2011 Boise Real Estate Market Predictions
There has been a lot of national and local press lately about the state of Idaho’s Real Estate Market for good reason. There are recent stats put out by Realty Trac, and Core Logic that suggest that Idaho either leads the nation or is in the top 10 States for the number of foreclosures in this area.
Nationwide the number of homes that went into foreclosure in 2010 was 2.3 homes out of 100. In Idaho, the average was 3 out of 100 homes, which ranks within the top 10 worst hit places. Nevada leads the nation at a staggering 9%, 9 out of every 100 homes went into foreclosure in 2010.
One stat provided by Core Logic, reported that Idaho saw the biggest price declines nationwide. When comparing prices of November 2009, to November 2010.
What does that mean for Boise and the Treasure Valley? Some experts are saying that Idaho is in for more bad news in 2011, and some predict it to get much worse in 2011, while others are predicting a major turnaround in 2011.
My perspective is that these stats are misleading, and cloud the true status of the marketplace.
Don’t get me wrong, I am a big numbers guy, I like to analyze practically everything through numbers, but that is my point, when I really study the stats they really show me some unexpected and surprising results.
For example, how can home prices still be falling when sales (demand) are up 9% from 2009, and up 16.5% from 2008 and have a rapidly shrinking inventory (supply) of available homes on the market; down 22% less than 2009, and over 30% less than 2008 and 2007.
It must be the sheer number of foreclosures that are influencing this area. The Boise Metro area is now reporting that over 60% of all homes sold are foreclosures and short sales, which is an amazing figure, and helps paint the picture of how and why our homes prices have fallen so much from the peak of the market. The good news is that so many people are purchasing these foreclosures that it will help to continue to reduce or keep pace with the inventory (supply) of foreclosures on the market.
I have also noticed recently from reading media about the real estate market here in Idaho that the public (or at least the public who responses to online articles about the market) is very negative. It appears to me the public, i.e., consumer confidence is still very low. With most public comments focusing that the worst is still to come, and any response saying otherwise is heavily criticized.
After 4-5 years of a declining market, it is no wonder people are so down in the mouth about the state of the local market.
It is too bad. By the time the general masses wake up and see what an amazing, once in a life time opportunity that exists right now, it will be too late or not as good as it is right now.
An 18th century British nobleman is credited with saying that, ”The time to buy is when there’s blood in the streets” and as Warren Buffett has warned, “You pay a very high price in the stock market for a cheery consensus.” In other words, if everyone agrees with your investment decision, then it’s probably not a good one.
The best time to buy MAY have already past us by even in this depressed Idaho market. The reason is interest rates. Even if the market falls another 5-10% or even stays the same for all of 2011 and 2012, interest rates will dictate the true bottom of the market not the home prices. Because when you discuss value and affordability, interest rates play a huge part. There are strong indications that Nov 2010, could be the lowest interest rate we see for the next decade or more.
Lets dig deeper about interest rates for moment.
In Nov 2010, the average interest rate for a 30 year mortgage was about 4.3%, as of Jan 2011 when I write this article it is at 4.8%, which is still pretty good, but do you really think it will be this good forever?
Here is a quick review of past interest rates for a 30 fixed mortgage loan: Jan 2010 = 5.1%, Aug 2008 6.5%, Aug 2000 = 8%, Jan 1995 = 9.1%, May 1990 = 10.5%, Jan 1985 = 13.1%, Oct 1981 18.45%.
The difference in your mortgage payment if your loan jumps from 5% to just 6% can be hundreds of dollars difference each month.
So my prediction for 2011: Smart buyers will decide to act and capitalize on the market, continue to eat up the available foreclosure deals, further reducing the supply of available foreclosures on the market, leaving us at year’s end a stronger market then what we see right now. Interest rates will go up, how much is anyone’s guess. But it is foolish to bank on that they will stay low indefinitely. Just look at history.
Buyers who stay on the fence waiting for a rosier picture of the market will miss out on the best of the best deals. But that is okay.
I don’t advocate that everyone should go out and buy real estate. But I do recommend it for anyone who has other significant capital invested in other areas or sitting in bank or CD, that they should examine this once in a lifetime opportunity to buy when the market is crazy low, as well as having interest rates as low as I will likely see in my lifetime, (based on the last 50 years of historical data).
Your getting a glimpse of what I think is perfect timing. I could be wrong of course, but if I wait until I am 100% positive, it will be too late.
Have a look at the 40 year history of mortgage interest rates, and watch the my quick video of the current status of the real estate market and decide for yourself if now is the time to act.
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