IS THE REAL ESTATE MARKET SLOWING?

13 09 2013

Recently I got several calls from a conscientious reporter at the Idaho Statesman.  He basically wanted an answer to this question – “What is happening right now in the Treasure Valley Real Estate Market?  Is it slowing?”

The short answer is “Yes.”  At this time of the year there is always a seasonal slowdown from the peak sales months of May, June, July, and August.  for a more complete analysis you have to look deeper into the numbers.  I will focus on Ada County.

1.  During the last 15 years, August sales have increased 8 times over July – 7 times there has been a decline.  But the 8% decline in 2013 marks a reversal from the 4 prior years which showed increases of 2%, 15%, 6%, and 12%.  Humm. . . that at least raises a note of concern.

2.  Interest rates have gone up since May almost 1%.  This has caused a bit of a “compression” in sales and accounts for the huge closing month in July.  It is only natural for buyers to get off the fence and try and get the deals closed when rates are increasing.  Comparing closed sales this year to the same month last year the numbers are quite revealing:  January -6%, February +4%, March +8%, April +9%, May +35%, June +19%, July +40%, August +15%.  The rise in interest rates has to be considered when you study those numbers.  Again my thought is “Humm. . . .”

3.  Checking Cumulative sales YtoD you can see the July push.  January started 6% lower than 2012, then by February sales were still 1% lower.  After that it was positive: March 3%, April 5%, May 12%, June 13%, July 18% and August 17% higher in 2013 than 2012.  That too, while still VERY strong, may signal a bit of slowing. . .

4.  What about pricing?  The Median resale price for a home in Ada County was virtually unchanged in August from July.  It actually went up by $100 from $189,900 to $190,000.  Again the “Cumulative” Median pricing for 2013 compared to 2012 gives a more accurate picture.  The year started strong with a 10% gain in January, February fell back to 6%, March moved up to 8%, April 10%, May 12%, June 15%, July 16% and August 17%.  No signs of a price slowdown at all!  In fact this puts the market back in equilibrium with a constant 3.7% appreciation using a base year of 2000 pricing.  The “bubble” of 2005-2008 is gone and so is the “depression” of 2010-2012.  In the price free fall 2009 just happened to catch the normal Median line on the way down!

5.   Inventory – With the rising prices more homeowners are finally able to sell.  There are more homes on the market now than there were over the past two years at his time.  This will slow the intense pressure on prices to skyrocket and help to stabilize growth at a more sustainable pace.  However make no mistake about it – there is still a housing shortage in Ada County.  The 2462 homes for sale at the end of August 2013 is nowhere near the 5125 in 2007 peak.

6.  The last data point that I want to check is new business written.  Here a case can certainly be made for “market slowing.”  609 contract were written in August.  This is just a little ahead of the number written in August the preceding 4 years: 2009 – 573,   2010 – 505,   2011 – 511,   2012 – 593.  However when you look at April – July of this year the numbers were much stronger when you compare them to the past 4 years.  Just comparing 2012 April-July with 2013 there was an average gain of 22%.  August was only up 3%.

Conclusion:  Yes there is some evidence of a market “slowdown” however most of the signs are still very positive.

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