Mike Brown Group

Let’s Talk About the Idaho Housing Market – March Update

The Idaho Housing Market

To say that the Idaho housing market is on fire would be an understatement. During the past several months, it seems the Idaho housing market as a whole, especially here in the Treasure Valley, has been growing in leaps and bounds. As people move into the Treasure Valley and with historically low-interest rates and limited housing supply, home values have done nothing but appreciate.

Home Values Continue their Ascent

Real estate tracking firm CoreLogic recently released its home price index report for January, looking at house pricing nationally. Once again, Idaho found itself on top of the list for home price appreciation. Out of all the states in the nation, Idaho had the highest year-over-year increase in housing prices at 21%. The next closest state to us was Montana, with a 17.4% year over year increase.

Nationally, the nation saw a 10% increase year-over-year through January for homes, which is the first time since November 2013 for the country to see double-digit appreciation. For Idaho to more than double the national average, especially during a pandemic, is startling.

Dr. Frank Northaft, the Chief Economist for CoreLogic, had this to say, “Despite first-time buyers driving high demand, entry-level homes remain in short supply. Homes priced below 75% of the local median price had 14% annual appreciation, negating most of the benefits of record-low mortgage rates. When interest rates rise, the affordability squeeze for first-time buyers will become even more of a challenge.”

2021 has started like a rocket for many real estate companies, with inventory quickly being snatched up by aggressive buyers. Many homes listed for sale find themselves as part of bidding wars which pushes the prices higher. Homes that just a couple of years ago went for around $450,000 are now fetching values closer to $800,000, and according to the Boise Regional REALTORS®, home values in Ada County have more than tripled since 2011. In January, the median home price for Ada County was $454,000, which was, not surprisingly, a record. It was also up 30% since January of 2020.

“Record-low mortgage rates were a significant driving force behind last year’s rebound in housing market activity. However, heavy competition for the few houses on the market drove home prices to historic highs, and mortgage rates are no longer enough to sway the affordability challenges for consumers,” said Frank Martell, President, and CEO of CoreLogic.

CoreLogic expects prices to continue increasing nationally and cautiously predicts a modest 3.3% gain by January 2022.

Is there a Crash Coming?

Many believe that the Idaho housing bubble will eventually burst, and home values will normalize, especially in Idaho. Unlike the recession of 2007-2009, where bad loans contributed to the collapse of the housing market, this market is driven by several factors that are different from the circumstances then.

First, interest rates were at near historic lows, giving people more buying power (they’ve since started to rise back up above the 3.0 APR threshold). Next, the classic principle of supply and demand is in play as there are far more people looking for homes than there are homes for sale. Consequently, home values are pushed higher as those put on the market will usually have multiple offers.

Finally, out-of-state buyers who are relocating to the Treasure Valley bring with them piles of cash from selling their properties in other states. As a result of their equity in selling their out-of-state homes, they’re able to be aggressive in what they’re offering when purchasing a home here in Idaho.

Out-of-State Demand and COVID-19

According to the Boise Valley Economic Partnership, Californians have made up 46% of the people relocating to the area in the last five years. That trend continues according to Realtor.com’s Cross-Market Demand report. Seven of the top ten regions looking at homes in Idaho are in California. Residents of other states are actively looking at Idaho, too, with Realtor.com reporting people in Utah, Washington, and New Jersey regularly viewing listings in our region.

Demand isn’t expected to diminish as society is becoming more accustomed to working remotely. As a result, people seek less densely populated locations and have a better quality of life, which the Boise area certainly provides.

The COVID pandemic has kept some home sellers on the sidelines as the thought of open houses or moving is not something they’re willing to do until the situation improves. Homebuilders are also struggling to keep up with demand as material prices have gone up significantly and there’s a shortage of skilled labor. There’s some optimism that as mortgage interest rates rise, that the demand may slow.

Indeed, for the balance of 2021, we’re not anticipating any sort of drop in demand. As the effects of the pandemic start to reside, there’s hope that more people will want to sell their homes, which will help add more inventory to the local market.

The Last Word

People looking to buy Idaho real estate are in a conundrum. Interest rates are still relatively low, allowing more people the opportunity to purchase a property. However, the skyrocketing prices and aggressive competition are scaring people from entering the market and attempting to buy a house. There’s still some uncertainty surrounding the pandemic, so it’s natural for people to have reservations about trying to buy a new home. Others would rather wait and hope that conditions improve (e.g., more inventory appears on the market), allowing them to get more value for their dollar.

Unfortunately, as we’ve seen the past few years, waiting for the right time may wind up being more expensive as there appears to be no end in sight concerning the demand for housing. As such, the sooner you’re able to buy, the better.

While the home buying process seems like it can be daunting, working with a REALTOR® can help you navigate the very competitive housing marketplace. The team of real estate experts at The Mike Brown Group are intimately familiar with the Idaho housing market, especially as it pertains to homes in the Treasure Valley. There is no time like the present to buy a house, especially while interest rates are still relatively low. And if you’re interested in selling your home, we can help you sell it for top dollar.

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