Buyers react as Boise-area median home price hits $600K and interest rates rise
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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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Even in what remains a strong seller’s real estate market, homebuyers in the Boise area have become more cautious.
The median price of a home in Ada County was $602,250 in May — the first time the price has crossed $600,000, according to the Boise Regional Realtors. That’s a 16.1% increase from last year. In May 2021, it was news when Ada County’s median price crossed a half-million dollars.
In Canyon County, the median price was $459,995, up 12.6% from last year.
The year-over-year percentage increases are smaller than when those percentages were often more than 30% last year. Ada County’s May 2021 price was a 45.4% increase from 2020. So the price, and other metrics, indicate the shift that’s happening.
Joel Hess, owner and managing broker of Realty One Group, believes buyers’ caution is a result of rising interest rates, inflation and gas prices, the stock market declining and increasing inventory of homes for sale.
“Now, the pool of buyers, because there’s more inventory, they have a little bit more choice,” Hess said. “So when you put a house on the market, you know, you have to make sure it’s priced competitively.”
There were 1.7 months of supply of inventory of homes in Ada County in May, more than double last May’s 0.7 months. Inventory measures how fast all the homes on the market would sell if no more came on the market. Experts say a balanced housing market is when there’s four to six months of inventory.
Boise remains in a strong seller’s market. But a recent increase in the number of listing price drops signals a shift that’s occurring. Fewer homes selling for over list price and more days on the market show a difference from a year ago.
“It may not translate to quite as strong of a seller’s market as what you would normally expect with that inventory number,” Hess said, “just because buyers are a little more cautious and their buying power (due to interest rates) is being challenged a little bit right now.”
A big driver of the increased inventory is new construction. There were 2.5 months of inventory of new construction Ada County homes in May, a 359% increase from last year’s 0.5 months. Building more has long been considered a potential solution for affordability as low supply and high demand pushed prices up.
Mortgage broker Freddie Mac reported last week mortgage rates have increased to 5.2%, a big jump from when they were mostly around 2% or 3% in recent years. Before 2010, however, interest rates were almost always at least 5% since the 1970s.
In real terms, paying off a $400,000 loan for 30 years at a 5.2% interest rate would cost $2,196 per month. At 3%, it would cost $1,686.
“People really need to think about what is causing them to be cautious, because even though interest rates have gone up, they’re still historically very good,” Hess said. “When people are weighing out if I should stay a renter or a buyer, in almost every case in my opinion, … you should buy a home, even if the rates are up a little bit.”
Hess ultimately sees a shift toward a more balanced market, but when or how that happens is to be determined. He also pointed out how Boise remains a market with lots of people moving in. He estimated half his clients have at least one remote worker in the family, another dynamic at play.
“The reality of it is that we all can kind of see what’s happening as it happens,” Hess said. “And you know, our best guess would be that we’ll continue to see this trend for at least a little while until something changes.”
Other details from the latest monthly report:
- The average days on market in Ada County was 14. That’s a slight increase from 11 last year, but a drop from 16 last month.
- The median price of a new construction home in Ada County was $639,105, a 17.5% increase from last year.
- There were 1,520 Ada County homes for sale in May, nearly tripling last May’s inventory of 570 and an even bigger jump from the low point of 269 in January 2021.
This story was originally published June 11, 2022 at 4:00 AM.
