Profits on sales of Boise homes are shrinking. What to know if you’re thinking of selling
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Affording Boise: Homeownership
Soaring rents. Skyrocketing home prices. The double-digit rates of increase in the costs of Boise-area housing until 2022 have created increasingly urgent problems for low-income, working-class and even moderate-income Idahoans who need places to live. Affording Boise is a series of Idaho Statesman special reports on housing. This collection focuses on homeownership. A separate collection focuses on rental homes, including apartments.
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The Boise area remains one of the best places to sell a home if you’re looking to maximize your money. But after the big price surge, your profit from a sale may be shrinking by the day.
Profit margins on Boise-area home sales fell at a faster rate from the last quarter of 2021 to the first quarter of 2022 than almost anywhere else in the United States, new data show.
That could be a sign that Boise’s market is cooling from white hot to red hot. And it could be a signal that the rest of the nation may start cooling too.
But those margins remain so high that Boise is still one of the most profitable markets.
A new report from ATTOM Data Solutions, a provider of real estate and property data, shows Boise’s median quarterly profit margin decreased in the first three months of this year from 110% to 89%, the second biggest drop of the 170 metro areas analyzed.
If you owned that median house sold in the last three months of 2021, you would have made $235,808. If you sold it in this year’s first quarter, your profit would have fallen to $217,500.
Profits peaked in the third quarter of 2021 at $251,601, the highest since at least 2008, as far back as ATTOM’s data goes. A one-quarter decline does not make a trend, but two quarters demands attention.
Should you worry? Probably not. At least not yet. Boise’s prices have been rising so fast that even if you bought a house a year ago and must sell it now, you’re unlikely to lose money.
“The prices have gone up so much in the region over the last year that unless you just bought a house and have to sell it, you’re still going to be fine,” said Rick Sharga, executive vice president of market intelligence for ATTOM, by phone. “You’re still going to wind up getting much more than you paid for the property.”
The median price of an Ada County home sold in March was $575,000, according to the Intermountain Multiple Listing Service — a 130% increase in five years and a 23% increase in the past 12 months.
ATTOM measures home seller profits by calculating the difference between the median sales price of homes sold in a metropolitan statistical area and the median sales price of those same homes the last time they were sold.
The only metro with a bigger drop in profitability last quarter was Santa Barbara, California. But its profit share was much slimmer than Boise’s to start with, decreasing from 73% to 46%.
Metro areas were included if they had at least 1,000 single-family home sales in the first quarter of 2022 and a population of at least 200,000.
Before 2021, Boise’s profitability was never even close to $200,000. Its most profitable quarter before 2021 was the fourth quarter of 2020, when profitability was measured at $152,484.
Each of the three quarters before that was another previous record at the time — $133,750 in 2020’s third quarter, $122,227 in the second and $117,290 in the first.
Profitability in Boise hit $100,000 for the first time in the third quarter of 2019 at $105,700.
Numbers at left are dollars. Source: ATTOM
Despite Boise’s decline, the city still ranks third in profit margin among the 170 metros. Boise’s 89% trailed Hilo, Hawaii’s 96% and Scranton, Pennsylvania’s 91%. It ranked ahead of San Jose, California’s 86% and Spokane, Washington’s 85%.
Nationally, the profit margins on median-priced homes dropped from 52% to 47%, the first quarterly decline since late 2019 and the largest dip in a decade. ATTOM interprets this as a potential sign of a slowing housing market across the country.
Sharga described Boise as a potential harbinger for other markets where prices exploded in the past year.
“What I’m talking about is home-price appreciation slowing down dramatically as affordability issues start to slow down demand a little bit,” Sharga said. “... Boise may have just hit that affordability wall a little sooner, because prices got up so high. But I wouldn’t be surprised at all to see similar patterns in other markets across the country.”
In a news release, Sharga offered this national outlook: “The combination of higher prices, rising mortgage rates, and the highest rates of inflation in 40 years may be pricing some prospective buyers out of the market, which means we may begin to see lower sales numbers. ... We may even see modest price corrections in some markets.”
Two months ago, ATTOM ranked Boise second in the country in “equity rich” properties. That’s a different measure of homeowner prosperity. ATTOM defines properties as “equity rich” when the combined estimated amount of loan balances secured by those properties is no greater than 50% of their estimated market value. Equity is the value of the home minus how much someone owes on the mortgage.
A quarter-million-dollar house was once a high-end house to Boiseans. In March 2017, it was news when the median home price in Ada County reached $250,000. Now, there are only mobile homes on the market for $250,000 or less, and those don’t include the land they sit on.
While home prices have grown, so have rents. A just-released report from Apartment List says Boise rents increased 2.9% in the past month, the second highest month-to-month percentage increase in the country. Median rent is $1,073 for a one-bedroom apartment and $1,273 for a two-bedroom.
This story was originally published April 29, 2022 at 11:41 AM.
