New Boise homes for less than $400K? This homebuilder sees it coming. ‘It just has to.’
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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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Before the COVID-19 pandemic, Corey Barton asked his son’s schoolteacher if she was buying a house. She had recently moved from California. Even then, before Boise’s housing prices exploded, costs had risen sharply, and buying a house was out of her reach.
“She goes, ‘I can’t afford it just yet,’” recalled Barton, president of CBH Homes, in an interview with the Idaho Statesman. “That just doesn’t seem right to me. You’re trying to help my kids grow, and you can’t afford a house. That’s not right. That has to be available.”
Then came the pandemic. As well-paid remote workers flocked to the Boise area, affordable housing for ordinary workers moved even farther out of reach. Ada County’s median home price increased 66% from $363,000 in January 2020 to $602,250 in May 2022, according to the Intermountain Multiple Listing Service.
Barton, Idaho’s biggest homebuilder, predicts houses will once again sell for less than $400,000, a price considered high five years ago. The median price for a newly constructed Ada County home today is $671,530, according to the Boise Regional Realtors.
That’s a 2.7% decline from June, when the median price for new homes was $690,000. Despite the month-to-month drop, July’s median price is still 20.3% more than the $558,000 median 12 months ago. The difference is there’s significantly more inventory of homes, meaning buyers have more choices.
CBH Homes has begun cutting some prices, and Barton said that will likely continue.
Hubble Homes, another major Treasure Valley homebuilder, says it is ready to lower prices too. Hubble says it will guarantee that if it cuts the base price of houses in one of its subdivisions, it will provide the same savings to buyers who agreed to buy at a higher price but whose purchases have not yet closed. If a home isn’t built on time, Hubble will credit buyers $2,500 per month.
“It needs to be priced appropriately for the people to buy,” Barton said. “Just point blank and simple.”
Increasing inventory gives buyers choices
Inventory of homes has increased significantly, leading to the slowdown. At the end of July, 2,408 homes were for sale, a 128.2% increase from July 2021 and the most since September 2015, according to the Boise Regional Realtors, a trade association for real estate brokers and agents.
July’s inventory was big enough to last 2.8 months, meaning if no more homes came on the market, the existing supply would sell in that time. Experts say a balanced market has four to six months of inventory. So it remains a seller’s market.
Among newly constructed homes, inventory was 3.6 months in July. That’s a steep rise from when it was just one month in July 2021.
Barton said his company considers the area’s median income when pricing a home. The median income for a four-person household in the Boise metro area is $87,500, according to the U.S. Department of Housing and Urban Development.
Buyers now have many more houses to pick from than they did earlier this year. Fewer people may move to Boise in the months to come, because anyone motivated to move here by COVID-19 policies likely already has moved. Remote workers may be called back to their offices, too.
Barton said homes might soon sell regularly for less than $400,000. He used the example of a 1,400-square-foot house in Meridian. During last year’s peak, Barton said that type of house sold for around $455,000. Now it’s selling in the low $400,000 range.
“We’ll be bringing on other stuff that will be trying to get underneath ($400,000),” Barton said.
On CBH’s website, two-bedroom, 912-square-foot homes in West Boise are on sale for about $375,000. Three-bedroom houses in Nampa, Kuna, Caldwell and Emmett are listed for less than $400,000.
The price cuts are happening as competition among buyers is shrinking. Sellers have accepted lower offers, reduced prices and made concessions, the Boise Regional Realtors reported.
While housing advocates often say increasing the inventory of homes is a key way to alleviate rising prices, Hubble Homes President Don Hubble said other factors than housing supply affect prices.
“It’s gonna be hard to get prices back down, just because of oversupply, because there’s a certain cost. We’ll follow that,” Hubble said in a phone interview. “You have to reduce the cost and increase supply.”
How reduced prices would affect profits
In recent years, the cost of materials and labor has also increased, making it harder for homebuilders to turn a profit, or as much of a profit, if they lower prices.
Barton said he doesn’t expect a profit on every house his company builds, but “a profit is necessary, because you can’t survive without it. You can’t hire or attract amazing talent without a profit or a future. So it’s tough. It’s like trying to get a square peg to go through this round hole.”
Barton said CBH’s profits were “good” in 2020 and started to “compress” in 2021. He said they were higher in 2020, because the price of homes rose so quickly throughout the market. But costs then rose on many necessary items, like trucking, garage doors, tubs, windows, lumber, labor and more.
The rising costs had been passed on to buyers and offset by the rising prices. Now that prices are coming down, Barton said he’s figuring out ways to reduce construction costs.
When asked if the lower prices mean CBH would build fewer houses, Barton said yes.
It would be “foolish,” he said, to build 1,000 houses if only 500 buyers were in the market. The challenging part is projecting ahead, since buyers don’t want to wait once they’re ready to buy.
“If we thought there were 500 buyers in the market, we would probably try to build 600 to 700 and then try to offer a better value and a better location,” Barton said.
Barton described lower prices for buyers as “super exciting.” He looks forward to selling homes to people like his son’s teachers, police officers, firefighters, electricians and anyone else already living in the Treasure Valley.
If home prices haven’t yet dropped enough to be affordable for that group, Barton believes they will soon.
“This can’t last,” Barton said. “This thing that was going on, this temporary thing couldn’t last for long before it goes away and it goes back to the local. It just has to.”
This story was originally published August 10, 2022 at 4:00 AM.
