Were you all excited, getting ready for a move to the Boise Idaho area this summer, and then bam – rising interest rates stopped you in your tracks and are causing you to rethink and pause? Well, you are not alone, this is a pretty common sentiment right now, and I don’t blame you for taking a minute to reevaluate the Boise housing market.
Due to the way I do my marketing, I have the fantastic opportunity to hear from people in a different way than most agents. I get to hear from you when you are researching moving, hear your concerns, and that really helps me understand that beyond just the numbers we see in the media about the housing market, there is a bigger underlying factor that can affect how the market goes – and that is YOU – the people with real lives and real concerns.
So, if you missed my most recent market update video, check that one out, here is a link, and it will help you understand this video a bit better, but today we are going to focus on: the potential home buyers.
Given the market volatility, we will discuss the questions:
Should you still move to Boise right now?
Should you buy or rent?
Should you wait?
And if you’re a potential home seller watching this, this information helps you understand the mindset of your potential buyer so you can understand the market when you sell as well, and watch for my next video, which will be about how the current market is affecting sellers.
But today we’ll discuss all of this in relation to numbers and data, and then we will discuss it in relation to psychology and your personal concerns, because I am getting a lot of emails about this. Of course, I can’t tell you, and won’t tell you what you should do, but hopefully this helps give you a little more education on the reality of things, as fear will paralyze your decision making, and education helps eliminate some of that fear.
Interest Rates:
So yes, interest rates are, as of June 28, 2022, just hovering right below 6% on an average 30 year fixed conventional loan. This could be higher if you have less money down or less than optimum credit score, and it could be slightly lower in some cases as well.
We all know that means that higher rates mean less affordability for you. If you could afford a house payment with a 4% rate on a $600,000 home with 20% down, and you wanted to keep that payment the same, now you’d either have to buy a much less expensive home or put down quite a bit more money. And buying a less expensive home in the Boise area can be difficult as our median home price in the Boise housing market is now just above $600,000, so you’d be facing giving up location, square feet, amenities, etc.., So of course that is causing a huge hesitation in buying.
Price Reductions:
And then there are large amounts of price reductions right now in the Boise housing market, as well as almost all markets in the US. Just today, for our whole valley, there were 74 new listings, but 213 price reductions. We’ve been seeing around 100-200 price reductions a day this past week. So as a potential home buyer, why doesn’t this make you jump at the chance of rising inventory and lowering of prices?? Well, because of the fear that prices will lower even more, and no one is quite sure yet where this is going and when it will stabilize.
Our price reductions are largely due to a lessening of demand with rising rates, in combination with more inventory with more homes on the market, and also, we have many people seriously overpricing homes right now. The majority of sellers are selling right now to try to cash out on their equity, and they are pricing homes in line with comps from a couple of months ago, or even higher as they are trying to get the most money from their homes. Because they are priced too high, they have big price reductions. And when they get to the right market value, they sell in a few weeks.
Our May sold data for the Boise housing market shows that even with price drops, the sold prices were still averaging either above or at the asking price.
That was true for all of May and June, and even just last week, for Ada County, our median sold price was $609,950 while the median list price was $599,995, which supports the idea that even with home prices dropping, once they reach market value, that our market is still appreciating overall.
But this past week is the first week showing that home appreciation in the Boise housing market overall may be slipping. The median list price for homes sold last week was $594,900 while the median sold price was $582,000. So, this is just one week of data, and it will take several weeks of data to paint a full picture. But it makes sense, I mean most buyers were not happy with the 4-5% rates but seemed to still be able to afford that higher payment but getting up towards 6% has been the game changer.
For most homes that have been listed for over a week, buyers do now have negotiating power. It is really, really fantastic to be able to show buyers several homes and for buyers not to feel pressured into making an offer way over asking price as fast as possible and waive all their rights like we did the last 2 years.
Rate Buy Down:
Now that you have more negotiating power as a buyer, if rising rates are your biggest holdback from purchasing now, how about negotiating in a seller credit for a rate buy down? That can put more money in the seller’s pocket than a huge price reduction, and you could get your house payment into a range you can afford. Negotiating a rate buy down could be a great way to overcome your concerns about the interest rates right now. And don’t forget, you can refinance in the future when rates stabilize and come back down.
Buy now or Wait?
