Now the March 2011 Boise Real Estate numbers are in, we see sales have risen 37% from last month. This is still 8% less than a year ago, but it’s difficult to compare both years as this time last year we were still in the final months of the First Time Homebuyer Tax Credit. Last year, March, April, May and June were strong real estate months due to the tax credit. The numbers for March 2011 are better than those of 2008 and 2009, and home sales are on the rise in Boise.
What can we expect of the Boise real estate market in the coming months? Pending sales are up 12% from last month, so more sales are on the horizon. Although we can’t expect to keep pace with last spring, home sales this summer should outperform those of last summer. (There were some very slow months last summer after the tax credit ended.)
Huge portions of total home sales are still made up of distressed sales. Short Sales in Boise represented 20% of the total this month – slightly less than the record high the month before at 23%. REO sales in March were 38% of the total sales, only slightly less than the all time high of 40% set in December 2010. Distressed sales combined made up well over half of all Boise real estate sales (58%), which is near the record high of 61% in December 2010. While sales volumes are relatively strong, they are mainly driven by distressed home sales. Those looking to buy real estate can easily shop only distressed homes and still find a large selection to choose from.
How are home prices in Boise doing? We are happy to see that the dollar volume is up 30% from last month, but sorry to report that is still down 20% from last year. This means prices are still dropping. The average cost of a Boise home sold this month is $135,000, which is down 9% from last month and down 14% from a year ago. The record low was in January 2011 with the average price of $126,500, so the past two months have seen a slight increase in price. The best guess puts us at the bottom of the housing market and that increasing sales volumes should stabilize and eventually increase home prices once more.
The three indicators that lead me to believe Boise home prices will soon stabilize are: 1. Affordability, 2. Inventory levels, and 3. Price discounts.
Concerning affordability; the median priced resale home in January 2005 cost 19% of a Boise resident’s median income. During the height of the real estate bubble in June 2006, that cost was 30%. Currently the affordability index has fallen to a record low of 12% for a resale home. Although prices may fall a bit more, this leads me to believe we are near the bottom.
Which brings me to my second reason for believing home prices will stabilize. Inventory has dropped 28% compared to last year at this time (down another 2% from last month). New Construction inventory is 570 vs. 644 last year. New Construction inventory has dropped for 42 of the last 54 months since reaching a high of 1890 September 2006. Resale inventory is 2057. Last year at this time there were 3028 resale homes for sale. July 2008 was the all-time record high at 3920. July 2005 was the low point in resale inventory at 657. (Look at that run-up in the 12-month period from 7/05 to 7/06. No wonder the Boise real estate bubble burst.)
Trends in price discounts indicate that prices are stabilizing. This month there is only a 1.1% discount given off the asking price, compared to 3% at this time last year. Discounts were virtually non-existent during the skyrocketing prices of 2005-2006. During Boise real estate’s “dark ages” (2007-2010), average discounts were nearly 7%! Homes priced at market value are now moving, and discounts have shrunk to 1%.
Todd McCauley is an owner/agent of Eagle Rock Properties, a Boise home sales brokerage. He manages a program called The HELP Program that designed to help struggling buyers qualify for a mortgage. He helps buyers and sellers with Boise homes.
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