September residential sales in Ada County continued a tale of two markets: inventory reductions in the resale market and inventory increases in the new home market. The charts below show the changes in inventory over the past 13 months in both resale and new homes, resulting at the end of September in 3.6 months of inventory in resale homes (often referred to as a “Sellers’ Market”) and 6.8 months of inventory in the new home market (tipped slightly toward a “Buyers’ Market”).
The main reason for the difference appears to be price. The average price of new homes (including detached single family up to 2 acres, condominiums and townhomes) for the past 12 months is $302,806, 38% (and $82,000) higher than the average price of a resale home.
It’s interesting to note that the price per square foot of new construction is only 17% higher than the price per square foot of existing homes but the average size of new homes is 18% larger than the average size of resale homes: 2,301 square feet for new homes and 1,952 square feet for resale homes.
The total residential market through three quarters of this year is down 4.6% in units compared to the same period last year: 2.1% lower for existing homes and 15.3% lower for new homes. Total dollar volume, however, increased 3.1% as a result of higher average sales prices.
The opportunity for sellers of resale homes is great: the price difference between existing and new homes makes resale look like a bargain. The opportunity for buyers may be to purchase an existing home and renovate it to lessen the home’s effective age.
The opportunity for builders might be to build smaller homes, thereby reducing the price difference between resale and new homes. Once that price difference approaches 20% rather than the current 38%, new home sales should flourish.