But what to do about the concern that home prices will drop more, so you want to wait to buy? It is interesting that people weren’t concerned about paying way over appraised value the last two years, but they are very concerned about overpaying now. That is a valid concern, but there is also a lot of uncertainty in that, but we don’t know how much more home prices will drop, and we don’t know how much interest rates will rise.
Go online to a mortgage calculator and play around with what your payment would be if the house were less expensive, but the rate was higher…often, a less expensive house with a higher rate will mean a higher payment.
And of course, you have to live somewhere, so if you are renting, you also need to factor in probable rent increases while you wait to buy, and all the money you spend on rent is going directly into someone else’s pocket, not working for you to build wealth and security and getting your mortgage paid down. And then, if we ever get back to a point where homes are priced much lower in combination with low rates, as in the beginning of 2020, we will have a repeat of over asking offers and paying over appraised values, which buyers didn’t like either.
Inflation:
There is also inflation to consider. Builders are not going to be able to just lower prices much in the years to come to overcome higher interest rates because they paid so much for the land, the labor wages have gone way up, and costs of supplies have gone way up. So, if builders just pull back from building over the next couple of years, that will create more inventory shortages over time, causing prices to eventually stay higher. I say eventually because right now, in response to this fast rise in interest rates, we are seeing builders offer incentives and price drops in the Boise housing market. But they can only offer that for so long as things will get more expensive for them over the next few years.
The White House came out with a Housing Supply Action Plan in May of 2022. I am not going to get into the details of that, and you can read it and try to decipher it for yourself, but I see a lot of things in there, such as them providing funding for more rental units, more multi-family housing, etc… that show me that the government it not expecting more people to become homeowners, rather that they are going to try to ease affordable housing by providing developers with incentives for more rental units. My concern is that if people wait too long to buy a home, the financial outlook of our economy will make it increasingly difficult to become a homeowner as time goes forward. And home ownership may be the defining factor in the future years as to whether or not you have a measure of financial security.
Evaluate Your Personal Situation:
We are working with a lot of unknowns right now, so when you are considering purchasing a home in the Boise housing market, instead of focusing on the fear the media is casting about right now, think about your overall personal situation. Financially, if the numbers work for you, have emergency savings, and plan to stay in the home at least 5-7 years, then council with a lender and consider the option of negotiating a rate buy down with the home seller or builder. Home ownership and home wealth are always a long-term investment, so weighing out renting for a few years vs. buying when the numbers work for your budget and getting your money paying off a mortgage is important to consider.
I am not saying go out and buy a house right now no matter what, but I am saying to really evaluate your personal situation and be realistic. If you’re a first-time investor needing to take a loan out and are hoping to earn money in a short-term equity gain, and can’t cash flow the property, now is not the time to buy.
But if you are a long term real-estate holder, or either a homeowner who needs to move due to a job change or just needing to bring your family to a new place, or an investor who is wanting to move their money from one market to another for external overall financial benefits, then yes, evaluate the numbers for you personally and understand that there is also risk and cost in waiting and trying to “time” the market to where the low interest rates and low prices converge again.
Politics of Moving:
So that historically low interest rate of under 3% was a driver of the housing market the last 2 years, but the other driver was people wanting to leave the politics of their home states behind and move their families to a state where they feel policies will be better for their families in the long run.
How do I know this? Every single person who’s emailed me, texted, or called in the last 2 years, hundreds and hundreds of people, have told me. The media says people moved inland because of what they call “climate change migration”. NO. The media says people moved inland because they were fearful of getting COVID in a populated area, so they moved to less populated areas…. uh , NO, just No….
So that real reason people moved, people wanting to find what they feel will be a better place to live for their families, has not ended all of a sudden. It has lessened somewhat as certain decisions, like whether or not a state will mandate the Covid vaccine for all children 5 and up to attend public school, has been put on hold by many places, but the underlying concern is still there. So, if your overall goal in moving is to find a place you feel is better for your family, then that is a pretty strong motivating factor to still move and make that change in your life sooner than later.
We will keep our eye on the interest rates and the Boise housing market and keep you updated and, of course, and if you are thinking of buying a home in the Boise and want to try to weed through all the media noise, contact us at our website, summerastonrealestate.com to set up a time to chat about your concerns or questions so we can help guide you to the best decision for you and your personal circumstances. You can follow us on Instagram for more tips and local updates, and in the meantime, keep pressing forward my friends.
I’ll see you next time.
