A tale of two Stories
It was a stabilizing housing market, it was a crashing housing market. It was a time of relying on intuition and experience, it was a time of relying only on data and fear…we are in an age of increasing divergence, and the Early 2023 Boise Housing Market is no exception.
One story the media is telling is of an eminent housing crash and, at the same time, realtors working hard in the daily grind are seeing certain areas of the market pick up and even having price increases. A tale of the Boise housing market having such high inventory, another of our inventory being so low, no one can find what they want. And one of home sellers having to have huge price drops to sell their home, and another of some home sellers seeing multiple offers again.
What’s the truth in the Boise Housing Market?
Well, all of it has some merit to a certain degree, and I’m going to help sort that out as we go through what I am seeing today, February 2023, in the Boise Housing Market.
First, the January Boise Housing Market data is out, and as expected, the median sales price for Ada County has dropped to $487,495, which is 9.7% lower than the same time last year, and the last time the median sales price was under $500,000 was in July of 2021. Canyon County dropped 6.4% year over year to a median sales price of $345,445. So, this is really not that crazy…this was totally expected, given the last couple of years market conditions, and given the fact that the Boise Housing Market needs to stabilize. And whether or not we see that median sales price continue to drop throughout this year, or just kind of hover around this price point will be completely dependent on interest rates, and I’ll come back to talking a bit more about the impact of rates in a minute.
Some people are saying, oh that’s so crazy, everyone in the Boise area lost upwards of 10% of their home value since a year ago, that means the market is crashing! First off, the market could not crash in the true sense unless tons of people decided to sell all at once and everyone selling had to sell for less than they owe. And second, I am not denying that the market value of homes has lessened. However, if you’ve been watching my videos for a while, you know I like to make sure we are looking at not just numbers on paper, but also use some common sense and experiences of real life to try to determine outcomes.
Interest Rates and the Boise Housing Market
One huge factor in the median price point dropping is that there are many more homes being sold that are close to the median price than there were in 2021. We had many, many more sales in homes that were over $1million when the interest rates were in the twos, making a payment on a more expensive home much more affordable. Now that interest rates have lessened affordability, people getting loans are really sticking to purchasing under $600k, and even more are really sticking to under that median price point. We currently have a gap in purchasers who need to get loans but want a $600k and above priced home, and most of our sales in the higher price points are either cash buyers, or people with enough down payment that they are taking out a minimal loan.
What is Selling in the Boise Housing Market?
The lowering of the median sales price in the Boise Housing Market is not just a function of home prices dropping, but it is also largely a function of WHAT is actually selling. We just have many more home sales near that median price point and not as many far above that will drag that median price data up.
Many purchasers near that median price point didn’t compete in the last couple of years because they couldn’t compete with all the cash investors, or with people who had enough cash to pay way over the asking price. So in some respects, the current market is a better environment for them because, if they can afford the payment, they can purchase without having the competition, and often times, they can negotiate in closing costs. Especially with builders.
However, as the data and my personal experience suggests, with home sales near and under the median price point making up the large majority of sales, that segment of the Boise Housing Market is really picking up. So back to the interest rates to demonstrate that. At the end of January, we had a bit of time where the rates dropped below 5%. All of the sideline buyers jumped in, and we had a big increase in pending sales, especially for prices closer to the median. CBH, a builder who supplies the majority of new homes under $500,000 in the Boise housing Market, saw a huge increase in pending sales those weeks and even stopped negotiating on price reductions, although they were still willing to help with closing costs.
So, the buyers in the market, who are the market by the way, not numbers on paper alone, are telling us that if interest rates drop and stay below 6%, they can afford the current prices near the median price point, and are ready to jump in. If our rates hover around 6.5% the rest of the year, that will slow things down, but if they stabilize below 6%, things will pick up. And, partly, those prices will remain higher due to lack of inventory.
What?? Summer, how can you say we have a lack of inventory in the Boise Housing Market when everyone else is thinking it’s crazy that our inventory is up over 150% from last year?? You’re crazy…
Well, I’m not crazy, well that’s debatable, but I am working with clients and watching numbers every single day. Every day real life experience here goes a long way over numbers on paper. So yes, inventory is up. What seems like a lot. But inventory was very, very low the last couple of years. Historically low, and buyer demand was incredibly high. Now buyer demand is lower, and inventory is lower, but it is still low…and I’ll show you what I mean. Come along on an MLS home search with me.
