2018 was the 4th year of record low inventory in Ada County. Last year began to give us the first signs that the market may be shifting back towards balance. We begin 2019 with a change in the Ada County existing homes supply. Note: January 2019 was the first time since October 2014 that the number of existing homes for sale in Ada County was higher than the same month the previous year. Despite this uptick in existing inventory, closed sales were down 6.3% year-over-year. The number of closed sales that are even possible was limited due to the fact we’ve had fewer and fewer existing homes to sell each month compared to buyer demand.
For the 2018 year overall median sales prices were often reported as the area norm. It is important to identify the factors that are driving prices in both segments to better understand our local market dynamics.
For example, based on past data, when new construction sales made up more than 24% or 25% of the total sales in a given month, the overall median sales price was 12-14% higher than the previous year, on average.
Since March 2018, every month of the year saw the share of new construction sales at or above that level, which had a major impact on the area’s overall median sales price. In the chart below you can see that the volume built went up, the median sales price went up and the year over year percentages also went up.
The median sales price for new homes has been rising, due to increasing costs of land, labor, and construction materials. The 2018 median sales price for new construction in Ada County was $373,898, an increase of 10.2% compared to 2017. This combination of more new homes selling at higher prices pushed Ada County’s overall median sales price up.
While new home sales were up 22.4% in 2018 compared to 2017, the number of existing/resale home sales over the same period was down 4.1%. This segment’s prices are being driven by the historic low levels of homes for sale compared to buyer demand.
December 2018 marked over 4 years of falling inventory in the number of existing homes for sale in Ada County. The number of closed sales that are even possible is limited due to the fact we’ve had fewer and fewer existing homes to sell each month compared to buyer demand. This is the primary reason we’re seeing closed sales down year-over-year.
We can measure the relationship between inventory and buyer demand with “Months Supply of Inventory.” This metric takes the number of homes for sale (inventory) divided by the average number of closed sales by month for the preceding twelve months. This means that assuming no other homes came on the market, this would be the number of months it would take to sell through all the homes currently on the market.
A balanced market—not favoring buyers or sellers—is typically between 4-6 months of supply. Below four months typically favors sellers and more than six months typically favors buyers.
When the supply of inventory for existing homes stays right around 1-2 months, existing home prices remain higher. This shows us that buyer demand persists, even when there are fewer homes to choose from.
In summary, local home prices are being driven by the persistent and historically low inventory of existing homes compared to demand, and more new homes selling at overall higher prices, primarily due to rising construction costs.
For 2018, Gem County’s overall median sales price ended at $199,782 year-to-date (January 1 – December 31, 2018), an increase of 7.9% over the same period in 2017. There were 342 home sales in 2018, up 8.2% compared to 2017. 317 of those were existing/resale closed sales, while 25 were new construction sales — a 25% increase in new construction sales from the year before.
New construction homes generally sell at higher prices, due to increases in costs of land, labor and construction materials, so this larger share of new construction sales has brought up the overall median sales price of homes in Gem County last year. Persistently low inventory compared to buyer demand is the other factor driving up the median sales price.
As of December 2018, the months supply of inventory in Gem County was at 2.5 months, for all price points combined. This is an uptick from the 1.5 months we saw in November, but still not considered a balanced market. As you can see in the chart below, the months supply inventory is at less than a month below $200,000 price point.
Gem County experienced the same market conditions in 2018 that we’ve seen elsewhere in the Treasure Valley — higher home prices due to low inventory and more new construction sales. We’ll continue to keep an eye on prices, inventory, and months supply of inventory to see if the market is shifting more into balance in 2019.
Additional information about trends within the Boise Region, by price point, by existing and new construction, and by neighborhood, are now available here: Ada County, Canyon County, Gem County, and City Data Market Reports. Each includes an explanation of the metrics and notes on data sources and methodology.
Some data from Boise Regional REALTORS® (BRR) and the Intermountain MLS (IMLS) as of 2/15/19.
The team at Stewart Realty knows homes and they know Southwest Idaho real estate. To find out more about real estate in the Boise Region give Jeff Stewart at Stewart Realty a call to set up your personal real estate search, a personal tour of the area and find some great homes that fit your needs and budget.
Jeff Stewart, Broker/Owner 208-602-1993 or firstname.lastname@example.org