were also 12% higher than they were at the end of last August, so the market seems to be picking up a little over last year’s pace.
Prices continue to rise, of course, and our average and median prices are higher than they were at their previous peak in 2007. The median price of new homes for the trailing 12 months is $324,065, 39% higher than the median price for resale homes at $233,000.
Below are charts that show market statistics for the trailing 12 months of new home sales.
July left us wishing for cooler temps and more inventory. Resale home inventory in Ada County is down 15% from last July but pending contracts were up 1%. Months of supply (inventory vs sold) for resale in Ada County are down 20% and down 26% for new construction.
Days on market might be part of the answer: 20% fewer days on the market for resale homes and 12% fewer days on market for new construction. This means buyers are more prepared than ever with loan qualification in hand and research done when they go out looking. They are knowledgeable, prepared, and ready to write offers and make decisions quickly.
Another part of the answer could be homes that don’t hit the multiple listing service (MLS). Long a bane of the homebuyer, the “Coming Soon” may be a thing of the past thanks to new MLS rules giving equal access to all buyers. Interestingly, Ada County resale listings for Group One Sotheby’s International Realty was up 15% in June and 7% in July over the same months in 2016, clearly bucking the trend of shrinking inventory.
If we continue to follow 2016 trends, as we have all year, we will see a continuation of strong demand vs low inventory. While this is a hot market for sellers, buyers are obviously finding homes with overall YTD closed sales up 7% in a market that saw overall inventory down 11.5%.
The residential market in Ada County has recovered from the cold, snowy winter months. Sales of residential units for the first six months in Ada County were almost identical to sales for the first six months of last year. Inventory, however, was down 16% from a year ago. Average prices increased 7% over the trailing twelve months, par for the course over the last several years.
Closings for the month of June were 4% higher than they were in June 2016 while pending contracts at the end of the month were up 6%, a good sign especially given the reduced inventory.
Resale sales were slightly down, as were pending sales. Closings in new construction for the month of June, however, increased 23% over closings for June 2016. The opportunity is huge for new construction to help answer more of our demand for housing.
The chart below shows average prices and the number of closings for the last sixteen-and-a-half years. The closings reflected for this year are the trailing twelve months ending at the end of June, only the second time since 2008 without an increase in the number of sales.
Although the average price increased over $100,000 since 2002, the increase averaged only 4.5% per year.
Every time there are five offers on a property, and only one buyer wins, four buyer transactions are pushed into the future. With 23% fewer properties on the market now compared to last year, sales for this May were 3% lower than they were for last May.
Although this is an opportunity for builders to fill the gap in available inventory, new home inventory has decreased by 6% over the past twelve months, creating an even more difficult barrier to sales. With only slightly more than 1200 resale and finished new homes on the market, we have only 39 days of ready-to-occupy homes available to sell.
The good news? Even though the amount of properties to choose from was down 23%, sales were down only 3%, telling us in no uncertain terms that demand for properties in Ada County continues to soar.
April closings in Ada County were down 9% from last April, and were down 1% for the first four months of this year compared to last. Closings on resale homes were down 12% while new home sales, which have climbed to 41% of our inventory, increased by 3% over April a year ago.
Resale inventory, at 36 days, is so low that multiple offers are becoming the norm: some with escalation clauses, and some with escalation clauses that have no caps. It’s a challenge to be a buyer in this market. Be sure you are with a Group One Sotheby’s sales professional who knows the ropes on how to get your offer accepted. Those multiple offers are driving up prices in the resale segment. The price per square foot of a resale home is now within 13% of the price per square foot of new homes.
New home prices, which had been close to 40% higher than resale homes, are now within 29% of new home prices. New home inventory is at 3.8 months but only 24% of that inventory is finished and ready to be occupied. Combined with the resale inventory, there is an effective supply of homes ready for occupancy of only 33 days.
Pending sales, and strong but frustrated demand, show that the demand side of the equation is strong. There is no way to tell just how vibrant our sales results could be if we had enough inventory. Sellers: Oh happy day! Put your property on the market now and take advantage of the strong demand. Buyers: be prepared to act quickly and let your Group One Sotheby’s sales professional help you prepare a strong offer.
It’s hard to predict the future from the first quarter results. Sales were tepid, although slightly (2%) higher than in the first quarter last year. Snow, ice, and frigid temperatures took their toll on the market but, thanks to longer closing times in new home sales, we survived our worst winter weather in decades.
Resale closings were almost 5% lower than they were in the first quarter last year while new home closings were 24% higher. Inventory dropped almost 20% in the last twelve months. The winter weather stopped a lot of new home starts while resale owners were slow to bring inventory to the market, both because of the weather and also because of the concern about finding replacement housing.
Total inventory is about 20% lower than it was at the end of the first quarter last year, leaving us with only 26 days of resale and finished new home inventory.
The chart below shows how new home closings helped the market from taking a step backward.
February closings were down 7% compared to last February – the first same month decline in years – caused obviously by the relentless snows in January. Resale closings took the biggest hit, a decrease of 15% from last February, compared to an increase of 14% for new home closings (which typically have a longer contract-to-close time).
Inventory rose slightly, 4% from the end of January, as happens seasonally.
Although the charts below show that there are 1.5 months of supply available, some of that inventory is new construction that is not ready for occupancy. There are only 27 days of combined ready-to-occupy resale and finished new home inventory. We definitely need more inventory of homes to satisfy demand for housing in Ada County.
We expect sunny skies and warmer temperatures in March to provide impetus to the market and help our real estate market continue to expand.
The charts below demonstrate the interplay between closings, inventory levels, and pending sales.
January results for the Ada County residential market have continued the trends in 2016. Unit sales this January were up almost 14% over last January. Average sales prices for the trailing twelve months increased 6.5%. Inventory was slightly lower than it was at the end of last January, which was the low mark for the year.
New construction is making headway: 22% of all homes sold this January were new homes compared to 17% in January 2016, but we still have less than one month of resale and finished new home inventory.
The charts below show closed sales, pending sales and inventory trends for the past thirteen months.
Would you have believed it if, at the beginning of the year, we had predicted that Ada County home sales would increase by 14% and yet prices would increase by only 6%? Wouldn’t it make more sense that a double-digit increase in demand would produce a double-digit increase in price?
And what about inventory? If we had said that we would go through the year with little more than one month of resale and finished new home inventory, with virtually nothing to sell, but our sales would increase by 14%, would you have said “phooey”?
That’s why it’s safer to look at history than it is to predict the future.
About a year ago, two pretty real estate ladies from another company were written up in the Statesman saying the market was about to slow down. Just before the market sped up. They gave no data to support their position. It was evidently just a feeling. And the Statesman gave that feeling a lot of exposure.
Let’s take a closer look at what happened. The chart below shows the relationship between sales, inventory and average prices for the last 15 years. Is there a country song entitled “We’re back up where we were again”? Look at the adventure we’ve been through, pictured in that chart.
Average prices are higher than they were in the “bubble” period and unit sales are almost as high. Does this mean we’re heading for another bubble? Ask your Group One Sotheby’s International Realtor for a copy of of our 2016 Market Report hand-out to see why we think we’re on more solid ground now than we were in 2006 and 2007.