Anyone looking to buy a home in the Treasure Valley has heard of, or experienced, the fast pace of the real estate market. In March 2021, the average number of days between when a home was listed for sale and received an offer to purchase was 22 — 50.0% faster than in March 2020. Offers were accepted even faster for existing homes with an average of 14 days — 24.1% faster than a year ago!
The insufficient supply of available homes compared to buyer demand is the main reason the Treasure Valley market is moving so quickly, and the competitiveness of the market continued to impact home prices. The median sales price in March was at $475,500 for existing homes — up 35.0% year-over-year, due in part to buyers often paying more than the list price to make their offer stand out.
On average last month, existing/resale homes in Ada County sold for approximately $18,000 over list price. If you’re searching for a home, this is certainly something to keep in mind. If you’re searching for a home, this is certainly something to keep in mind. If you are struggling to compete in the market and keep getting maxed out on budget, consider reducing the top end of your price range so you’re still looking at homes that could be purchased within your overall budget – try to account for the $18-25,000 over list price that most homes are selling for.
Speaking of budget, working with a mortgage lender early on is crucial. For buyers that have credit concerns or questions about saving for a down payment, creating and implementing a plan well before you begin searching for a home will allow you to shop confidentiality when you’re ready. Lenders may also help identify down payment programs or grants to help first-time home buyers, for example, especially where affordability is a concern.
One of the main drivers of housing affordability are interest rates, which have pushed up off of the historic lows experienced during much of 2020, however continue to be very low giving borrowers strong buying power…
Ryan Froehlich, President of Idaho mortgage lenders association
Froehlich continues, “rates fluctuate daily and a great indicator for rate movement is to watch 10-year treasury bond yields, which as of this past week have been pointing to a slight downward trend in rates. With that said, if you have a property under contract the recommendation is to lock your rate as the bond markets can be dynamic. As the number of COVID-19 vaccinations continues to build and the economy continues to open back up there looks to be more pressure on upward rate movement, hopefully in a gradual and natural fashion.”
Historically low rates are continuing to drive demand from prospective home buyers, along with rising rental costs within the Treasure Valley. As reported by KTVB, “Boise rent has gone up 16% since March 2020, according to a study done by Apartment List. The study also said Boise rent rose 3.4% in March 2021.” Additionally, the desire to own a home and move away from rentals – in some cases from larger metro areas, due to COVID-19 – have also been factors increasing home buyer demand.
Looking at our March 2020 report, we were unsure of the impact the pandemic would have on the Treasure Valley real estate market, which we now know has roared back despite a few months of limited activity last year. We will do our best to provide context to year-over-year figures in the next few months of reports – keeping in mind that sales activity for April and May in particular might look high in comparison to 2020, since sales were dampened in those months as a result of the statewide stay-home order.
Although real estate was deemed essential in Idaho, the level of general uncertainty put a lot of home buyers and sellers on pause. In July, we began seeing year-over-year increases in existing/resale sales, while listing activity remained below 2019 levels throughout most of last year. This, compounded with the overall trend of year-over-year declines in existing inventory since 2014, further contributed to the insufficient supply compared to demand problem we find ourselves in today.
However, there are still homes available for purchase within the Treasure Valley, even if they are selling quickly or over list price. These competitive conditions mean it is imperative for prospective buyers to work with a REALTOR® to help them through the process. Sellers, too, are finding that their REALTORS® provide tremendous value in helping them determine the best pricing strategy based on current market conditions specific to their property and managing multiple offer situations.
If you are considering buying a home soon or anytime this year, reach out to us right away.
Together, we can make a plan that works best for your timeline, especially if you need to coordinate selling your current home and would like to negotiate a rent back agreement. And most importantly, we can help navigate what to expect when making offers, including: offers over list price, ways to compete with cash offers, how to avoid fair housing violations by skipping the buyer “love letter”, holding off on any large purchases or credit pulls to protect your loan qualification, and discussing any contingencies that a seller may request be waived, such as an inspection or appraisal, and how that may create risk for you… and more.
Builders and prospective home sellers have been unable to keep up with the persistent demand from homebuyers, stemming from general population growth, millennials “aging into” the traditional homeownership years, in-migration due to our comparative affordability, and now the ability for many to work from anywhere.
These reasons, coupled with historically low mortgage rates, have resulted in buyer demand outpacing supply for years, which has been driving the growth in home prices and increasing the speed of the market. In February 2021, the median sales price was $452,400 — up 25.5% year-over-year — and the average days on market metric was 19 days — down 62.0% year-over-year.
