Real Estate Counselors

Low Inventory + High Demand = Increased Home Values

If our market conditions of low inventory and high demand continue, there is no guarantee we’ll see prices drop significantly over the next few months.  However, those thinking about selling or buying shouldn’t be concerned with ‘timing the market,’ because the best time to buy or sell is when it fits your needs and circumstances.

Key Takeaways:

  • The median sales price for Ada County reached a new record in August 2018, of $334,400 for existing and new homes combined. This was up 20.3% over the same month last year, and up 4.8% from July.
  • Local home prices are being driven by the persistent and historically low inventory of existing homes compared to demand, and more new homes selling at overall higher prices, primarily due to rising construction costs.
  • In August 2018, the median sales price of existing homes in Ada County reached $309,200 — a new record — up 9.0% over August 2017. This number mostly reflects homes that went under contract in June and July — when we had the fastest market times on record — indicating that many buyers offered higher prices to be competitive in the face of high demand for the persistent low inventory.

Analysis:

The median sales price for Ada County reached a new record in August 2018, of $334,400 for existing and new homes combined. This was up 20.3% over the same month last year, and up 4.8% from July.

As we’ve shared many times through our market reports, local home prices are being driven by the persistent and historically low inventory of existing homes compared to demand, and more new homes selling at overall higher prices, primarily due to rising construction costs.

On average, the share of monthly homes sales that are new is typically between 22-23%, meaning the other 77-78% of the sales are of existing homes. When the share of new home sales goes over 24% or 25%, we will see overall home prices (looking at existing and new homes together) increase, on average, between 12-14% year-over-year. As the share of new home sales increases, so does the overall median sales price.

This is what’s meant by “overall home price being driven up by more new homes selling.” To further illustrate this trend, the table below shows the share of new home sales for the five months this year in which we’ve had record high prices:

Month Share of Sales that were New Homes Overall Median Sales Price YOY % Change
Mar 2018 30.7% $308,950 +23.6%
May 2018 28.0% $305,000 +16.4%
Jun 2018 26.7% $324,647 +18.5%
Jul 2018 25.2% $319,000 +18.2%
Aug 2018 26.8% $334,400 +20.3%

 

But new home prices are just half of the story.

In August 2018, the median sales price of existing homes in Ada County reached $309,200 — a new record — up 9.0% over August 2017. This number mostly reflects homes that went under contract in June and July — when we had the fastest market times on record — indicating that many buyers offered higher prices to be competitive in the face of high demand for the persistent low inventory. Inventory is needed in all prices points, and that’s eventually what will help our market come back in to balance.

In comparison, the median sales price for new construction was at $386,470 in August 2018, up 8.6% over August 2017, and the most recent record high for the new home segment was $393,705 in June 2018.

This information is provided by the Ada County Association of REALTORS®, which began doing business as Boise Regional REALTORS® (BRR) in 2016. BRR is the largest local REALTOR® association in Idaho, with over 4,000 members and two wholly-owned subsidiaries — the Intermountain Multiple Listing Service, Inc. (IMLS) and the Boise Regional REALTORS® Foundation.  Source: MORE NEW CONSTRUCTION SALES DROVE
ADA COUNTY HOMES PRICES HIGHER IN AUGUST

 

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