When making an informed decision as to whether to buy or sell a home, there are many factors to take into consideration. Knowing what the market is doing is an important piece in determining if buying or selling is conducive to your long and short-term goals. Since 2011, housing prices have steadily increased along with our strong national economic expansion. Recently, news outlets have been reporting that several cities in the United States are showing a decline in real estate market values and sales. First American’s Chief Economist Mark Fleming reports that national home prices are in the beginning stages of correcting to demand. “As buyers pull back from the market and sellers adjust their price expectations, house prices will adjust, but the strong economic conditions and the shortage of supply relative to demand continue to support the housing market.” Currently, Boise appears unaffected and ranks the fifth fastest rising housing market in the United States. The Intermountain Multiple Listing Service provided data in October showing the Treasure Valley is currently in a seller’s market with 2 months of available inventory.
In a seller’s market, sellers can garner a higher asking price and strategically downsize with a large down payment. In a buyer’s market, there are too many homes on the market and not enough buyers, resulting in lower than average sales prices. Inventory continues to be very short in the Treasure Valley, an on-going issue for first-time homebuyers here and across the country. During a seller’s market, buyers are typically priced out of their desired locations and must be willing to reconsider their search criteria. First-time buyers are especially affected because out of state buyers are coming in with cash, beating out locals in an already competitive market.
The ideal market is a balanced market. In this market, no one side has an upper hand. Buyers and sellers are on an equal playing field. In this scenario, homes typically go pending within 45 to 60 days. Listing prices stay close to sold prices and there are usually five to seven months of inventory on the market. Most would agree this is the healthiest market as there are no volatile swings in either direction.
As expected, new construction home prices have continued to rise and homebuilders haven’t been able to keep up with the demand. With a shortage of workers and an increase in building and land costs this trend doesn’t seem to be slowing down anytime soon. The Ada county average sales price for a new construction home (as of September 2018) is $395,664, which is an increase of 12% compared to 2017 average sales price.
But what does that really mean, and how does it affect you?
Full-time agents who are in the trenches for their clients would say that residential resale pricing isn't skyrocketing as quickly as compared to earlier this year. The marketplace is also not seeing excessive urgency and as many escalation clauses as were seen in the spring (an escalation clause allows a prospective buyer to bid a certain amount over the highest bidder for the house they want usually in tiered increments).
In Ada County, the average sales price is up 16% year-to-date. The month of September shows a decrease of sales prices by 4% when compared to the month prior. The decreases seen in September was an expected seasonal dip and is not unexpected. This decrease is seen year-after-year due to the start of the school year and all of the busyness that comes with it. For many homeowners, there’s a lot going on in the fall and selling a home is not on the radar during this season as much as it was in the spring - although it should be.
Canyon County shows:
- New construction average sales price year-to-date (YTD) is $266,901. This is up by $28,690 or a +12% increase compared to the 2017 average sales price.
- Residential resale average sales price YTD is $207,686. This is up by $32,331 or +18% compared to the 2017 average sales price.
Has the Treasure Valley reached the peak of market pricing?
Once we begin to see a major drop in demand, which is unlikely due to the shortage of houses, a stabilization of residential resale pricing may occur. New construction’s fixed costs will continue to cause pricing to increase, yet hold steady, as there’s nothing sweeter than a shiny, brand-new home. What does this mean for you? As a seller, if you are ready to downsize or move into a different area of town, this is the time to do so. As a buyer, you might not have to compete against five other offers and might not have to pay over asking price. The factors that influence pricing all lead to a continued increase in pricing, albeit at a slower pace than was seen at the beginning of the year. Until more inventory is made available (more sellers, more homes built), demand will not allow for a peak or a regression in home prices.
Buying and selling in the winter
Contrary to popular belief, selling in the winter can garner a higher sales price as house shoppers in January and February are highly motivated buyers. They’re looking in winter because they need and want to move, not because they’re just looking for fun (as can happen in the warmer months). Ask the public and the consensus is that a home will sell the fastest in spring or summer, so there are very few homes to buy at the start of a new year. This school of thought is not necessarily correct, as seasoned real estate agents know that homes listed in the winter months have a superior advantage over homes listed in spring and summer. If your house is the only game in town, you’re likely to have a lot more interested buyers than in spring when the market becomes more saturated. There are always potential buyers on the prowl, especially during the holidays when friends and family are visiting and enjoying time off and more discussions are taking place regarding relocation.
Your home may not show as often in the winter, but the showings will consist of buyers who are highly interested in advance of the showing. Because of the elements, most people just don’t want to schedule a ton of showings with their agent. Instead, they want the buying process to be swift and they’re more sure of the homes they’ve chosen to look at. They’ve done their research on their own and with their agent and they’re on a dedicated mission to buy. This is good news for sellers who don’t want to have to leave their homes for multiple and excessive showings.
Are you interested in knowing what your home is worth right now? Give The Mike Brown Group a call and we’ll help you understand what’s going on in your area and what your home might sell for if you were to list it in these current market conditions.
Are you curious how the IMLS calculates months of inventory? Here's how it's done: Find the total number of active listings on the market last month. Find the total number of sold or closed transactions for last month. Divide the number of total listings by the number of total sales, which results in the number of months of inventory remaining.