Good News for Sellers
Rising home prices are good news for prospective sellers, allowing them to utilize any equity gained to help with the purchase of their next home or a variety of other opportunities. According to a recent Homeowner Equity Insights report from CoreLogic, Idaho ranked second among all states in which homeowners gained the most equity between 2019 and 2020, $48,500 on average year-over-year.
Despite the equity sellers may bring to their next purchase, the tight supply of inventory has made some hesitate to put their current home up for sale until they find their next one. At the end of February 2021, there were just 168 existing homes for sale — 51.2% less than in February 2020. However, there were 65 more homes for sale at the end of February than in January, an increase of 63.1% month-over-month, which we hope is an early indicator of more inventory coming online as the weather warms up.
Looking at weekly activity through the second week of March, new listings were nearly even with 2020 and just below 2019. This is a trend BRR will continue to monitor, keeping in mind any year-over-year comparisons to April 2020 will be skewed due to COVID-19 restrictions.
For those shopping in the new construction segment, there were just 135 homes for sale at the end of February — 80.6% less than the same month last year, and a month-over-month decrease of 18.7%. However, we have heard from some builders that they are selling properties yet-to-be built, meaning more new homes are available than indicated in the inventory counts.
This tight supply has contributed to the fast, competitive market with homes receiving accepted offers quickly after being listed. Looking at just the existing/resale segment, in February, homes were on the market for just 10 days on average, compared to 32 days last year — a decrease of 68.8% and the fastest we have on record.
If you are considering selling your home soon or anytime this year, talk to your REALTOR® right away. Together, we can make a plan that will coordinate your sale and purchase around a timeline that best suits you, keeping these fast market times in mind.
In this planning stage and as part of this pre-sale consultation, we can also advise you on what’s needed to prepare your home – such as how to declutter, how much to invest in staging, repairs, or updates (or even if that is needed) and will then coordinate the professional marketing to help your home show best and be seen by the widest audience of potential buyers.
The first month of 2021 saw a continuation of 2020 trends — insufficient inventory compared to demand, faster market times than a year earlier, and persistently low mortgage rates — which combined, led to a new record median sales price of $454,000 in January.
Looking specifically at existing homes, the median sales price was at $443,500 in January, also a record, and an increase of 30.4% from last year. For many sellers, higher home prices usually mean greater equity, which can be used for another home purchase, to fund a business, send a child to college, or a variety of other opportunities.
For some buyers, the higher prices have caused affordability challenges, while others have found the low mortgage rates have increased their purchase power, helping them buy despite the rising prices. The average rate for a 30-year fixed mortgage was 2.73% in January 2021 compared to 3.60% last year.
Most buyers and sellers have also experienced a competitive, fast-paced market where offers and decisions must be made quickly. To understand just how fast things have been moving, we looked at the average pace of existing home sales in Ada County over the last 15 years.
In the chart above, the gray bars show the average time between when an offer to purchase a home was accepted and when the sale officially closed. That has remained at 34 days, on average during this period, and is the stage in which the buyer and seller, with the help of their REALTOR®, lender, home inspector, and title company, work through the final mortgage approval, and any appraisals, home inspections, or repairs.
The stage that has sped up significantly is the time between when a home is listed and when an offer is accepted, as illustrated by the blue bars falling well below 30 days by 2020. This is important to point out because it is the reason sales can be higher year-over-year despite falling inventory. Here’s why: Inventory is reported as a snapshot of what is available for sale on the last day of each month, so if a home were listed on the first day of the month and then when under contract on the 17th of the month, the home would show up as a pending sale in our monthly reports but never as an active listing or available inventory. While our market is experiencing low inventory, these fast turnaround times have created a misperception that there is “no inventory.”
This acceleration has made the market feel frantic for many home buyers. In 2015, for example, after being listed a seller could expect to accept an offer in about 43 days, on average. Prior to then, they may have fielded multiple showings, had a few open houses, and had some buyers back for a second or third showing before receiving an offer. By 2020, that timeframe dropped to just 17 days, on average, meaning, if a buyer saw a home they liked, they may only have a few days, or hours even, to decide whether to make an offer as there were likely others interested.
In January 2021, that fell even further, as the average days on market for existing homes was at just 13 days — 66.7% faster than the same month last year.
To be competitive in these situations, many buyers have offered full list price or more, which is another reason the overall median sales price rose again. In January 2021, the percent of original list price received on existing home sales was 103.5%, compared to 97.2% in January 2020. This indicates that multiple offer situations are becoming more common, and buyers are willing to pay more to get an accepted offer. Among existing homes, the $400,000–$699,999 price range for existing homes was the most competitive, with the percent of original list price received reaching 104% or more, in January.
