Analysis: You could make 6-figure profit selling your Boise-area house now. Should you?
It’s a good time to sell your house, real estate agents always say, whether the market is rising or falling, high-priced or low-priced.
You can be forgiven for dismissing that message as a sales pitch. Agents make their livings off those 6% commissions on a home’s sale price.
Today, though, in the Boise area, you might want to listen.
You can make a great deal of money if you sell your house now.
Worsening affordability for home buyers has a flip side: rising profits for sellers. Newly released data show that the average profit made by Boise homeowners on the sale of their houses has exploded since 2017.
The median return on investment, or profit, for a Boise home seller was $193,463 in the first quarter of 2021, according to ATTOM, a national real estate data service. That’s nearly three times the national median, $70,050.
The Boise median profit margin was 103% in the first quarter from the same quarter a year ago — a windfall benefit of the acute local imbalance between house supply and demand. The profit is second only to Knoxville, Tennessee’s 122%.
The $193,463 is the difference between the median sales price of houses sold during the quarter and the median sales price of the previous sale of the very same houses, whether those sales were two years ago or 20, ATTOM says. The national average tenure in a house is just under eight years.
Returns on house investments climb fast in Boise
Profit increases are occurring nationwide as low mortgage-interest rates fuel sales. In Boise, they’re just more dramatic.
“The latest data on home prices and seller profits across the U.S. provide the latest markers of how the U.S. housing market keeps roaring ahead even as major parts of the broader economy try to overcome the impact of the pandemic,” said Todd Teta, chief product officer at ATTOM, in a news release.
ATTOM provided the Idaho Statesman with quarterly profit data since the first quarter of 2008, when the last housing boom had ended but financial markets had not yet seized up, and the Great Recession had not yet begun. Then, the median Boise house sale made a $37,920 profit.
Profits declined rapidly the rest of that fateful year, turned to losses as 2009 opened, and reached their nadir in the first quarter of 2011 at negative $54,963, as Boiseans desperate to sell were forced to take losses.
Then the current long recovery began. Since late 2017, when the median profit reached a healthy $60,055, the rise has been steady, with just one slight dip in 14 quarters through winter 2021.
The pace has accelerated. Profits rose nearly $40,000 in the latest quarter alone.
So why not sell your house?
You know why: Because there is a problem, and it’s big. If you leave your house, you must find somewhere else to live.
Longtime residents can stay put, not risk Boise market
If you want to buy another house in the Boise area, perhaps to move up to something bigger or nicer, what good would all that profit do for you? The answer: little to nothing. You could actually end up worse off.
Prices are going up so fast that a house you could afford this month may be out of reach a month or two later. Homes are so scarce that buyers keep making cash offers and skipping inspections — anything to avoid losing that cozy fixer-upper to a dozen other bidders.
That’s the competition you would face. Boise’s ordinary wage earners are outgunned by wealthier migrants fleeing even-more-costly West Coast metroplexes. Longtime residents can stay put but may fear selling to avoid taking on even deeper mortgage debt — or being forced to flee.
Remember when you were supposed to bid less than the asking price? Not today: Existing homes in Ada County in March sold for $18,000 over list price on average, according to Boise Regional Realtors, the real estate agents’ local trade association.
Treasure Valley agents have pleaded with homeowners for years to give them something to sell, but most aren’t budging. The more prices ascend, the more would-be sellers hunker down instead.
Only 945 existing homes sold in Ada County in the first quarter, according to the Intermountain Multiple Listing Service. That’s a 32% decline in the already shrunken resale-home market of the first quarter of 2020.
Resale-home median prices now exceed new homes’
It used to be that existing homes, with their age and wear, sold for less than new ones. In March, though, the median sales price of resale homes reached $475,500, beating the median for new ones. New-home prices are exploding, too, of course, but their rocket ascended only to $460,920 in the latest monthly report. (Better luck next month, homebuilders.)
“The insufficient supply of available homes compared to buyer demand is the main reason the market is moving so quickly, and the competitiveness of the market continued to impact home prices,” the Realtors said in an April 12 news release.
Evidence of the rout of Boise’s (and other parts of Idaho’s) pro-affordability forces comes in dispatches from the front almost daily.
Earlier in April, ATTOM ranked Ada County as the third-worst U.S. county in affordability compared with the county’s historic averages. For that ranking, ATTOM considered prices, wages and mortgage-interest rates. Canyon County was fifth worst. Bonneville County, home of Idaho Falls, was the worst, period.
Boise now ranked 21st least-affordable U.S. city
On Thursday, Boise moved up again on one real estate site’s list of the nation’s least-affordable cities for buying a house.
Boise now ranks 21st among the 100 largest U.S. cities, says RealtyHop, which finds undervalued homes for investors to buy. Boise was ranked 33rd just four months earlier.
RealtyHop’s ranking compares median house prices listed in its database to median household incomes. The median price of Boise homes as of April 28 is $435,400, up from $424,000 a month earlier.
The share of income needed for a buyer with the local median household income of $60,035 to own a home is 41.8%, a percentage point higher than one month earlier, RealtyHop said.
The company calculated that percentage based on estimated mortgage and taxes totaling $2,093 per month (up $50 in one month).
Who says $2,093 is not affordable?
Well, for the past 40 years, the federal government has deemed households that devote more than 30% of their income to housing costs to be “housing burdened.” They spend more on housing than they should to have enough left for other nondiscretionary spending.
The 30% standard does not matter to prosperous households that can devote higher shares of their income to housing as a lifestyle choice and still have plenty of money left. But it does matter to low- to moderate-income households, and especially so for those with other debt besides mortgages.
Earn $60K a year? You should pay no more than $1,500 monthly
Applying the 30% rule, a Boise household earning $60,000 a year, or $1,154 per week, should be spending no more than $1,500 per month on rent or a mortgage, property taxes, insurance on the house, and utilities such as water, sewer and electricity. That’s about $600 short of RealtyHop’s $2,093 — and RealtyHop doesn’t even include utilities.
With houses out of reach, more Treasure Valley residents rent than ever before.
Rents keep going up, too. Apartment List puts the latest median rent in Boise at $1,144 for a two-bedroom unit, including units not on the market. Zumper, a listing service that measures only apartments on the market, puts the two-bedroom median at $1,420.
Perhaps you’re ready to leave Boise. If so, there are plenty of good-sized cities that are now cheaper: Spokane, Albuquerque, Phoenix, Dallas, Houston, Des Moines, Pittsburgh, Atlanta, Cleveland, Providence, the list goes on.
If you’re moving to a less-in-demand city, you could indeed take your profits here, buy a house there, and use the difference to pay down debts, help fund a child’s education or build a retirement fund.
The national median resale house price was $275,000 in the first quarter, ATTOM says. That’s $200,000 less than Ada County’s.
This could be your chance to sell the house, take the money and run. Just ask your agent.
This story was originally published May 3, 2021 at 4:00 AM.
