Boise Idaho Real Estate Market Update
In October and into November, the Boise real estate market saw a decrease in the number of pending home sales. Although many attribute the seemingly abrupt halt to seasonality, some are wondering if they are witnessing a weakening of the Boise real estate market. If you are one of the "some" in the second category, we're here to encourage you...that's just not the case.
True, this year's seasonal slowdown has been more apparent than in 2011 and 2012. But, that was overwhelmingly
due to the number of investors purchasing properties during that time. You see, your average home buyer typically wants to purchase in the spring or summer, before the school year starts, cold weather returns, and the busyness of the holidays hits. Investors, on the other hand, don't care too much when they buy, they just want to get the best deal. Since the winter months typically bring the best prices and because well priced foreclosures and short sales were abundant in those months, the number of investor purchases was up significantly. This made for higher than normal pending sales figures. This year, however, investors aren't out in as great of numbers. Thus, the Boise real estate market is experiencing a more normalized seasonal change, not a weakening of the market.
In fact, despite the seasonal slowdown and market changes that are affecting buyers and sellers, the overall Boise real estate market is healthy and headed for a slower but stabilized upward trajectory.
November Boise Real Estate Market Trends
1) Several Price Changes: Over the past couple of months, I have seen a crazy amount of price drops on actively listed Boise homes. Sellers who became overeager as they saw Boise housing prices appreciation in July and August to their highest levels since the housing bubble burst, listed their homes in August and September with high expectations on the increasing real estate market values. As supply has increased and demand decreased, these sellers are discovering they priced above what the current market could handle. Now they are back pedaling to pull the price of their home down to a position it will actually attract a buyer.
2) Increasing Supply: As we all know, housing prices have a great deal to do with supply and demand. As a general real estate guideline (see the graph to the right), 1-5 months inventory means there is not enough supply to meet the demands of buyers and prices go up. If we have 5-6 months supply, that’s a normalized market and prices will remain relatively stable. If you have more than six months inventory, there is not enough demand for the supply and prices go down. Although still relatively low, inventory in the Boise real estate market is starting to increase. Our months inventory for October 2013 was 4.5, versus 3 months last October. As we approach the 5 months inventory mark, we will continue to see a stabilizing of the market and a decrease in the RATE of appreciation.
3) Decreasing RATE of Appreciation: As we approach the 5 months inventory mark, we will continue to see a stabilizing of the market and a decrease in the RATE of appreciation. Although real estate will continue to appreciate, we will not see the dramatic price appreciation we saw in the summer months. This may be discouraging to some, but all and all we believe this will be a good thing for our market. Slower paced price increases will help keep homes affordable which is a positive for housing demand.
4) Interest rates will begin to rise: Interest rates are largely influenced by the number of bonds purchased by the government. To help stimulate the economy after the housing crises, the government started buying certain bonds to keep interest rates down. Now that the economy is improving, they are considering tapering off those bond purchases which will cause interest rates to creep back up. Even talk of the tapering the bond purchases resulted in a jump in rates in September. In October and November, the government said “not yet” to the taper, which has kept rates low. But most analysts anticipate tapering to occur by late 2013 or early 2014, causing definite increases in interest rates next year. The graph to the right gives predictions on where those rates are likely headed.