Ada house prices drop slightly but home sales still up

For the first time in many months, the median sales price for homes sold in Ada County dropped to $406,684 in October, down slightly from September’s $409,945. Regardless, the October price still represents a year-over-year increase of 14.7%.

The Boise Regional Realtors calculated the median price based on 1,112 home sales. This amount of sales was an increase of 11.9% compared to a year ago in October 2019. As far as inventory is concerned, according to data from the Intermountain Multiple Listing Service, there were 443 single-family homes available for purchase at the end of October, down 73.7% compared to the same month last year.

This raises the question, “How can home sales be up while inventory continues to drop?”

The answer starts by noting that inventory fluctuates daily and is based on the number of homes listed as “active” in the IMLS on any particular day. For consistency, the BRR reports always use the number of single-family homes available for sale on the last day of each month. As a result, the inventory number does not represent the total number of homes that may have been available for sale throughout the month.

In contrast, the closed sales metric does reflect all homes sold during the month. The comparison of the inventory “snapshot” with the total monthly sales is one reason there are more closings than the available inventory reported at the end of the month.

Adding to that, once a seller accepts an offer, a home is no longer considered as available inventory. With homes spending an average of only 20 days on the market before going under contract, some may never even make it into the reported inventory statistic.

Looking specifically at inventory trends for existing/resale properties, there are a variety of reasons the supply has been so constricted. Many homeowners delay listing their property until they find their next home, a process that will takes longer due to the already-limited inventory. Some homeowners are holding onto properties longer because they may not feel they can “trade up” from their current home due to current prices, despite equity and low mortgage rates. In addition, the surge in mortgage refinancing may have reduced some homeowners’ monthly payments,  making their current home more affordable. Also, in response to COVID-19, some have delayed listing to limit the number of people in their home, can’t manage a sale while working from home or can’t swing a new home purchase while they have children at home for school.

BRR notes that many homeowners do not understand their options even during the pandemic. Michelle Bailey, the president of BRR, explained some of the ways home buyers and sellers can move move forward under current market conditions: “Discussing new construction opportunities for those worried they won’t be able to find their next home, or explaining how virtual open houses and showings can limit in-person visits while still exposing the home to the widest pool of potential buyers can help homeowners find a path forward.”

New construction inventory for October was also down significantly, year-over-year, while sales were up by 16.7%. With new homes selling almost twice as fast this year than last year, the end-of-the-month inventory snapshot also has missed some of these new homes due to the rapidity of sales. Some builders are able to pre-sell units through model homes, which then later show up in our reports as a closed sale but never as active inventory.

On the other hand, many builders have had to alter construction timelines because of labor shortages and difficulty obtaining building materials — including home appliances. This has introduced construction delays for some builders. Others have lagged on when or how they list a new home in IMLS. These are some of the other factors for why low inventory may not reflect higher monthly sales.

The low inventory conditions have put tremendous demand on builders, and they have been responding. Between January and September of this year, 3,374 permits were approved for new single-family homes throughout Ada County, according to Construction Monitor, and another 380 permits were approved in October. While a few of the newly approved permits were for existing owners, most were for homes that will be available for purchase in the coming months.

Bailey remarked: “While inventory remains low compared to demand, higher year-over-year sales show that there are properties available to be purchased.”