Home Prices Adjust to Market Changes
The median sales price for homes in Ada County was $589,990 in July, down 0.4% from June but 9.3% higher than July 2021. Buyers who purchased in recent months faced larger monthly mortgage payments due to higher mortgage interest rates and home prices, which has had a cooling effect on the demand for housing. As a result, home price growth and sales have slowed.
This point is made more obvious when looking the existing/resale segment, which had a median sales price of $549,000 in July, a 3.7% decrease from the previous month, but a 4.6% increase from a year prior. The existing segment can react more quickly to changes in what buyers are willing or able to pay in contrast to new construction which must factor in land, labor, materials, and other fixed costs into the final home price.
The month-over-month price declines indicate that the local housing market continues to be driven by supply versus demand, not speculation like we experienced over a decade ago. As demand decreases and supply increases, prices are responding accordingly.
There were 2,408 homes listed for sale at the end of July, a 128.2% increase from July 2021, and the highest level of inventory we've seen since September 2015. Even with the uptick in inventory, the months supply of inventory in July was 2.8 months, meaning, if no additional homes were listed, the supply of homes would run out in about three months. A "balanced" market, or one that does not favor buyers or sellers, is typically between 4-6 months of supply.
July also marked the fifth consecutive month of year-over-year declines in the number of sales. There were 685 closed home sales last month, down 33.8% compared to July 2021. There have been 5,370 total sales year-to-date, 707 fewer, or 11.6% less, than this time last year.
Metrics that indicate competition in the market continued to show signs of normalizing in July. Focusing on the existing/resale segment, homes that closed last month spent an average of 21 days on the market before going under contract, compared to 11 days in July 2021. Additionally, the average original list price received for existing homes in July was 95.6%, which means that on average, buyers paid less than asking through a lower accepted offer, price reductions, or seller concessions. In July 2021, the average original list price received was 101.3%, meaning that on average, buyers paid more than asking price.
Higher mortgage interest rates have done what the Fed intended and cooled demand for housing, which in turn, has also slowed sales and price growth. However, it's important to remember that 2020 and 2021 were out of the norm for our market — we experienced a surge of demand for housing while we had record low inventory, which drove home prices up at a very rapid rate. Today, we're in the midst of a shift to a more normal market, one where bidding wars are less common, buyers have more time and choices, and appraisals and home inspections don't have to be waived in order for an offer to even be considered.
Whether you're ready to buy today or would like to purchase within the next two, five, or even ten years, work with trusted advisors to make a plan to reach your goals. Taking important steps today, such as improving your credit, researching down payment programs, and saving for your down payment in a tax-sheltered savings account can really make a difference when you're ready to make a move.
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