Based on the limited data available so far in the fourth quarter, the torrid pace set in the first three quarters appears to be slowing. October’s closings were down 3% and pending sales down 4% from October 2012.
Several things are happening to create this slowdown:
(1) The institutional investors are pretty much gone from the market, decreasing the demand for residential income property. (2) Although interest rates remain at very affordable levels, they have risen approximately 1.5% this year, eroding buying power by about 15%. (3) The inventory of distressed property has decreased significantly. Only 6% of listings and 9% of sales were distressed properties in October. (4) Average prices have risen 17% in the last year, again decreasing the affordability of owning a home.
However, there are many signs our market will continue to be healthy for the next year. (1) Although average prices have risen, the average price of a home now is still 20% lower than six years ago when the market turned down. (2) Even though interest rates have increased recently, they are still near all-time lows, making real estate ownership look like a great, affordable deal. (3) While inventory levels have risen by 50% over the low point this year, we still have only 3.7 months of residential property on the market. (4) Ada County is creating jobs. And finally (5) we have found that, as California prices rise, Californians are able to sell their homes and come to Idaho.
Buyers: Prices are still competitive and interest rates are still low. Fall is often a more relaxed time to buy before the expected surge next spring. The main obstacle you may have to deal with is finding just the right property because of limited availability. It’s a good idea to have a trusted relationship with an agent who can get in touch with you right away when they find something new has come on the market.
Sellers: The good news is that, with inventories still lean, you are in a position to have success. Buyers who are in the market now are generally quite serious. Bringing your property onto the market now may enable you to beat the more competitive market in the spring.
Be sure to stay in touch so I can keep you updated on market conditions.