Last month we discussed 5 anomalies in our current Ada County housing market:
More units sold than we have in inventory
Existing homes sell for about the same price per square foot as new homes
Average time on the market is roughly the amount of time it takes to process a loan
There is only a 15-day supply of resale homes on the market
Pending contracts at the end of August were 181% of the average number of units for sale
At the end of September 2019, there were 1,872 housing units available for sale and 985 sold during the month, a ratio of .53 sold units to available units. That seemed to make sense. This September, there were only 583 units available at the end of the month yet 1,288 were sold during the month, a ratio of 2.2 sold to available units. How can we sell more properties than are available at any point in time? The answer is that many properties that come on the market are sold within a few days – or a few hours – of being listed.
As a result of this hot market, the average price of a residential
property in Ada County (we include single family, single family on
acreages, condominiums and town homes in our statistics) has jumped
12.7% in the last year.
The chart below, similar to the chart in our last report, depicts the
relationship between sold and available units at the end of September
for each of the last 5 years.
ANOMALIES: something that deviates from what is
standard, normal or expected. Below are a few anomalies presented by
our current residential real estate market in Ada County:
1. We have more sales than we have inventory. Put your home on the
market and it is likely to be sold very quickly. Not only is it sold,
but you may have a choice of several offers. Newly constructed homes can
expect an offer before construction is complete. In fact, many builders
want to build only specs, not presales, because with a spec, a builder
doesn’t have to hold a buyer’s hands through the many choices the buyer
2. Resales, or existing homes, sell for about the same as new
construction. The sales price per square foot for resales over the last
12 months is $191 compared to $196 for new construction, a difference
of 2.5%. Historically, we have felt that new homes should sell for about
20% more than existing homes.
3. Average time on market for resale homes is 40 days. That’s about
how long it takes for a loan to be processed. We don’t pay attention to
average days on market for new homes because most of them are listed
before construction is complete.
4. There is only a 15-day supply of resale homes and only 25 days of new homes that are ready for occupancy.
5. Pending contracts at the end of August were 181% of the number of
inventory units, a reversal of the normal relationship which was
discussed in our last month’s market report.
Consult the chart below to see the relationship of sold properties to
available properties at the end of August for the past 5 years.
Pending transactions at the end of July were two-and-a-half times the
number of residential properties on the market. The number of pending
contracts at the end of the last two months are the highest we’ve seen
in at least the last ten years. Homes that show pride of ownership and
are well cared for are likely to sell quickly. Multiple offers are
flourishing in all price ranges, even over $1 million.
The average price of homes sold in the last year have risen to $405,316, an 11% increase over the last twelve months.
Sellers: Bring on your properties. The prices are great and the sale should be quick.
Buyers: Act quickly and be prepared to loosen your purse strings.
Check out the graph below to follow July’s pending and inventory statistics for the last ten years.
June saw a small increase in Ada County closings and an 18% increase in pending contracts compared to the pendings at the end of June, 2019. This increase in new contracts was achieved despite a 40% drop in inventory over the last year. The demand-to-supply ratio is higher than ever! Resale inventory has dropped over 50% since June, 2019, and new home inventory has increased 23%.
Despite the increase in new home inventory, as builders rush to
answer the need for homes, there are only 26 days of new homes ready for
occupancy. Owners of residential property in Ada County are reluctant
to put their homes on the market for want of replacement property during
a period of low inventory. As a result, there is only a 21 day supply
of resale homes.
Despite the Coronavirus effect on demand, average prices over the
last year have increased 10.2%. Unless inventory can increase, which
will probably mean new home construction must pick up dramatically, we
expect prices to rise more rapidly in the future as people in congested
living areas look for more spacious and safer environments.
The chart below shows the number of new contracts at the end of each month over the past year.
effects of COVID-19 finally hit the Ada County housing market, but the
market is resoundingly still alive and getting better. Since the
business of real estate sales was declared an essential business, we
were able to generate and close property transactions during the need to
shelter in place.
Residential closings were down almost 30% from May 2019, clearly an
effect of the Coronavirus, but new transactions (pendings) at the end of
May were down only 6%, which seems amazing since it was challenging to
conduct business for a couple of months.
Supply, not demand, is still our major challenge. Inventory, which
has been very low, was down even further with a 6% drop from April.
