So, Boise takes the number 1 spot again in the housing market, but is that a good thing?
In fact, so many people have decided that living in the Boise, Idaho area is so fantastic, and they were willing to pay a lot of money over asking price on homes… that Boise has been repeatedly named by many news outlets as being the #1 most overvalued housing market in the nation!
(Check out my video on the Pros and Cons of living in Boise!)
So. is that true? Is Boise really the #1 most overvalued housing market?
Well, that depends on your definition of value. And that leads to the next question on everyone’s minds: Will that mean an imminent death to the Boise housing market? I know that many of my potential clients reading this who are wanting to plan a move to Boise, Idaho in the future are doing your research, you’re intelligent and thoughtful, and many of you are calling me to discuss, what exactly do these headlines mean for you if you are considering buying a home in the Boise area?
I’ll give you a brief update of how the September housing market is shaping up.
(Spoiler alert, it’s slowing down as interest rates rise)
Let’s discuss what being the number 1 overvalued housing market in America actually means and looks like to those of us working in the housing market trenches in Boise every day.
Okay so first, as you are probably aware, interest rates went a bit crazy again at the end of August 2022, rising up to about 6.25 % for a conventional loan and, as of Sept. 8th, 2022, settling to just over 6%. I’m thinking the interest rates are a bit like our gas prices…they’ll raise them way up high so we all freak out, then when they lower them, everyone is like, phew, oh good, the prices are coming down, but in reality, it’s still much higher than before they started raising them. Oh, the good old psychology of price manipulations…and we fall for it every time. So, of course there is more to it than that when it comes to interest rates, but the volatility in rates right now is unprecedented.
And that makes potential buyers nervous. Which makes potential buyers hold off from buying. Which makes homes sit on the market longer. Which is why, as of this first week of September, our median days on market have gone up to 31 days. So that is a huge rise for us, that is true. And the media really likes to focus on how horrible it sounds to go from 2 median days on market back in April up to 31. BUT perspective is everything. We knew the 2 days on market was not sustainable, and it is completely normal for the Boise market to have 45- 60-day median days on market. That is where we were pre-pandemic, and so as long as we stay within that time frame, we are normalizing, not crashing.
Heading into the fall, as expected, we are seeing slightly fewer homes come on the market, more homes being taken off the market if sellers can’t sell for what they want, and even though we are indeed seeing large price reductions, the overall home values, while coming down, are sticking to the upside. We are not seeing crash type numbers, rather, we are seeing homes that were way overpriced have large reductions, homes priced correctly still selling in a few days or weeks, and a general value decline on average of about 2%. So, while home prices are coming down a bit, they really are hanging on higher than many predict. This fall market will really turn into a showdown between sellers who don’t really have to sell, so they hang onto prices, and those who really do have to sell, so they have huge price reductions. We are already seeing this reflected with an increasing gap between the median and average sold prices, showing that the sold price data is not following a bell curve so much anymore, but getting skewed.
(Check out my video of what the weather is like in Boise!)
And the reason sellers can have huge price reductions brings us back to what makes us the #1 overvalued housing market, according to the media.
So, the numbers on the media are all over the place, but it’s safe to say that our home values more than doubled in a 2-year span, and in some cases, they came closer to tripling in value. One reason our values went up so much was that our market was undervalued compared to other inland western markets. Boise really did enjoy being a quiet little hidden treasure when in past market booms, places like Salt Lake, Phoenix, and Las Vegas were being discovered. And that does have largely to do with work opportunities in those cities, but this is interesting:
According to the National Association of Realtors®, in 2019, Boise’s median sales price was around $300, 000. So, to compare, Salt Lake’s was around $356,000, Reno’s was around $378,000, Spokane was around $325,000, and Las Vegas was around $337,000. Once the playing field became leveled by people being able to work from home, Boise had the largest increases in prices to begin with as we immediately jumped up to meet the prices of the surrounding inland west markets. Because we started lower, our increase was greater overall. And then, of course, as people realized how much less expensive homes were in the Boise area compared to other markets, they rushed here, you know the rest of the story… At our peak, we were either in line with or exceeded the other western inland housing markets in pricing.
So what does that have to do with being concerned about prices coming down? The media says that because we went up the most, we will come down the most…okay…except, the housing market is not an experiment in gravity. Now that Boise has been discovered, and people are still moving here to retire, work from home, and businesses move in for better tax loads, our market, although declining like all the other markets in the US, will not drop back to pre-pandemic pricing. It just won’t. I mean, I could be wrong, 2020 taught us to never say never, but it is just highly, highly unlikely that our market will drop that much. Not only due to the factors of inflation, but also because we are now on par with other surrounding markets.
Another reason the media outlets say we are overvalued is due to local salaries not being able to support current housing prices. But the problem is the way they figure local salaries, and the narrow way they look at potential home buyers. So, while it is true and unfortunate that the local salaries do not support our current home values, it is only true for first time home buyers, or re-entry buyers who happen to have Idaho incomes. The media states that that is proof that our market will decline more than other markets, but again, let’s get the real perspective, which is that the first-time home buyer with Idaho salary population is only a very small portion of the potential buyers in the housing market.
A large portion of potential buyers are Idahoans who have been homeowners for more than 2 years and have large amounts of equity. Even with local Idaho salaries, because of their equity, if they want to downsize or upsize homes, they can. That is within their financial ability to do so due to the equity. Even with the current average 2% equity loss, there is still plenty of equity left to make a move and buy another home.
The other portion of the population of Idahoans are either small business owners in Idaho, who traditionally do very well financially and make up a huge part of our Idaho economy, and the population of Idahoans, new residents, and longtime residents, who work from home with a salary base from a different state. I have helped many first-time home buyers who have salaries from other states where it was not possible for them to purchase a home in their previous cities but they can still purchase a home here.
And, Boise has been a “choice” city for many, many years, meaning, it had a large population who worked from home long before the pandemic, people who could choose to live anywhere, and chose to live in Boise. So, when the statistics talk about local Idaho salaries, they fail to include the long-term and new residents who have out of state pay. Which is typically much higher than a local Idaho salary, and therefore means they can afford home prices here.
So while Boise may be the number one in terms of home prices that rose the most, the factors the media says that will lead to a bigger market decline here than anywhere else, like the local salaries and the overall “value” of living here, are not solid proof that our market will decline more than others, the salary reason only applying to a small, select group of people, and the definition of “value” being completely subjective. I am not saying our prices won’t continue to decline with the market slowing and normalizing in response to rising rates and uncertainties, it’s just that we are not seeing a massive housing market crash like the media wants you to believe.
We all value things differently. And the value in living in the Boise area comes from so many external factors, that as long as people keep valuing what Boise and Idaho have to offer more than the cities and states they are coming from, then our home values will hold up overall. The media will never speak honestly about why people are truly showing that they value living in places like Boise more than other coastal western cities, so I hope you are all thinking for yourselves and seeing the big picture.
Because the home prices rose in Boise more than any other city, and people are willing to pay the housing costs to live here, does that truly mean we are the most overvalued housing market in the nation?
