Boise home sales are down 6% vs. 12 months, but have actually risen 6% over last month (May 2011). Last spring, first-time Boise home buyers received Federal tax credits—artificially increasing the number of qualified Boise home buyers. More accurate month by month comparisons will come later this year the 2010 tax credit won’t be a factor.
For nearly two years, distressed home sales have driven the Boise real estate market. In June, short sales made up 15% of all home sales and REOs (bank owned properties) accounted for 29%. In total, 44% of all Boise home sales were distressed. The sheer volume of these distressed sales has a major impact on Boise home prices. With nearly half of all home sales are distressed, it’s no wonder that prices continue to fall. Fortunately, the percentage of distressed Boise home sales is actually dropping. In December 2010, distressed sales made up 61% of all Boise real estate. By the way, less than one in six (16%) of Boise short sale listings actually close.
Six years ago, a Boise real estate professional began measuring a home affordability Index. At that time the index was at 19%– indicating that it took 19% of a median Boise income to buy a median priced home. At the height of the real estate bubble, in June of 2006, that index had risen to 30%. In the past five years, that index has fallen to 13%.
In June, the cost of the median Boise home was $150,000—up 5% from May 2011. Surprisingly, the median new construction home was nearly $240,000. Relatively few entry level buyers are choosing new construction and, obviously, most of the current new construction is on the high end.
Examining only resale homes in the Boise market, the median priced home falls to $138,500. The record low was in January 2011 when the median resale price dropped to $126,500. Is that as low as we’ll go? Most likely; barring a major disaster in the Boise real estate market.
Prices will rise only when home inventory levels are depleted enough to upset the supply / demand balance. Real estate inventory is falling—indicating that we are potentially on the way to a market recovery. In June of 2011, housing inventory was 32% lower than June 2010. Resale inventory is down even further. In June 2011, there were 1,970 available homes vs. 3,129 available homes a year ago. That’s a whopping 37% drop in only 12 months.
Why are available homes so hard to find? In a market like Boise’s, where values have plummeted for over five straight years, most potential sellers won’t sell unless they absolutely have to. As a result, as buyers purchase the available short sales and REOs, inventory levels drop. Eventually, buyers will bid Boise home prices up in an effort to obtain the relatively scarce resources. Then sellers will return to the market.
Price discounts in Boise home sales are of interest to both sellers and homebuyers. A discount represents the difference between the final sales price and the home’s final asking price. In June, the average discount was about 2.3% –not far from where it was a year ago. A low discount rate does mean Boise home prices are necessarily rising. It just shows that home buyer and sellers are more likely to agree on fair market real estate values.
Todd McCauley serves the Boise real estate market, working with both buyers and sellers. He is regularly among the top Boise real estate agents and owns Eagle Rock Properties, a real estate brokerage based in Eagle, Idaho.