The median sales price for homes in Ada County was $561,500 in October, up 4.0% from the month prior and 5.4% higher than October 2021. Until last month, there have been month-over month declines in the median sales price since the peak of $602,250 in May 2022. We haven’t seen a year-over-year decline in the overall median sales price since October 2014.
Higher mortgage interest rates have decreased purchase power for buyers and cooled demand, causing some buyers to make budget adjustments and others to press pause on their home search. According to Freddie Mac, retrieved from FRED, Federal Reserve Bank of St. Louis, the average 30 year fixed-rate mortgage was 7.08% on October 27, 2022, more than double the 3.14% average in October 2021.
With the steady incline in rates and dampened demand, why didn’t prices dip last month? While there were 32.5% fewer home sales in October 2022 than in 2021, there were still 670 home sales, and the mix of those sales gives us a clue as to why the overall median sales price didn’t budge much in October.
There are two primary segments to housing inventory — existing/resale homes, and new construction homes. New home sales made up 31.9%, or nearly a third, of all home sales in October. The median sales price for new homes was $657,500, while the median sales price for existing homes was $500,000, down 3.7% from October 2021. This significant share of new home sales pulled up the overall median sales price.
Due to rising mortgage interest rates, we’ve watched price growth decelerate on a monthly basis since May of this year. The fact that October didn’t bring any major changes, price wise, indicates home values are not likely poised to plummet, though we may see more adjustments to come. Sales have slowed but won’t disappear — regardless of market conditions, life continues to go on, and some life events require a move.
Buyers who were able to purchase this fall had more negotiation power than we’ve seen in years and used creative tactics, like using closing cost credits to buy down the interest rate, to combat higher monthly payments. With price growth slowing and more inventory to choose from, buyers have been able to snag existing homes at a lower price point than they would have a year ago, with the option to refinance down the road if interest rates go down.
To read more about the trends in the market, please see the Boise Regional Realtors October 2022 Market Report.