Does this remind you of the housing market in 2007, the precursor to the housing recession of 2008-09? In the first ten months of 2007, residential unit sales in Ada County were down 31% from the year before while average prices increased by 2%.
The last three months of this year showed a similar, albeit less pronounced, pattern. Unit sales were 5.7% lower than the comparable three months in 2017 while average prices increased 16.9%. Is this a harbinger of things to come?
It might be wise to look at our starter market since new entrants into the market are necessary for unit sales to grow. CoreLogic sited their recent study of younger millenials, the best hope for growth in the housing market: "73% of younger millenials site affordability as a barrier to home ownership (far higher than any other age cohort)."
Fortunately, there are major differences between what we are experiencing now and what happened in 2007 to start the great housing slump. First, in the lead-up to the 2008-09 slump, many people who shouldn't have been able to buy were able to use "no doc" loans to purchase housing that they really couldn't afford. Since then, and including this past year, buyers have generally used standard type financing that has required cash down payments. Secondly, in 2007 there was a huge supply of inventory, almost 8 months of inventory at the end of October compared to less than 2 months now.
There appears to be a correction in the winds, and with our feeder markets slowing down, that correction is about affordability for our current residents.
If you're a seller, price and stage your property to be competitive. If you're a buyer, enjoy a market with a few more choices than we've had in the recent past.
The graph below depicts the changes in year-to-year unit sales and average prices.