We have seen three full years of falling inventory in Ada County. It is interesting to consider some of the factors that have been working together to cause this, especially in the $250,000 and under price range.
1. Increased Demand: Our local population is growing which is increasing demand for housing.
2. Rental Cost Is Outpacing Mortgage Cost: There is a high demand/low supply issue in the rental market as well, which has caused rental costs to become increasingly expensive. With our still historically low interest rates and tax incentives for homeownership, it is usually less expensive to buy than to rent. Thus, many people pursue this option—increasing demand in the housing market even further.
3. Increased Building Cost: Our local builders were hit hard by the housing bubble bursting in 2008. They are trying to rebound, but land and materials are more expensive now. Also, labor is challenging because there are fewer local trade workers available. This makes it difficult for builders to meet the demand for lower to mid-priced housing.
4. Overloaded Approval Process: City planning, zoning, and permit departments are receiving more local project requests than they can manage. Although there are housing projects in the pipeline they want to approve, the entire process has been slowed by the volume of paperwork.
5. People Aren’t Moving Up As Often: In the past, the trend has been for people to move from starter homes to larger homes as their families or their incomes grow. In 2012, the average time a person lived in a house before moving up was six years. Today, that timeframe is ten years, which results in less entry level housing coming available.
6. Investor Impact: Investors are able to outbid the average buyer on lower-priced homes and either flip them into a higher price points or turn them into rental properties.
Returning to a more balanced market by seeking to minimize these factors would benefit our economy. But, it is difficult to achieve and requires realtors, builders, investors, and homeowners to work together toward a common goal. As realtors, we are seeking to educate homeowners on the current market conditions and help those who have owned their properties for awhile realize their equity positions and options for moving up may be much more positive than they had assumed. As people move up or purchase new construction, we hope to see the inventory of existing homes increase.
If you’d like to talk more about the market conditions and how they could personally affect you and your home investment decisions, please don’t hesitate to call us. We’d be happy to meet with you!