Also, as more buyers purchased existing homes at higher price points — with the biggest increase among homes selling for more than $700,000 — that further contributed to a higher median sales price in January. For example, in January 2021, just 5.5% of the existing homes that sold were for more than $700,000, compared to 15.8% in January 2020. This mix of homes sold had a significant impact in pushing up the overall median sales price for the county.
Why You Need To Be Working With a REALTOR®
These two scenarios outlined above – faster market times and more off-market sales – make it imperative to work with a REALTOR®.
A REALTOR® provides buyers the advice and data needed to make informed decisions quickly and may be able to identify properties that are not yet on the market. Sellers find value in a REALTOR®’s ability to help evaluate multiple offers, oversee the negotiating process, as well as all the legal, financial, and administrative steps that come after the offer has been accepted in the pending stage. And for both groups, a REALTOR® can provide guidance in planning and preparing for a purchase or listing, long before any offers are accepted or for sale signs are put up.
When you are ready to make a move and work with a 5-star REALTOR®, then get in touch with me. My proven track record and competitive marketing strategy will get you the best price and offer terms when selling.
We cannot have a 2020 review without first addressing the impact that COVID-19 had on the real estate market locally. The year started strong with January 2020 sales 21.5% higher than in January 2019 but began to taper off in February and March as the uncertainties of the pandemic made their way to our local market. In April and May, when our spring market typically begins to ramp up, sales activity dropped by 19.5% and 29.7%, respectively, because of the government-mandated shutdowns and restrictions.
Sales began to pick up in June, then jumped 22.0% year-over-year in July and remained elevated through November, compressing nearly a year’s worth of activity into just six months. Despite the many challenges to buying and selling homes during the pandemic, home sales were able to continue due to a greater adoption of virtual technology for showings which limited in-person activities, as well as additional steps taken by REALTORS® to protect clients and properties when meeting in person couldn’t be avoided.
In total, 11,728 homes sold in Ada County in 2020 — 5.2% more than in the previous year. The only other time we saw more sales in one year was in 2005 which had 11,974 sales. This represents existing and new construction combined.
Historically low interest rates allowed home sales to quickly recover and then outpace 2019 levels. According to Freddie Mac, the 30-year fixed rate mortgage in the U.S. was at 3.11% on average in 2020 — the lowest ever based on data going back to 1971. These low rates increased purchasing power for buyers, allowing them buy despite rising prices, and in some cases, compete in multiple offer situations.
Supply vs. Demand
A major factor that pushed home prices up was insufficient supply compared to demand, especially for existing inventory. For most of the year, the average Days on Market metric (DOM) for existing homes was at 20 days in 2020, on average, compared to 42 days in 2019. Then in October, DOM dropped to just 13 days — a record low based on data going back to 2004. This meant buyers had to act quickly and write a competitive offer when they found a home.
On the last day of December 2020, there were just 333 homes available for sale, for both existing and new construction combined — 79.6% lower than December 2019 and a record low based on data going back to 2004. More inventory is needed to bring balance back into the market at all price points and product types.
This begs the question, “How can home sales be up while inventory continues to drop?”
Unlike the closed sales metric which reflects all homes sold during the month, the inventory metric fluctuates daily and is based on the number of homes listed as “active” in the multiple listing service on a given day. For our monthly reports, it’s the last day of the month. This “snapshot” of inventory compared to a monthly total of sales is one reason we can see more closings than available inventory.
Additionally, once a seller accepts an offer, the home is no longer considered available inventory. With the average Days on Market at less than a month, many properties that were available during the month are not reflected in the reported inventory “snapshot” at the end of the month.
Factors Restricting Inventory
The historically low mortgage rates mentioned earlier also caused a surge in refinancing at the beginning of the year (SOURCE) which likely kept some of the existing homes that may have otherwise been listed for sale off the market. Then after COVID hit, it further reduced the number of homeowners willing to sell due to safety concerns or general uncertainty. While we cannot quantify how many homeowners held back from listing, it was something we heard often from REALTORS® throughout the year.
In addition to the impacts of refinancing and safety concerns, there were a variety of other reasons existing/resale inventory has been so limited. Many homeowners have delayed listing until they find their next home, which takes longer due to already limited and fast-moving inventory; some homeowners may not have felt they could “trade up” from their current home due to current prices, despite equity and low mortgage rates; or people may have been unable to manage a sale while working from home or if they had children at home for school.
