As Boise-area home prices fall, agent tells sellers: ‘Forget (’20 and ’21) even happened’
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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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A few weeks ago, Shauna Pendleton spent a day crunching numbers on her computer. As the housing market has shifted, she wanted to dive into the best way for her clients to list their homes.
She calculated that Treasure Valley home prices increased about 10% each year from January 2015 to January 2020. Then COVID-19 hit, prices went kerflooey. The aftereffects are being felt.
Pendleton, a listing principal agent with Redfin, said she now tells clients, “You’ve got to forget that the last half of 2020 and all of 2021 even existed. It’s out the door. Forget it even happened. Let’s go back to 2019 prices.”
Pendleton recommends sellers calculate prices assuming the 10% per year increase would have continued each year and ignore what happened when the market was scintillating.
That’s because prices have dropped in Ada County for four straight months. The median price of an Ada County home in September was $540,000, according to a new report from the Intermountain Multiple Listing Service. That is a 0.9% increase from the price in September 2021. In Canyon County, the median price was $426,990 in September, a 1.2% increase from a year earlier.
Buyers, sellers return to negotiating
The dwindling year-over-year increases show a significant shift in the housing market from the days when homes became ever more out of the reach of ordinary Boise-area workers. Year-over-year increases were routinely in the 20% or 30% range as recently 2021 and early 2022.
Becky Enrico-Crum, president of the Boise Regional Realtors, said more negotiations occur now between buyers and sellers. That wasn’t possible when buyers had to fend off stiff competition last year. They can negotiate on contingencies, closing costs and repairs.
“It becomes a win-win for the buyer and the seller, because we can get buyers into their houses and sellers can get their houses sold,” Enrico-Crum said by phone. “So it’s just a different way of negotiating power.”
For the first time since 2016, there’s a balanced market, Enrico-Crum said. Real estate agents say a balanced market is when there’s between four and six months of inventory of houses on the market. Right now, there are four months of inventory in Ada County, meaning if no more homes came on the market, it would take four months for all the houses on the market to sell.
During the peak of the housing frenzy, there was less than a month of inventory. Even going back to 2017, the market favored sellers capitalizing on high demand and low supply.
Real estate agent tells sellers: You’ll make less. They resist
Pendleton said she routinely tells sellers they need to be prepared to make less on their home than a comparable home might have sold for in the spring.
“The sellers acknowledge it, and they’re like, ‘Yeah, we get it, we get it,’ ” Pendleton said by phone. “But they still don’t want to price to what your recommendation is.”
A major driver in the prices declining has been the rapid rise of mortgage rates. A 30-year fixed-rate mortgage rate is 6.7%, according to mortgage buyer Freddie Mac. It was as low as 3.2% in January.
What that means for someone buying a $500,000 home with a 20% down payment and 30-year fixed-rate mortgage: The monthly payment with a 3% mortgage rate would have been $1,686, said Fairway Mortgage Branch Manager Steve Cox. With a 7% mortgage rate, the monthly payment would be $2,661. That’s more than a $1,000 increase in the monthly payment.
“It’s put it beyond (homebuyers’) fingertips now,” Cox said by phone.
Though prices have come down, they haven’t yet offset that, Cox said: “It’s not anywhere near enough to offset what they’ve lost in terms of their buying power because of their financing.”
Ada County house sales fall
The Federal Reserve has increased interest rates in an effort to curb inflation, but that’s led to the real estate market’s big slowdown as buyers can’t afford to keep up. Ada County sales dropped 30.3% in September, the seventh straight month of year-over-year declines in sales.
Other details from the latest monthly listing-service report:
- Ada County homes spent an average of 38 days on the market in September.
- Canyon County homes spent an average of 44 days on the market.
- Ada County sellers on average received 92.5% of their list price, according to the Boise Regional Realtors.
- The median price of newly constructed Ada County homes in September was $650,635, an 18.3% increase from the previous year.
- The median price of existing Canyon County homes in September was $381,000, a 4.6% decrease from the previous year.
- Highest median prices: Eagle, $932,000; Northeast Boise, $890,000; North Boise, $814,500.
- Lowest median prices: Parma, $212,500; Melba, $329,000; Northwest Nampa, $365,000.
This story was originally published October 12, 2022 at 4:00 AM.
