Boise-area home prices rise yet again. And now this change is making buying even harder
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Affording Boise: Rental housing
Soaring rents. Skyrocketing home prices. The double-digit rates of increase in the costs of Boise-area housing create 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 rental homes, including apartments. A separate collection focuses on homeownership.
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Treasure Valley home prices keep going up. You probably know that already. Now there’s another factor that could be limiting affordability: Mortgage rates.
Mortgage buyer Freddie Mac reported last week that mortgage rates have increased 1.5 percentage points in the last three months, the fastest three-month rise since May 1994.
That’s coinciding with record median home prices. In Ada County in March, the median price of a single-family home was $575,000, according to the Intermountain Multiple Listing Service. In Canyon County, it was $452,915. To no surprise, both are records.
For the week ending Dec. 30, Freddie Mac’s 30-year fixed rate mortgage nationwide average was 3.11%. By the end of last week, it was 4.72%.
To put this in context, someone who bought a $400,000 house and put 20% down would need to pay back a $320,000 loan. At the 3.11% rate, the monthly principal and interest payment would be $1,369. At the 4.72% rate, it would be $1,664 — nearly $300 more per month.
Amy Wirshing, a loan officer for PrimeLending based in Boise, calculated that to keep that same monthly payment, with a 20% down payment, the buyer would need to buy a home for $325,000 instead of $400,000.
Mortgage rates affect homebuyers
Though these are rough numbers, they give a glimpse into how interest rates can dramatically affect homebuyers.
“A lot of (first-time homebuyers) are tight with qualifying, they’re having to max out their earnings and what they’re comfortable with affordability-wise,” Wirshing said by phone. “They’re having to spend a lot more than they used to have to, because the purchase prices have gone up so much.”
Ada County’s $575,000 median price in March is a 22.6% increase from March 2021. Canyon County’s $452,915 median price is an 18.3% increase from last year.
Wirshing added that a lot of factors go into mortgage rates like credit scores and the down payment amount. She said in the Boise area, some mortgage rates were as low as 2% last year, and now some are up to as high as 5%.
The government intentionally kept rates low, Wirshing said, by buying mortgage-backed securities. That’s what led to historically low interest rates a year ago and a historically frenzied real estate market.
The government then warned that interest rates would rise, but “I just don’t think we realize how quickly … and then how steep that curve would be,” Wirshing said.
These higher interest rates could eventually help bring prices down. People might start spending less, based on what they can afford, which could make higher-priced homes less popular.
Wirshing believes rates will continue climbing based on what she’s gathered from industry experts. How much remains a key question.
And ultimately, mortgage rates are just one piece of the housing market puzzle.
“Many economists are predicting that the increase in mortgage rates will eventually temper home prices,” Boise Regional Realtors President Becky Enrico Crum said in a news release. “While we are still watching for that, the insufficient supply of homes compared to demand will continue to put pressure on local home prices.”
Other details from the latest monthly listing-service report:
- Existing homes in Ada County spent an average of 15 days on the market in March, another metric indicating a fast pace in the market.
- The median price of a newly built home in Ada County was $606,050 in March. It’s the first time this category has hit $600,000 since November, when the median price was $601,301.
- The median price of a new construction home in Canyon County in March was $505,000.
- Highest median prices: Northeast Boise, $950,000; Eagle, $932,450; North Boise, $812,392.
- Lowest median prices: Wilder, $348,000; Parma, $375,000; Greenleaf $380,000.
This story was originally published April 12, 2022 at 4:00 AM.