Interestingly, the push to stay home for work and school as a result of COVID had people across the country re-evaluating where they wanted to live. Wills added, “It’s no secret that Idaho has been one of the top states experiencing growth over the past few years, and the ability for many to work from anywhere brought more interest than ever, equating to even more demand for homes in our market.”
New Construction
The lack of existing/resale inventory put tremendous demand on builders, and they have been responding. According to Construction Monitor, 3,336 permits were approved for new single-family homes throughout Ada County during 2020. When we compare this permit count to the 4,010 new homes that sold in 2020, it suggests that we are not overbuilding as demand is absorbing all supply that becomes available, reinforcing the need for continued building.
New home sales made up 34.2% of all sales in 2020, up slightly from 2019. New construction typically costs more than an existing home, due to higher increasing land, labor, and materials, so as the share of new home sales increases, it pushed up the overall median sales price. The median sales price for new construction in Ada County in 2020 was $424,995 compared to $375,000 for existing homes. Taking the two segments together, the median sales price for the market overall was $392,230 in 2020.
Looking Forward to 2021
Looking forward to 2021, the Boise Metro area continues to be among many economists’ top picks for markets that should see continued growth. The National Association of REALTORS® even included Boise in their list of markets that are “expected to perform well in a post-COVID-19 environment.” (SOURCE)
To help balance the market out, again, we need more inventory among new and existing product. We hope to see more homeowners list in the coming months and take advantage of the ongoing demand. One additional opportunity for more existing inventory, though, comes from investors holding single-family properties. Investors should talk to a REALTOR® and tax professional to understand their options for selling their rental homes and potentially rolling proceeds into other sectors such as commercial or multi-family to diversify their portfolios.
A fast, competitive market like ours presents challenges and opportunities to buyers and sellers alike. Whether you’re looking to buy or sell, it’s never been more important to work with a REALTOR®. I will help identify potential options for purchase, connect you with a mortgage lender, help craft a competitive offer, and negotiate on your behalf, allowing you to make decisions confidently and quickly to achieve your real estate goals.
Contact me today:
Market analysis and information provided by Boise Regional Realtors.
Home prices continued to rise in November around the Treasure Valley making it more difficult for first-time home buyers to enter the market and causing others to get creative with offers.
There were 887 homes sold in Ada County last month with a median sales price of $425,000 — the point at which half of the homes sold for more and half sold for less. This new record is a result of insufficient supply compared to persistently strong demand, fueled by historically low mortgage rates. The 30-year fixed rate mortgage was at 2.77% on average in November 2020, according to Freddie Mac — down 24.3% from last year. Based on the median sales price, a buyer with this rate could expect a monthly mortgage payment (principal and interest only) of $1,565 if they put 10% down or $1,391 if they put 20% down.
As mortgage rates have fallen, homebuyers’ purchase power has increased and for some, so has their willingness to offer higher purchase prices to be competitive, which has also had an impact on the overall median sales price. For buyers who are selling a property and then purchasing another, their down payment often comes from the incredible equity that has built up over the past few years, as home prices have risen.
However, many first-time homebuyers report securing a down payment was the most difficult task in the home buying process. In a less competitive market, home buyers could negotiate having the seller pay their closing costs. Negotiating this into a contract allows for buyers to reallocate their available cash into a higher down payment if necessary. But in this current Treasure Valley real estate market, the chances of getting a buyers closing costs paid for by the seller are slim to none. This increases the amount of cash buyers need to have saved in order to purchase a home.
In a report from the National Association of REALTORS®, 22% of non-homeowners surveyed nationwide said that rising rents was holding them back from saving from a down payment, second only to their income level. According to data from Apartment List.com, the average monthly rent in Ada County was at $1,106 in November, up 10.6% or approximately $106 per month compared to last year.
A $1,106 monthly mortgage payment, based on the latest interest rates and a 20% down payment, is roughly the equivalent of a $270,000 home. In November, 138 homes sold at or below that price, which represented 14.4% of all sales. At this price point, buyers need to move away from areas like Boise, Meridian, and Eagle and consider a move to Kuna or Canyon County.
While rents remain more affordable than purchasing when looking at market averages, the pressure of rising rents and increased purchase power due to low mortgage rates is pushing many renters to become homebuyers, adding additional demand to the market. As noted, 887 Ada County homes sold in November, another 1,700 were under contract and should close within the next month or so, and an additional 408 homes were listed as available inventory.
As the supply of homes remained insufficient compared to demand, and as more buyers compete for the inventory that is available, the speed of the market continued to accelerate.
