In a perfect world, Boise couple Christi and Micah Farrell could take a day to talk about spending more than $350,000 on a house.
The Treasure Valley housing market is not that world. Compressed inventory means tighter windows for buyers. Sellers often field multiple offers at asking prices or higher the day their homes hit the market.
The Farrells have been house hunting for two months and have visited 10 homes in the past two weeks. Christi Farrell said each home was a little too small or needed a little too much work for the asking price.
“It’s nerve-wracking,” she said. “I want to walk through a house and be able to sleep on it, process it just a little bit. I feel this pressure that if you want something, you have to buy it now or it will be gone.”
The Treasure Valley is a seller’s market, especially in Ada County, where not a single price bracket under $700,000 approaches the threshold most agents say is the balancing point between a buyer’s and seller’s market: six months’ worth of inventory at current sales rates.
It’s kind of a roller coaster. We look online a lot. We get amped up [by a listing]. We schedule to see it. We think it’s the one, then we walk through it and the list goes on about things we don’t love about it.
Home shopper Christi Farrell
The Canyon County market is less severe, with a six-month inventory in the $200,000 to $250,000 bracket and the market tilting to favor buyers in higher price ranges. But prices have shot up 13 percent, a rate almost twice as fast as Ada County’s, so far this year.
Agents are coaching house hunters to line up financing and to be prepared to jump on a house immediately after it lists, said Mike Brown, owner of the 31-agent Mike Brown Group in Boise.
Brown said his office has $111 million in closed and pending sales in the first five months of 2016, nearly matching the $115 million closed all last year.
“Our numbers are skyrocketing,” Brown said. “That’s partially the growth of the group. But really, it’s the market.”
Some buyers — especially those who have lost bids on other houses — are winning bids after writing personal letters to sellers explaining why their families would cherish a house.
Resale homes are particularly scarce. In Ada County, 2016 resale-home prices climbed 8 percent from January through April while already scant listings fell an additional 18 percent, according to the Intermountain Multiple Listing Service.
“Buyers are trying to appeal to the emotional side of the seller,” Brown said. “The seller loved the home, and now they want to hand it over to another family who will love it as their home.”
WHERE ARE SELLERS?
Under normal conditions, a market with low inventory and strong price gains would attract more sellers, said Mike Turner, owner of Front Street Brokers in Boise.
Before the recession, the Valley had one listing per 80 residents, Turner said. Today it has one for every 265, suggesting many owners who would normally sell still have not regained value lost during the downturn.
Some sellers are waiting because they aren’t excited about what they can get for their house yet.
Mike Turner, Front Street Brokers owner
The Farrells are in that camp. Christi Farrell, who has sons ages 3 and 6, said the family outgrew its four bedrooms and two-and-a-half bathrooms in Southwest Boise’s Moon Ridge subdivision several years ago. But the Farrells bought the home for $227,000 in 2007, the tail end of the boom, and soon found themselves owing more than the home was worth. The Farrells plan to list it for $230,000 and expect to receive multiple offers, Christi Farrell said.
“We spent years and years below water, so for sure want to sell while it’s a good time,” Farrell said. “We’re throwing around the possibility of renting until we find exactly what we want instead of having pressure to buy.”
At some point, more homeowners like the Farrells will list their houses after recovering lost value, Turner said. “But right now, it’s really surprising how low the inventory is,” he said.
LOW INCOMES, HIGH PRICES
In May, the national real estate research company FitchRatings released a study saying Idaho’s real estate market was the most overvalued in the nation.
The study was based on an index Fitch created that compares price growth to economic factors, such as employment, population growth, incomes and wage growth. Co-author Marc Gilbert said the goal was to identify markets where there wasn’t enough economic growth to support rising home values.
While scoring well for employment, Idaho suffered because of its income and wage growth numbers, which rank among the worst in the nation.
“If I were a house flipper, I wouldn’t be buying in Idaho with hopes of selling a year later,” Gilbert said. “Even though there’s momentum, there’s risk there as well.”
$242,000Ada County median home price in May, according to the Intermountain Multiple Listing Service
$162,100Canyon County median price
7%Ada County’s year-to-date median home-price increase
13% Canyon County’s increase
But the Fitch study ignores a pillar supporting the Treasure Valley market: out-of-state buyers. More than half of Turner’s buyers hail from outside of the state, he said. Brown said 30 percent of his office’s buyers come from outside of the area.
Turner said there’s no reason to think out-of-state money won’t continue to support rising home values as long as buyers in expensive markets, such as California, can sell homes there and replace them at a fraction of the cost in the Treasure Valley.
Ada County’s 7 percent year-to-date median price growth is stronger than historical averages but much smaller than the gains in the buildup to the recession a decade ago, Turner said. Today’s moderate growth, less speculative building and tighter lending regulations make for an ideal market, he said.
“Boise is still, hands-down, more affordable than alternatives,” Turner said. “Maybe prices are higher than what we’re used to, but for those buyers, the cost of living is still a fraction of where they’re coming from. That’s why I think it’s sustainable.”
RISING RENTS SQUEEZE TENANTS
That sustainability is bad news for Idahoans with modest incomes seeking to buy their first or second homes. Out-of-state buyers threaten to price Valley residents out of the market, Turner said. Rents are rising, too — a byproduct of the affordable-home shortage.
“Will we lose that affordable aspect? Maybe,” Turner said. “In any city, with growth, that happens.”
Some builders are aiming at the new-home buyer seeking affordability. CBH Homes, for example, has several subdivisions in Kuna with homes starting in the $160,000 range.
Increasing prices will erode affordability for borderline home buyers, said Gerald Hunter, executive director of the Idaho Housing and Finance Association, which caters lending services to average earners.
Hunter said association borrowers are still finding houses.
“Of greater concern are increasing rents throughout the Treasure Valley,” Hunter said. “Many renter households are struggling with an increasing share of their monthly income going for housing.”
‘IT WAS BEST IF WE HONOR THE OFFER’
Michael Kozup said he received three written offers and a few informal ones on the Friday in April when he listed his 5,000-square-foot West Boise home for $539,500. More than 200 people came to an open house over a weekend. He sold the house, which has a pool, for its asking price on Monday.
I’m pleasantly surprised how quickly the house sold. If it didn't get any offers that weekend, that would be an indicator I didn’t price it right.
Boise home seller Michael Kozup
Brown, Kozup’s agent, said some sellers receiving multiple full-price bids are asking for a second round of bids. Kozup did not.
“I really felt like it was best if we honor the offer in that first bid that came in and not use it as a bargaining chip,” Kozup said. “We certainly could have.”