WATCH THE VIDEO TO SEE DEMONSTRATION OF HOW LOW INVENTORY CAN BE IN THE BOISE HOUSING MARKET!
Okay, so yes, people can shout, the Boise Housing Market inventory is up so high from the last few years! The sky is falling! They can post that on YouTube or news articles all they want, but look, when I am working with clients, searching for homes daily, and you actually have specific wants and needs, which everyone does and should, your personal choice in inventory is incredibly low right now. Which is why, we are actually seeing a comeback of multiple offers.
Multiple offers in the Boise housing market again?
Summer, you’re crazy! Again, debatable on that one, but, yes, there is a crazy dichotomy, back to those tales of two stories happening, of some multiple offer situations and some homes sitting on the market over 100 days having huge price drops. What is going on?
As far as homes with price drops and sitting on the market a long time, it’s simple, they are overpriced and not showing well, not kept up well, not maintained well, any number of problems, but usually a combination of incorrect pricing and lack of proper preparation for selling. We do have lower buyer demand overall, so selling a home in 30-45 days or so is still an acceptable range.
And as far as homes with multiple offers? Well, some sellers will be reasonable and/or motivated, and they will list their homes for the correct price, not their neighbors’ selling price of April of 2022, but the correct price in line with our current market, and on top of that, they will make sure the home is in tip top shape for showings. Neutral paint colors, deep cleaning, yard cleaned up, all deferred maintenance taken care of, you know, all the things sellers should do when selling their most valuable asset. As I said before, we have buyers waiting on the sidelines who don’t want to buy overpriced and underwhelming homes. And when a correctly priced, well taken care of home comes on the market, buyers jump on it. Especially in homes close to the median price point.
Now the multiple offers situation that has begun to emerge in the last couple of weeks is not the same as before…people are generally not waiving the appraisal contingency because they don’t want to pay more than the bank says it’s worth, and it is not showing up as much in those higher price points. Also, it is not happening in just the Boise Housing Market.
I have a friend who is a top agent in Bakersfield, Angel, your Bakersfield Realtor, and she asked the question of her realtor friends across the US if they were seeing a re-emergence of multiple offers in their markets. Because, you know, when you’re one agent keeping your head down and plowing forward with work, it’s hard to know if it’s just you or if it’s a new housing market trend, especially with the media claiming that the opposite is true, and she had an overwhelming response from agents in Utah, Arizona, Arkansas, all over, who said yes, they are all seeing the market pick up and multiple offers show up again. And again, it’s not every house or every price point, but around that median price point, we’ve got to keep our eyes on it if we have clients that may need to get into that price point.
And I am also seeing the reemergence of agents in my network locally in the Treasure Valley who are asking each other for off market listings because our inventory is too low to find what our clients want. It’s a bit worrisome because that is how 2020 started out. A little rumbling on the ground floor level that inventory was getting lower and random homes here and there were getting multiple offers.
New Consruction and the Boise Housing Market
And as I’ve mentioned before… one of the biggest factors, other than interest rates, that will affect 2023 and into 2023 is our new construction inventory. It is getting so low in the Boise Housing Market. As I said, CBH sold off many homes late January, and guess what, they have slowed down on building soooo much, you drive through the communities and see very few homes getting framed and a lot of empty lots. It’s true of all of our other builders too. So, in December of 2022, builders applied for 89% fewer building permits in Ada County than in December of 2021. That number is from the monthly housing data report from Pioneer Title Company. Okay do you realize what that means? It means that this fall, we will have up to 89% fewer new construction homes available. Yes, many builders are switching back to a semi-custom build business model so that they don’t have spec homes sitting around, so there will still be plenty of lots if someone wants to build from the ground up. And the larger builders, like Toll Brothers, are offering amazing incentives right now. But our local builders don’t’ have as deep of pockets, so they can’t offer as much, and are just slowing things way, way down.
So, inventory will stay low on new construction so that prices can stay up. Very simple.
The Boise Housing Market, and most of the rest of the county, is truly experiencing a tale of two different housing market stories. Housing prices coming down- but my clients just went through a bidding war. Higher inventory- but when you whittle down to specific needs, there’s not much to choose from. Lessening buyer demand- but increasing pendings… well the real tale is your personal story and your personal needs for buying and selling home. All this bigger picture data is interesting, but what really matters is your personal situation and home buying or selling story. And we’d love to be part of that and help guide you through it.
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