The Boise Real Estate Market – Update October 2022
Chicken Little – The Sky Is Falling!!!
In a market highlighted during the Pandemic as one of the hottest, you must remember that everything that goes up must eventually come down. But to say the sky is falling may be a little overstated.
Here is a graph of the Ada County Idaho Resale Market from January 2021 to the end of September 2022. The Blue line is the original list prices. The Orange line is the last list price before selling. And the Grey line is the sold prices. The data points represent the average prices in Ada County Idaho of resale homes. This graph does not include new construction as the prices builders charge for new homes are affected by things not related to market values. They are more related to the actual costs that go into their homes. Or there abouts.
You can see the exponential growth that occurred to about June 2021. Then, a combination of buyer frustration, inventory build-up, and overall price constraints, a slow-down occurred in the second half of 2021 that flattened average pricing.
Then starting about January of 2022, the market caught its breath and started another bull run with increased pricing. About May 2022, the FED decided to put the brakes on the economy. They identified housing as the number one driver of inflation and they knew cheap money was the reason. So they started increasing prime rates. Immediately, buyers were kicked from the market. Homes under contract came back on the market as buyers at the top of their qualification range were suddenly priced out by the increasing interest rates. In other words, the homes that buyers could qualify at the time of offer, they could no longer qualify during the underwriting process.
As interest rates rose, so did the supply of homes available to buyers.
Here is a graph showing the units of resale single family homes in Ada County, Idaho that sold from January 2021 to the end of September 2022 (blue bars) and the supply of resale homes available to purchase (green section. Notice the bump in the second half of 2021 that led to a short-term stabilization of pricing? Then notice the exponential surplus in supply that occurred starting around May 2022 referenced earlier. The supply of homes has caused downward pressure on pricing.
But notice the direction of the green? Its falling. It’s actually falling faster than the trend of homes sold is decreasing. If this trend continues, we could start seeing a stabilization of prices by early 2023. But notice I said stabilization. I did not say appreciation.
The overall sentiment is that the FED will continue its efforts to put the brakes on the economy. That takes more and more buyers out of the market and leaves more and more homes available for sale. Sellers are already starting to say enough is enough and cancelling their listings. Just like Buyers said enough is enough when they couldn’t compete well enough when the market was so overheated.
Overall, my guess is that prices will continue to fall through the end of 2022. I believe prices will stabilize through the normal sales spurt in the first and second quarter of 2023. The Treasure Valley is attracting so much industry that demand for the area will likely stay strong. Population growth likely will continue and demand for housing will likely stay strong.
If you are considering selling, I would suggest jumping into the market sooner than later. If you are a buyer able to buy, you now have the luxury to be selective about the home you want to buy and take your time in making your decision.
Bottom line is, if you hate the home you are living in and the situation is so bad it’s causing issues with your life, sell and get into the home you and your family really need. You pay for your home once but live in it every day. If you want to buy, there is a fantastic supply of homes to choose from. As much as possible, ignore the rate. The home is where you live. It’s easy to change the rate you pay when it changes. But living where you want in the home you want may be more difficult to replicate. So set your roots and enjoy where you live.
V Squared Realty offers a full-service listing program based solely on the size of your home – not the price. As a result, we save our clients ON AVERAGE, $13,272. When you are ready to sell, this program can give you a competitive edge over your neighbors being charged twice as much to list their home.