Hello 2023!
A new year filled with plenty of excitement, anticipation, and opportunities. As an optimist, I am excited for the new year. Being optimistic, however doesn’t mean I see everything as rainbows and butterflies. It’s about helping clients, past, present, and future, have positive outcomes based on reliable data and perspectives. So, lets jump right in…
Auld Lang Syne 2022
As expected and shared in our November Newsletter, the market had its ups and downs. That’s a little good, or a little bad depending on if you are on the side of buying or the side of selling.
In December 2022, 324 single family resale homes sold in Ada County. Average price was $560,068. Up 0.7% from November but down 11% from 6 months earlier. The average Pending List Price (orange) was 6% lower than the average Original List Price (blue). And the Sold Price (grey) was 2% less than the average Pending Price. That’s an 8% difference from the original List Price and the Sold Price in a market already down 11% from 6 months earlier. Refer to the graph to illustrate.
December 2022 Days On Market Effect on Pricing
- Homes that sold in 30 days or less: 25% took price reductions; the average price reduction was $27,815.
- Homes that took over 30 days to sell: 89% took price reductions; the average price reduction was $64,760. More than twice the price reductions of homes selling in 30 days or less.
Flushing out the older inventory will help narrow the gap between original list and pending list price as Sellers (and their agents) become more realistic in the current market.
Mortgage Interest Rates
According to Mortgage News Daily, Mortgage application activity gained ground for the second straight week, with significant increases across the board during the week ended January 13. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of loan application volume increased 27.9 percent on a seasonally adjusted basis and was 32 percent higher on an unadjusted basis compared with the previous week.
Considering Buying?
Buyers struggling to get into the market over the last couple of years were then hit with rapid interest rate hikes starting mid April 2022. Many had already tempered their hopes of ever owning a home. Now that prices have fallen and interest rates are retreating, we are seeing more Buyers re-enter the market. They are finding a market that is slower paced, more options to choose from, and Sellers more willing to be open minded to the composition of offers. Buyers are also finding their budgets go a little further too.
For example, we started working with a buyer in November who’s rate was in the high 6’s. They can now lock in the mid-high 5’s. That’s a $260 per month difference in payments on a $400,000 mortgage. The 1% reduction in interest rate allows for a $45,000 increase in buying power. In other words, their buying power went from $400,000 at 6.75%, to $445,000 at 5.75% with no change to their payment!
Considering Selling?
Waiting for prices to return to their early 2022 peak is probably a losing strategy– at least in the short term. More likely, local prices will remain stable or continue to decline somewhat through 2023. I expect the up and down trend to continue like we have seen since September. However, if concerns of a recession are realized or interest rates take off again, sellers will definitely find it increasingly more difficult as a result. The upside to selling now is inventory is very low so your competition is also low.
Bottom Line: The Decision to Buy or Sell
In our experience, the market crash of 2007-2008 caused a paradigm shift in people’s ideas of real estate as primarily an investment vehicle. While resale is still a consideration, overall, we find that being in the right home for the owner’s current needs and lifestyle is becoming a bigger part of the buying decision. If the home isn’t a good fit, more sellers are considering a change, regardless of the market.
Our belief is, if you don’t like your current home or it doesn’t meet your needs, you should consider a change. Vikie and I recently did. In 2019, we sold our large two-story house in Eagle to purchase a small single story. The two-story setup was no longer a good fit and the home and property became more than we wanted to deal with.
While the new home met our needs, we felt like it was likely a transition house.
After three years in the transition home, we were ready for a change. We sold mid-year after we found a home that better met our needs of today. Is it our “forever” home? Probably not. Did we sell at the top and buy at the bottom? Nope. Not even Realtors can do that. LOL. We did ok on the business side but it was ultimately about being happy where we lived. Bottom line—life’s too short and fragile to not enjoy where you live.
Contact us today to start your Buying or Selling Journey.