Pending activity for new homes at the end of May was 9% higher than it
was at the end of May 2019.There were only 33 days of resale homes on
the market at the end of May and only 37 days of new homes that are
ready for occupancy.
Sellers, if you are thinking of selling, this would be the time!
Builders and developers, what an opportunity to generate more housing
Buyers, prices are rising but rates are low, so it’s probably best to act now!
April was the first month to show the effects of
COVID-19 on the Ada County residential real estate market. April
closings were down 12% compared to last April while new (pending)
contracts at the end of the month were down 16%. It is telling that new
resale contracts, which are generated more recently than contracts for
new construction, were down 26%.
When people are confined to their homes, and when people lose their jobs, it’s difficult to buy real estate.
An interesting statistic we’ve been following is the ratio of pending
units to total inventory units. At the end of last April, there were
1,910 pending units compared to 1,523 available units in inventory, a
ratio of 1.25 to 1, a significant statistic for a hot market. The ratio
at the end of this April was 1.05 to 1, which was lower but it still
shows strong demand for the limited inventory available. See below:
is normally a month in which people list their resale homes
anticipating strong Spring demand. But this March was unusual with an
86% increase in resale inventory!
Many homeowners may feel that property values are at their peak,
especially with the uncertainty provided by the Coronavirus, and they
may not want to see their properties decrease in value and the net
equities diminish. Whatever their reasons, the sudden increase in resale
listings is a welcome surprise to a real estate market starved for
That said, we still have only 45 days of inventory available, 30 days immediately ready for occupancy.
What happens to upward pressure on prices? It’s too early to tell
but, even with the recent upsurge in listings, there remain precious few
properties for buyers to choose from. The best indicator of future
pricing may be the fall off in the number of pending contracts compared
to the number of available housing units. As of the end of March this
year, there were 599 pending contracts compared to 754 at the end of
last March, a drop of 26%.
A good statistic to watch as the market develops is the ratio of pending units to inventory units. Last March we had 1615 pending units to 1475 of inventory units, or a factor of 109.5%. At the end of this March it was 1518 pending units to 1480 inventory units, or a factor of 102.6%, lower but not drastically lower. Let’s watch how this statistic develops by the end of April and beyond.
Contact your Group One Sotheby’s International Realtor to find out how your neighborhood measures in this important statistic.
The chart below shows the sudden jump in resale listing activity.
The trajectory of the market continued this February with sales 8.6% ahead of last February, even though inventory is 28% lower than it was at the same time last year. Pending contracts were 16% higher than they were at the same time last year, so it appears the trend of increasing sales will continue.
The average price of homes sold in the last year is 11.2% higher, and the median price is 10.9% higher than the previous 12 months, continuing the aggressive rise in home prices.
While some people are busy preparing for COVID-19, others are busy buying homes.
What would the market be like if we had more inventory?
Resales are not coming on the market fast enough. New homes make up an astounding 67% of available homes with only 20 days of inventory ready to be occupied. The chart below displays a breakdown of new and resale inventory.
What’s going to stop us? There are certainly concerns: how long will low interest rates last? Will the lack of affordability begin to limit sales? What if we have a pandemic? But for now, the demand for properties in Ada County remains strong. And the strong demand, combined with low inventory continues to push prices up.
Inventory at the end of January was 20% lower than at the end of last January with only 780 single-family homes, homes on acreages, townhomes, and condominiums on the market, but sales for the month were 20% higher than that for January 2019 pushing median and average prices up almost 11% over the past year.
39% of the homes sold in January were newly constructed. New home sales have been helping enormously. The average price per square foot of a new home is only 4% higher than the price per square foot for resale homes, making new homes look like a bargain. The chart below demonstrates that new homes also have had a much smoother availability in high versus low months.
We closed 2019 with optimism toward 2020. December’s sales were 15% higher than they were last December, and pending contracts were 18% higher.
Annually, our sales were very slightly ahead of sales in 2018, pretty close to a dead heat. Following detached single-family, condominiums, townhouses and single-family homes with acreages, a breakdown of the sales for each residence type in 2018 and 2019 is presented below:
Inventory continues to decline by 21% over the last year, forcing prices up by just under 11% in the past 12 months.
Based on the strong end to 2019, it looks like the trends in the graph below could continue into 2020.