The sky is not falling on Treasure Valley residential real estate, and there is more reason to smile than frown. This was our response to many friends and clients who expressed concern over a recent Idaho Statesman article covering Treasure Valley market conditions ( Aug. 6, “Treasure Valley home sales likely to slow, real estate agents say”).
Moving past the headline and arguably melancholy lead photo, there were some good points noted. The economy is indeed cyclical, and history tells us to proceed with caution. Significant price weakness will likely be driven by a national economic event (vs. local demand) and characterized as a “soft landing,” paling in comparison to the Great Recession. Lastly, continued price increases may not be sustainable, given Ada County prices have been rising steadily since 2013, averaging 18 percent annually.
Recent stats show prices are hovering around a possible plateau, and homes are taking slightly longer to sell now compared to a few weeks ago. Nonetheless, supply remains historically low and demand high. The low inventory (supply) story may be old news, but it is perhaps the single biggest factor driving the market today both locally and nationally, followed closely by high demand and historically low interest rates.
The current Ada County housing inventory is 2.7 (the supply of homes available calculated in months), which is extraordinarily low. In a normal or balanced market, available inventory is approximately five to six months. Currently, competition among buyers for appropriately priced homes remains robust, especially for homes under $175,000. Nationally, new construction starts are at an eight-year high, but locally new construction inventory has slowed slightly, likely the result of price jumps, a shortage of build-able lots, and builder caution as winter approaches. Bottom line: There is little indication the low supply trend, both in resale and new construction, will change significantly anytime soon.
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Barring a major national economic hiccup, demand in our market should also remain favorable. The Treasure Valley has been fed by a steady diet of financially strong buyers, especially folks from California and larger Northwest population centers.
According to the Idaho Transportation Department, 21 percent of all 2014 Idaho driver’s licenses issued (age 21-plus) originated from California. And, given California’s catastrophic drought crisis, repetitive natural disasters and skyrocketing cost of living, Golden State residents will continue to drive the exodus to Idaho in the months and years ahead.
Additionally, National Association of Realtors Chief Economist Lawrence Yun visited Boise late last year, unveiling a new NAR Baby Boomer Study, which identified housing markets most likely to see a major boost in sales from leading-edge (age 65-plus) baby boomers. Boise and Raleigh, N.C., topped the list, primarily due to solid job growth, a strong entrepreneurial workforce and affordable housing prices.
Interest rates are (still) historically low, and have continued to buck prognosticators’ forecasts of significant increases in 2015. To the contrary, rates dropped in August compared to 60 days earlier. Also, interest rates historically remain calm prior to a presidential election, which is 15 months ahead.
Our local economy is gaining steam. Five Downtown hotels have recently been announced. Albertsons completed its corporate headquarters relocation. Jobs are up and unemployment is down. The entrepreneurial startup community is thriving like never before. St. Luke’s Health System is moving forward with a $400 million Downtown expansion, and the Boise Valley Economic Partnership (BVEP) continues to attract and land sizable employers to the Valley.
Preparedness for future change is always the best practice, and it is also important to smile and smell the roses, for they too do not last forever.
Dan Givens is an associate broker and partner of Givens Group Real Estate, an affiliate of Keller Williams Realty Boise.