In November, the number of days between when a home was listed and went under contract was at 13 days for existing homes (compared to 32 days in November 2019) and 29 for new construction (compared to 57 days). Meaning that properties can be listed and go under contract without ever being reflected in our inventory numbers. As long as the average days on market metric remains below 30 days, we could continue to see higher monthly sales numbers compared to available inventory.
A fast, competitive market like ours presents challenges and opportunities to buyers and sellers alike. We are not seeing a typical winter slow down. In fact, throw out all of your preconceived notions about the best time to buy or sell. If you’re ready to enter the market as a buyer or seller, a licensed and experienced REALTOR® will be your most valuable resource in helping you make decisions quickly, navigate possible multiple offer situations, and achieve your real estate goals. That’s where we come in.
Contact Gabriel today to learn more about buying or selling in the Treasure Valley real estate market.
**This market snapshot is made available by Boise Regional Realtors.
Treasure Valley Real Estate Market Report for October 2020
For years now, Boise Regional REALTORS® has reported on how the demand for homes has outpaced supply and the impact that has had on home prices. October 2020 was no exception as the median sales price for homes sold in Ada County was $406,684 in October, up 14.7% year-over-year, but down slightly from September 2020.
This was based on 1,112 home sales, an increase of 11.9% compared to October 2019. But looking at the supply of homes for sale, according to data from the Intermountain MLS (IMLS), there were 443 of single-family homes available for purchase at the end of October, down 73.7% compared to the same month last year.
This begs the question, “How can home sales be up while inventory continues to drop?”
It’s important to note that the inventory metric fluctuates daily and is based on the number of homes listed as “active” in IMLS on any particular day. For consistency purposes, our reports use the number of single–family homes available for sale on the last day of each month, so it does not represent the total number of homes that may have been available for sale throughout the month; however, the closed sales metric reflects all homes sold during the month.
That one day “snapshot” of inventory compared to a monthly total of sales is one reason we can see more closings than available inventory in our monthly reports.
Adding to that, once a seller accepts an offer, the home is no longer considered available inventory. With homes spending an average of only 20 days on the market before going under contract, some may not make it into the reported inventory numbers.
Looking specifically at inventory trends for existing/resale properties, there are a variety of reasons the supply has been so constricted: homeowners delaying listing until they find their next home, which takes longer due to already limited inventory; some homeowners may not feel they can “trade up” from their current home due to current prices, despite equity and low mortgage rates; the surge in mortgage refinancing may have reduced some homeowners’ monthly payments, making it more affordable compared to what they may spend on another home; and in response to COVID-19, some have delayed listing to limit the number of people in their home, or, they may be unable to manage a sale while working from home or if they have children at home for school.
These kinds of situations are when a REALTOR® can be incredibly valuable to a homeowner in helping them understand their options. Discussing new construction opportunities for those worried they won’t be able to find their next home, or explaining how virtual open houses and showings can limit in-person visits while still exposing the home to the widest pool of potential buyers can help homeowners find a path forward.
New construction inventory was also down significantly, year-over-year, while sales were up by 16.7%. With new homes selling almost twice as fast this year than last year, similar to existing homes, it reduces the numbers captured in our monthly inventory snapshot. But as many builders have had to alter their construction timelines, with fewer tradespeople or difficulty obtaining materials (including home appliances) causing delays, some have also delayed when or how they list a home as available in IMLS. Some builders are able to pre-sell units through model homes, which then later show up in our reports as a closed sale but never as active inventory.
The low inventory conditions have put tremendous demand on builders, and they have been responding. Between January and September of this year, 3,374 permits were approved for new single-family homes throughout Ada County, according to Construction Monitor, and another 380 permits were approved in October. While a few of the newly approved permits were for existing owners, most were for homes that will be available for purchase in the coming months.
Again, this is where working with a REALTOR® is so important for home buyers. They can help guide you through the complex process of a new build, and often, can identify new construction options before the ground has even been broken, or, for existing homes, they may have insights on those that may be getting ready to sell. So, while inventory remains low compared to demand, higher year-over-year sales show that there are properties available to be purchased.
For additional market reports, head over to the Data Driven Real Estate blog. Market reports are posted monthly on our blog and summarized on our Instagram page.
NOTE: While this month’s report provided an explanation on our inventory metrics, even with the variables that affect the monthly counts, the information from IMLS remains the most complete and reliable database for tracking our local housing market, helping home buyers, home sellers, and their REALTORS® make the best decisions for their unique situations.
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