While fewer Treasure Valley home buyers paid over asking for homes in September, home prices are holding steady overall. The median sales price for homes in Ada County moved to $534,950 in September 2021, marking a slight 0.8% increase over August when the median sales price was $530,500.
While prices remained steady month-over-month, the most notable statistic was the share of homes that sold for over list price dropped to 33.1% — the lowest level since June 2020.
Competition for homes has been fierce for nearly a year, and as market times fell, more buyers were willing to pay over list price, which became a primary factor driving up the median sales price. When the share of homes that sold over list price exceeded 40% in August 2020, the median sales price moved into the $400,000-range for the first time. When it reached nearly 65% in May 2021, that’s when prices exceeded the $500,000-mark.
These price gains have been the result of various market conditions that have built up over time, further accelerated by the economic and migration effects of the pandemic. These conditions include insufficient supply of inventory compared to demand, the share of new home sales, and more recently, the share of homes that were selling above list price.
Insufficient Existing/Resale Inventory
You may have heard that the national and local housing market is experiencing a housing shortage, which has been at play for some time now. We saw consistent year-over-year declines in existing/resale inventory in Ada County from October 2014 through January 2019, and from April 2020 through May 2021. While we’ve seen some year-over-year increases in months outside of those ranges, we’re still dealing with constricted existing inventory, particularly at the lower price points. This has left Ada County with an insufficient supply of homes compared to demand, driving up home prices.
Persistent Demand for Homes
Demand for homes has been primarily fueled by population growth, migration trends, and increased purchase power due to historically low mortgage rates, with the most recent uptick in demand coming from people re-thinking how they live and work as a result of the pandemic.
Concerns Over 2008 Repeating Itself
“We are waiting for the bubble to burst” and “This is 2008 all over again” are two phrases we have been hearing a lot lately when it comes to the Treasure Valley market and home prices. It is important to note that the circumstances surround rising home prices are different this time around than when the market crashed in 2008. The crash was largely due to people obtaining large mortgages without actually being able to afford them, aka poor lending practices. Lenders have tightened up the requirements to be able to qualify for a mortgage and home prices are being driven up now due to lack of supply – its simple economics.
The jump in price likely brought prospective sellers to the market, which has helped inventory levels increase. In fact, September marked the sixth consecutive month of inventory growth. The 1,249 homes available for sale at the end of the month was an 11.1% increase from August and a staggering 165.7% increase compared to September 2020.
One metric used to illustrate the supply vs. demand relationship is Months Supply of Inventory (MSI), which takes the number of homes for sale divided by the average number of sales by month for the preceding 12 months. As of September 2021, Ada County was at just 1.5 months for existing homes and 1.4 months for new construction, meaning, if no additional homes were listed, the supply of homes for sale would run out in less than two months. A balanced market – not favoring buyers or sellers — is typically between 4-6 months of supply.
In addition, the average number of days between when existing homes were listed for sale and an offer was accepted increased to 17 days — the longest market time in the last 12 months — and 21.4% longer than the 14 days we saw in August 2021.
The increased inventory and a slightly slower pace are good news for buyers, and may be two reasons that fewer homes sold over list price last month. That said, while the Months Supply of Inventory (MSI) continued to trend up Ada County is still not in the 4-6 month range of supply which is typically considered a balanced market — creating ongoing opportunities for sellers.
This fall is still proving to be a great time for homeowners to capitalize on the current home prices. For those who are considering selling, please reach out to me about the different factors at play within our market and how they may affect different situations.
This market report was provided by Boise Regional Realtors.
