In my day to day dealings as a REALTOR® here is Boise, Idaho, a number of people are wanting to know "Are home prices going to continue to fall?" or "How will we know when the market has bottomed out?" I answer that question with a consistent answer, but one that always leaves people a little frustrated.
To me, the housing market is best forcasted by analyzing the numbers. The peaks and valleys of the market are due in large part to simple supply and demand. When supplies are low, demand, and price, increase accordingly. When supplies are up, as in our current market, demand, and price decrease. So all we have to do is monitor the inventory numbers and when they start going down, we know the bottom has been hit right? Well hang on a second...
Another factor that has led to our slower market in Boise, and across the nation, has been the major changes that have occurred in the credit arena, home mortgage lending specifically. As a REALTOR® I am always on the lookout for ready, willing, and able buyers. For years the ready and willing buyers were not hard to find, but able buyers were a little harder to come by. But by 2004 lenders were offering a plethora of exciting new loan programs that helped a number of these ready and willing buyers, become able to purchase a home. Unfortunately many lenders became a little bit to loose with their standards, and made able buyers out of people that had no business purchasing a home at that time. What followed were large problems for most lenders, and massive reform in lending guidelines. So how does that affect our current market?
Along with high inventories of homes, the market is dealing with a couple of issues in regards to the home buyers. There are many buyers now who are able to purchase, but right now don't know if the time is right, so they are no longer ready and willing. These are some of the people that are posing the initial questions. What is also happening is that there are many people, especially first time home buyers, that are ready and willing to purchase, but with the strict lending guidelines, are no longer able to purchase.
So to sum it all up, we have a large supply of homes, and less demand, which has caused pricing to adjust down. We have many buyers who are skeptical of the market, and not sure when it is going to be o.k. to purchase a home again. We have other buyers who would like to purchase, but cannot because of strict lending guidelines.
Here is what I am observing in the market as of this post. Inventories in Ada County were down in July 2008 from July 2007. This is the first time that the current years inventory has been less than the prior years inventory all year long. Housing has become more and more affordable in this area, and has opened up the option of purchasing to a number of buyers who were priced out of the market during the peak. Now these are good signs for the market, but I'd like to see a few more months of decreasing inventories before I will feel comfortable telling buyers or sellers that we are out of the woods. But remember...
It is going to be hard to time the market perfectly. Right now some sellers, especially some builders, and banks, are showing a willingness to cut their losses in a sense, and are offering substantial price reductions to willing home buyers. Buyers right now are buying homes at or below 2004 levels, which in my mind will only last until we have purged our inventory of foreclosure, and bank owned properties. So keep a close eye on the market, and keep coming back to my Boise Housing Market blog for updates!