What is going on in the Boise Housing Market as we wrap up March of 2023?? Well, it’s been an interesting month for sure, from the bank crisis to rate volatility to ramping up of multiple offers… So, let’s dig in and see what springs up!
While we’ve all been enduring this long winter – it hasn’t been super cold, but we hit a record of number of days under 60 degrees since 1899, so it’s just been longer, but while others are focused on why we keep getting snow, the Boise housing market has been heating up, and we’ve been focused on helping our clients weather the current market environment.
Let’s start with some market data first. The Median Ada County home sales price for February of 2023 was $492,175, which is 10.5 percent lower from February of 2022, but an increase of $5000 from last month. Our home sales jumped up 40% month over month, with new construction sales being up 25% from January and up 3% from February of 2022. So, with the month over month increase in median price and the increase in home sales, did our Boise housing market bottom out? Only time will tell of course.
I do want to point something out regarding average home prices. There is a misunderstanding on what that data means. Many people imagine that when they hear the statistic that the median home price has dropped 10.5% since last year, then automatically all homes are worth 10.5% less than last February’s pricing. While the home values have dropped, and that is part of the interpretation, another often overlooked part of the interpretation is that we are just selling significantly more volume of homes around that median price point than we did a year ago. We are not selling as many homes over $800k or $1million to pull that average or median price point up. So please keep that in mind so you can understand the complete picture. Understanding that helps to answer why homes are still priced high when the median sales prices dropped…it’s due to the volume of the lower price point selling compared to volume of higher price point. Which has largely to do with interest rates, which we will talk about in a minute.
As I’ve been tracking in past market updates, a number that is super important to future sales and inventory is the number of permits getting pulled for new construction. Good news is that it is up 32% since January of this year, but still down 62% from February of 2022. And this is so important because it takes about 6-12 months right now for those building permits to turn into homes. So, if we have 62% fewer new construction homes coming on the market, that means significantly fewer spec homes will be available for move-in ready purchase, which means that we will have much less inventory.
And it is exactly that low inventory that is keeping home prices up. Yes, of course, I feel like I’m saying the same things every month for the last several months, yes, we do have large price reductions on homes that were overpriced, but we are also back to multiple offers in many cases. If you follow me on Instagram, you’ll know from my mini updates that some of my clients and I are dealing with multiple offer situations. There have been several homes I’ve shown lately where there were groups lined up to see the home, another with people streaming in the open house, and others where there were 6 or 7 offers. And these are not amazingly beautiful, one-of-a-kind homes. These are homes near the median price point, homes that are well taken care of, and homes that are priced well.
And many builders who are building near that median price point are also seeing multiple offers on spec homes and on building lots, so some are lessening incentives now that the demand is picking back up. It’s a tricky game, because many builders are switching back to a semi-custom build job business model and not building as many specs, so they still need to figure out a way to overcome that hesitancy of the risk of interest rates rising over the course of the build job, so many are still offering ways to deal with that, but as of last week, a few really cut back on incentives and are just saying, this is the cost, you take on the risk, if you can’t, then we’ll hold out for someone who can. Many builders have also raised their earnest money requirements in the last year so that they have some recourse if you back out for whatever reason.
So, our inventory is back down to about 6 weeks, meaning, if every home we had on the market right now sold and nothing new came on the market, we’d be out of homes in 6 weeks. I do expect more homes to come on the market as we head towards the summer, but sellers still aren’t selling unless they have a good reason to do so. People moving up to new homes used to make up a good portion of home sales and put more homes on the market. But with lower new construction inventory, coupled with the higher interest rates, it’s pretty unmotivating for a seller to move into a new home and lose a 2.5% rate for a 6.5% rate.
So, as we know, the FEDs really want to help stop inflation by stopping people spending money by people losing jobs, and so far, the job market is hanging on strong. So again, unless or until people have serious financial constraints such that they can no longer pay their house payment at a 2.5% rate that they have, then we won’t see a significant increase in housing inventory in the Boise housing market and even then, I think many people will find a way to make it work since rent is most likely more than their current mortgage.
The interest rates at the end of February topped out at just over 7% for an average conventional 30-year fixed rate. The rates dropped to just below 6.5% after the FED meeting last week since some uncertainty was alleviated for now. While they said that fed rate increases could end sooner than expected, some of the other economic data is not helping the case for lower interest rates. The next Fed meeting is May 3rd, and there is no crystal ball as to what will happen with mortgage rates.
So what does that have to do with the Boise Housing Market? Well, right now, the reason why the bulk of sales are happening near that median price point, near the $400-$500,000 price point, is because that is what most people can afford right now with the higher rates. When we had an interest rate decrease in the end of January to just under 6%, many buyers jumped in to take advantage of the rate, which is probably why we saw a 40% increase in closings in February compared to January. So, what that tells us is, that if our interest rates drop below 6%, demand will increase on our already low inventory. If interest rates go up above 7% again, demand will decrease, inventory will also decrease as less people will want to sell, and things will slow way down. Sellers and builders will have to offer rate buy down incentives to keep things moving along.
So, it’s an interesting time of it being a pretty good time to sell your home, most people can still get a significant amount of equity out of it, but then you have to deal with a higher interest rate on the buying side if you aren’t a cash buyer. As a buyer, it’s a good time to buy in that sellers and builders have mostly accepted that they will need to offer some closing cost assistance so buyers can buy down their rate to make the house more affordable, unless, of course it is a multiple offer situation, and as I’ve said before, please be so very cautious about choosing to rent when you can purchase a home. I am very concerned that it will become more difficult to purchase a home in the future, and I can tell you, that if rates ever come down coinciding with home prices coming down, there are tons of cash buyers and investors waiting on the sideline for that moment, and it will be incredibly hard to compete. Owning a home is a long-term investment and should be seen as such. You purchase when you need to, ride out the ups and downs, refinance when you can, and little by little, grow your long-term wealth.
So, what will April of 2023 hold for the Boise Housing Market? Well, hopefully warmer weather and sunnier days. And starting off April, we have about a 6.5% interest rate, lowering inventory, increasing buyer demand, and some unrealistic sellers still lowering prices from starting way too high. So, much as we were in March, we are weebling and wobbling between spectrums and sellers, buyers, and builders will have to continue to respond in creative ways to keep things moving forward. We are in a unique housing market with many factors influencing it that haven’t been seen before. And it makes sense, we just went through a couple of years of completely new experiences and now we are dealing with the fallout in a world where many things have changed.
One thing is for sure, people will always need to buy and sell homes, and my team and I are here to help you when you are ready. We are happy to have a consultation to help you know what’s best for you. Follow us on Instagram for more info about the Boise Housing Market and info about living in Boise…I am so glad you shared your time with me today. Thanks so much for watching, and I’ll see you next time!
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