Just Below The Surface
If you have ever been near an irrigation canal, you know from the surface, it looks calm and serene. But just below the surface is a torrent of currents, snags, and flow gates. That’s pretty much what we are seeing when we peel back a few layers on the overall statistics to see what is really happening in the Ada County resale real estate market—just below the surface.
Subtle Signs of Improvement
As always, improvement is relative to whether you are a Buyer or a Seller. A Buyer’s improvement is a ton of inventory and falling prices. A Seller’s definition of improvement is high demand with low inventory increasing prices. I think a market that’s in freefall is just about as concerning as one that is on a stratospheric trajectory. We’ve seen both in the past 18 months so a little “normal” is refreshing. Unfortunately, whatever signs of “normal’ may be somewhat short lived based on some Signs we are noticing.
Sign 1: Price Stabilization. While April is not over yet, it would appear, so far, we are continuing to see some stabilization in average prices. The gap between Original List Price and Sold Price is also continuing to narrow. We mentioned this likelihood in the last newsletter when we suggested that Agents and Sellers would eventually become aware of the condition of the current market and price accordingly.
Sign 2: Inventory Stabilization. The graph to the left shows the relationship between sales (blue bars) and Inventory (green area).
When Inventory is below the blue bars, there is upward pressure on pricing. When the green area is above, there is more inventory available to attempt to meet demand. The more extreme these two are, the more extreme the market’s reaction. Just notice the trajectory of pricing relative to the relationship between inventory and sales. When the inventory is well below sales, prices skyrocket. When inventory is well above sales, prices fall.
It would appear inventory and sales are more in sync over the last few months. However, inventory is currently not adequate to keep up with sales for any period of time. If this continues, prices will continue to climb.
Sign 3: What is Selling and How Fast. As you may know, my wife Vikie and I look at all New, Back On Market, and Price Change listings from the day before every morning while enjoying our coffee. We also look at the previous day’s Pending Listings. A couple months ago, we started noticing a very interesting trend—the number of homes selling extremely quickly.
While the Average Days on Market (ADOM) steadily increased from an average of 8 days in May, 2022 to 54 days in February 2023, they started receding in March and are continuing to recede in April. What we noticed a couple months ago was the number of homes selling in a matter of days.
The common assumption is the homes that are suddenly selling the fastest are the lower priced homes. In actuality, there is no discernable difference in the average sales price of the homes selling more quickly. This tells us, the speed at which homes are selling is not tied to it’s price point, but to the accuracy of the pricing relative to the market and the market’s response to the new listings. Let’s look at it graphically…
Selling in 14 days or less: Notice the rapid increase in the percentage of overall monthly sales happening in 14 days or less starting in January 2023.(yellow highlight)
So far in April (not shown) 59% of all the single family resale homes going Pending are doing so in 2-weeks or less. And based on the average price difference, we see that the quick sales are happening from the lowest price to the highest price in the market, not consolidated in the lower price points.
Notice the Percentage difference in average sales price between the total market and those homes selling in 14 days or less. There is no discernable difference starting in January 2023. (green highlight)
Selling in 7 days or less: Again, notice the rapid increase in the percentage of overall monthly sales happening in 7 days or less starting in January 2023.(yellow highlight)
So far in April (not shown), 47% of all single family resale homes going Pending are doing so in 7 days or less.
And again, there is no percentage difference in average sales price between the total market and those homes selling in 7 days or less. (green highlight)
Summary Observations
Overall, if you are considering selling, the market is responding well to new listings priced to the current market. Buyers appear to be waiting for homes with longer days on market to take significant price reductions to catch their attention. Even if they have taken price reductions along the way and are priced right now, the days on market have likely stigmatized those homes as undesirable.
If you are considering Buying, you may be catching the market somewhere near the bottom right now. If you buy now or in the very near future, you may be well positioned. There are a lot of indications we could see some fairly substantial upward pressure in pricing through the rest of 2023—Especially if inventory fails to keep up with demand.
Whatever you decide to do, we are here whenever you are ready. And if you know someone considering selling or buying, please pass on our information. It would be our honor to help them.
