Ada County Home Prices Leap 12% From Start of Year Amid Inventory Crunch
Posted by Lisa Kohl on Friday, July 7th, 2023 at 4:42pm
Home prices in Ada County rose again in June, accompanied by a yearly 36% decrease in the availability of homes for sale. This highlights the fierce competition over the diminishing supply of low-priced homes.
The median price of a single-family home in Ada County fell 8% from the previous year, reaching $544,881 in June. Canyon County also experienced a decrease, with prices dropping 9% to $405,000.
While home prices remain below year-ago levels, a limited supply of homes has led to steadily higher prices since the beginning of the year. Since January, prices in Ada County have risen by 12.3%, while those in Canyon County have seen a 2.4% increase. In Boise, prices have jumped by 9.7%, ending June at $525,000—the highest level since last July.
Local home prices peaked in May 2022 as buyers rushed to get ahead of rising interest rates. Then, fears of a potentially slowing economy sapped demand and sent house prices plunging in the back half of the year.
The pace of new listings has slowed as homeowners, benefiting from low-interest loans, have been reluctant to pick up stakes. At the same time, demand has remained remarkably steady due to persistent interest from out-of-state and first-time buyers. There were only 1,502 new listings in the Treasure Valley in June compared to 2,831 in June of 2022, a staggering 47% decline in 12 months.
Despite overall demand being weaker than in previous years, there's still significant competition for most homes. The supply of properties priced below $500,000 is particularly scarce. Homes at this price point often receive multiple offers and sell above their asking price.
This scarcity is matched with a demand that has turned out to be stronger than many forecasts expected. In Ada County, the supply in months dropped from 2.39 last year to 2.03, and in Canyon County, it fell from 2.28 to 1.99 months. This shrinking supply suggests the market has become more competitive over the past year.
The shortage of existing homes has created less competition for builders, paving the way for higher sales of new construction. However, some local builders have struggled to scale up production after reducing new home starts and laying off staff in 2022.
Sales of existing homes, which comprise the majority of all transactions, were down 24% in the first half of the year compared to the same period in 2022. In contrast, sales of newly built homes increased. The constrained supply and robust demand for lower-priced homes have allowed builders to raise prices.
After reaching a 2023 low of 6.09% in early February, 30-year mortgage rates have steadily risen, hitting 6.81% by the week of July 6. While interest rates can notably impact affordability, especially for first-time buyers, they are currently having a smaller effect than they have historically.
One reason for this is the high number of first-time buyers. The largest group of Millennials turns 32 this year, the median age when many people buy their first home. According to the National Association of Realtors, the percentage of homes purchased by first-time buyers has risen over the past year, despite higher interest rates. These buyers, who have no existing house to sell, aren't bound by the "golden handcuffs" of low-interest-rate loans.
Another contributing factor has been the considerable rise in homeowner equity over the past decade, a time marked by one of the largest real estate booms in history. Data from the St. Louis Federal Reserve indicates that homeowner equity has surged, increasing nearly 3.5 times during this period. According to estimates from real estate data firm CoreLogic, average equity surpassed $274,000 in June.
Homeowner equity can be used to make hefty down payments or even eliminate the need for a mortgage entirely. In Ada County, all-cash purchases have increased to nearly a quarter of sales this year.
In the past few years, builders have primarily focused on constructing luxury houses, driven by the prevailing demand. Now, as the demand has shifted, they are turning their attention to the construction of more affordable homes.
The new construction supply crunch we predicted in October has arrived even earlier than expected. Although builders began to increase production this spring, most homes under construction now won't be complete for several months.
Nevertheless, we project that new construction will make up an outsized portion of available homes for sale for the remainder of 2023.
As we move beyond the spring selling season, we anticipate that rising interest rates will accentuate historical seasonal trends. As demand slowly decreases and supply swells moving into the fall, we expect that home prices, which have almost hit their annual peak, will begin a gradual descent in the second half of the year.
Boise Real Estate Market Summary for June 2023
- Median list price: $530,625, down $29,375 (-5.3%)
- Median sold price: $525,000, down $30,511 (-5.5%)
- Average price per square foot: $309 (-4.6%)
- Total home sales: 336 (up 20)
- Median days on market: 6 days (down 1)
- Available homes for sale: 1.55 month supply (down 0.73)
- 30-year mortgage rate: 6.71% (up 1.19)
Treasure Valley Housing Market by Area
- Ada County: $544,881, down $47,209 (-8.0%)
- Eagle: $785,000, down $73,000 (-8.5%)
- Garden City: $536,000, up $13,000 (2.1%)
- Kuna: $449,990, down $20,095 (-4.3%)
- Meridian: $535,000, down $50,000 (-8.5%)
- Star: $570,000, down $57,500 (-9.2%)
- Canyon County: $405,000, down $39,990 (-9.0%)
- Caldwell: $375,000, down $35,000 (-8.5%)
- Middleton: $449,900, down $83,295 (-15.6%)
- Nampa: $405,950, down $35,550 (-8.1%)
Lisa Kohl
Lisa carefully studies the local housing market to give her clients the edge when buying or selling a home in Idaho. We Know Boise is a full-service real estate team that combines our LOCAL expertise with traditional know-how to create exceptional results for each of our clients.
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Select information in this We Know Boise market report was obtained from the Intermountain MLS (IMLS) on July 7th, 2023, and is deemed reliable but not guaranteed. City data refers to single-family homes on less than one acre, while county data includes homesites of all sizes. Months of supply is calculated on a 12-month rolling average. Combining existing homes for sale with new construction is the best way to gauge current home prices and Boise housing market trends. New house prices can be more volatile and can make comparisons, particularly on a month-to-month basis, less reliable.
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