Home Prices Near Peak but Inventory Mix Makes This Market Different

In April 2016, home sales and prices were up, while inventory and market times were down. These have been the trends for the past few months, and as such, we’ve talked about how our low supply of existing homes and increasing demand from in-migration and growing local population have impacted prices in past market reports.

But month-after-month, the median sales price has been getting closer to our market peak in July 2006 — off just 3.1% for Ada County as of April 2016. While this has caused many to wonder if we’re nearing another market peak, taking a closer look at today’s inventory, that doesn’t seem to be the case.

Single-family inventory in Ada County, for existing and new construction combined, in April 2016, was 63.9% lower than the high in July 2007. So, while prices are getting back to the recent market peak, inventory is nowhere near the levels we saw back then. And that’s kind of a good thing…

We don’t have an oversupply of homes being built speculatively, nor do we have the fear of a distressed “shadow market” as we did back in the mid-2000s. On the contrary, new construction inventory in Ada County was at 3.9 months of supply in April (on the edge of the 4-6 month mark that’s considered balanced). Homes that were foreclosures or short sales accounted for less than 1% of the inventory — and a recent report from RealtyTrac indicated that the number of homes nationwide that are “underwater” continues to go down.

Of course the difficulty with having low inventory overall, especially among existing homes, is that buyers don’t have many options. On top of that, pending sales continue to outpace the previous year, up 20.2% in Ada County compared to April 2015. Therefore, it’s high demand vs. low supply that is pushing up prices, not market speculation. And for those buyers who do purchase, improved lending practices and low unemployment rates mean the mortgage default risk going forward should remain low.

Another positive sign regarding equity is that Idaho is one of the top states for all-cash purchases. While this includes some owner-occupants, most of this activity is among investors who have equity in these properties, instead of carrying multiple, potentially risky, mortgages.

Improving prices should also help homeowners who purchased just before, or during, the market peak regain any lost equity, which will in turn, enable to them to sell. “Many people have held off listing their homes because they simply couldn’t afford to; and it’s been a main contributor to our current inventory situation,” said Carey Farmer, 2016 President of Boise Regional REALTORS® and Broker Associate with Group One Sotheby’s International Realty. “I encourage anyone who is considering selling their home to talk to a REALTOR® to get a true picture of what their home is worth in today’s market. Many people are in a better position than they realize, and we need more homes to come online to meet the demand from buyers.”

Additional information about trends within each county, and by price point, by existing vs. new construction, and by neighborhood, are now available in the April 2016 Market Report.  This report includes an explanation of the metrics and notes on data sources and methodology.

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This report is provided by the Ada County Association of REALTORS®, which began doing business as Boise Regional REALTORS® (BRR) in 2016. BRR is the largest local REALTOR® association in Idaho, with over 3,600 members and two wholly-owned subsidiaries — the Intermountain Multiple Listing Service, Inc. (IMLS) and the REALTORS® Community Foundation. This report is based primarily on the public statistics provided by the IMLS, available at: intermountainmls.com/Statistics/Static.aspx. These statistics are based upon information secured by the agent from the owner or their representative. The accuracy of this information, while deemed reliable, has not been verified and is not guaranteed. These statistics are not intended to represent the total number of properties sold in the counties or cities during the specified time period. The IMLS and BRR provide these statistics for purposes of general market analysis but make no representations as to past or future performance.  || The term “single-family homes” includes detached single-family homes with or without acreage, as classified in the IMLS. These numbers do not include activity for mobile homes, condominiums, townhomes, land, commercial, or multi-family properties (like apartment buildings). If you are a consumer, please contact a REALTOR® to get the most current and accurate information specific to your situation.

Distributed to the media on May 12, 2016.