What’s Happening with Interest Rates? | Your Boise Market Update

If you own or are considering owning real estate in the Boise area, staying informed about the latest market trends is crucial. With the release of market statistics through the end of July 2024, we’ve identified several key trends that you should be aware of. Here’s a detailed breakdown of the top three things currently shaping our market:

1. Inventory Levels Are Holding Steady Despite Seasonal Expectations

Typically, the Boise real estate market sees an increase in inventory from June to July, driven by more homeowners listing their properties during the summer. However, this year has proven to be an exception. Contrary to the usual trend, inventory levels remained virtually unchanged, with a slight dip from 1,070 active listings in June to 1,068 in July. This flatlining is especially notable compared to last year’s dramatic 133% increase in inventory during the same period.

This stagnation in inventory growth highlights the market’s sensitivity to interest rates. At the start of May, interest rates were approaching 7.5%, a level that historically would have led to an inventory surge as more sellers attempted to offload their properties before rates went even higher. However, as rates began to ease in June, dipping into the mid to high 6% range, the expected increase in inventory did not materialize.

As we approach the end of August, it’s important to monitor inventory trends closely. If interest rates remain below 6.5%, we may see inventory levels continue to stay flat or even decrease, which could tighten the market further. For sellers, this means fewer competing listings, potentially leading to faster sales and better pricing power. For buyers, limited inventory could result in more competitive bidding, especially in desirable neighborhoods and price ranges.

2. Pending Home Sales Are Rising: Demand Remains Strong

While inventory levels have remained flat, the market is seeing a significant increase in pending home sales. In July 2024, 549 homes went under contract, a 6.6% increase compared to the 515 homes pending in July 2023. This rise in pending sales indicates that despite fluctuating interest rates, buyer demand remains robust.

The strength of the demand is particularly evident in the lower price ranges. For example, homes priced between $250,000 and $300,000 currently have just 1.8 months of supply, a clear indication of a strong seller’s market. Homes in this price range are moving quickly, often receiving multiple offers and selling at or near the asking price.

As we move up the price ladder, the market dynamics begin to shift. Homes priced between $500,000 and $600,000 have over two months of supply, indicating a slower market where buyers have more negotiating power. However, it’s not until you reach the $1.5 million to $2 million range that we see a balanced market, with around five months of supply. Beyond $2 million, the market shifts into buyer’s market territory, with homes taking longer to sell and often requiring price adjustments to attract buyers.

Despite these variations, it’s worth noting that even in the higher price ranges, the market remains active. For instance, there are currently only 62 active resale listings in all of Ada County for homes priced over $1.5 million. This represents less than 5% of the total market, highlighting the limited supply of high-end homes and suggesting that demand, while slower, still exists.

3. Interest Rates: A Major Driver of Market Dynamics

Interest rates have been a major factor in the Boise real estate market this year. With rates fluctuating between 6.25% and 7.5%, the market has experienced periods of both heightened activity and stagnation. As of August 8th, rates have settled between 6.25% and 6.5%, offering some relief to buyers who may have been priced out of the market during the higher rate periods earlier in the year.

The Federal Reserve’s actions, coupled with economic indicators like job market data, jobless claims, and inflation reports, have contributed to this rate volatility. As we look towards the end of 2024, these factors will continue to influence interest rates, and by extension, the real estate market.

For potential buyers, even a slight decrease in interest rates can significantly impact affordability. Lower rates increase purchasing power, allowing buyers to afford more home for their money or qualify for financing they might not have been able to secure at higher rates. On the flip side, sellers need to be aware that rate increases can dampen buyer enthusiasm, potentially leading to longer listing times and the need for price adjustments.

What These Trends Mean for You

For Sellers: If you’re considering selling your home, especially in the lower to mid-range price brackets, now is an opportune time. With inventory levels flat and demand high, you’re likely to receive strong offers quickly. However, if your home is priced above $1.5 million, be prepared for a potentially longer sales process, and consider pricing your home competitively to attract buyers.

For Buyers: If you’re in the market to buy, keep a close watch on interest rates. With rates hovering below 6.5%, now might be an ideal time to lock in a mortgage before rates potentially rise again. However, be prepared for competitive bidding in lower price ranges due to limited inventory. Working with an experienced real estate team can help you navigate these challenges and find the right home at the right price.

In conclusion, the Boise real estate market remains dynamic, with interest rates playing a pivotal role in shaping current trends. Whether you’re buying or selling, staying informed and aligning with a knowledgeable real estate team will help you make the most of the opportunities available in today’s market.

If you have any questions or would like personalized advice, don’t hesitate to reach out to our team at City of Trees Real Estate. We’re here to help you make the best decisions for your real estate goals.