Early Demand Boost Helps Stabilize Boise-Area Home Prices
Posted by Lisa Kohl on Friday, March 10th, 2023 at 2:23pm
As the spring selling season begins, Treasure Valley home prices display glimmers of stability following year-over-year declines.
In Ada County, the median single-family home price declined 10.7% from the previous year, finishing February at $491,057. Canyon County prices dipped to $389,945, down 10.2% from the year before.
While prices rose slightly in Ada County and declined somewhat in Canyon County, their combined prices are essentially unchanged from January, marking the first month without a decline since October.
Star and Middleton emerged as the only two cities in the Treasure Valley to record a yearly increase in prices. Star saw a gain of 11.7%, while Middleton's prices rose by 2.6%. Conversely, Kuna showed the biggest decline, with prices falling 19.8% year-over-year.
With fewer bidding wars, less competition, and more homes to choose from, buyers are enjoying better market conditions than last spring.
Following a sluggish fourth quarter, buyer activity jumped in January and February as increased affordability from falling home prices and a notable decline in mortgage rates pulled buyers off the sidelines.
According to data from the National Association of Realtors, sales to first-time buyers climbed to 31% of the market in January, up from 27% the previous year. We have seen a similar trend locally, with first-time homebuyers capitalizing on increased affordability from lower mortgage rates and home prices.
At the beginning of March, months of supply of homes for sale dipped to 1.54 in Ada County and 1.62 in Canyon County, the fifth monthly decline. While inventory is nearly double last year's level, it remains well below balanced levels, which has helped stabilize prices.
Most of the decline in supply since the fall months can be attributed to the resale market. Many homeowners have mortgages with interest rates below 4% and are reluctant to give them up for a higher rate on a new home. Additionally, with a robust labor market and a healthy economy, few people are in a position where they have to sell.
New construction inventory remains more abundant. Despite a reduction in new home starts, few builders we have spoken to are having trouble meeting demand. Builders have been quick to react to the slump in purchases by lowering prices and offering incentives, part of the reason local home prices have fallen so quickly.
While down from levels from earlier in the year, Treasure Valley home sales jumped 32% from the prior month. Homes typically go “under contract” 30 to 45 days before the sale closes. Hence, the February sales data largely reflect purchase decisions made between mid-December and the end of January.
In contrast, January is usually the slowest month for recorded sales. The month's data reflect homes going under contract between the week before Thanksgiving and New Year's Day.
There was a clear return in buyer demand at the beginning of the year that continued into February. However, that trend has tapered off in the last few weeks as mortgage rates have ticked higher.
Continued economic growth, which has boosted buyer confidence, is keeping inflation hot, encouraging the Federal Reserve to keep its foot firmly on the monetary brakes. The result is rising interest rates and a notable decline in new mortgage applications in the last few weeks.
People apply for loans early in the home-buying process. Therefore, the current decrease in applications will not have a substantial impact in March. However, if we continue to see a slowdown in applications, it could lead to a reduction in sales by April or May.
As of the week ending March 9th, the average 30-year fixed-rate mortgage climbed to 6.73%. While still below November 2022's high of 7.08%, it represents a notable increase from 6.12% just a month ago.
Mortgage rates are a reliable predictor of home-buying demand, particularly in the short term. Even a slight uptick in rates can raise the cost of purchasing a home. However, the recent shifts in demand are more significant than would be expected purely from an affordability standpoint, suggesting there is some psychology at play.
Traditionally, March marks the beginning of the spring selling season in the Treasure Valley, with nearly 40% of the annual purchase volume occurring between then and June. However, with buyer demand surging in January, demand may have been pulled forward by a few months.
Since the beginning of 2023, the demand from homebuyers has been surpassing the available supply. Still, there are early indications this trend is slowing down, just as we head into a period of increased new listings. It is worth noting that historically, supply reaches its lowest point in February.
Recently, the Fed suggested they plan to raise interest rates higher than expected and keep them there longer. While the real estate market is experiencing elevated buyer demand, there is no guarantee that it will continue into the summer.
If you're considering selling your home this year, the spring selling season is already in full swing, and it's essential to price it right and capitalize on the current high demand while it lasts. It is a case of striking while the iron is hot.
Boise Real Estate Market Summary for February 2023
- Median list price - $493,750, down $31,250 (-5.95%)
- Median sold price - $483,995, down $41,005 (-7.81%)
- Price per square foot - $280 (-8.20%)
- Total home sales - 222 (down 37)
- Median days on market - 45 days (up 38)
- Available homes for sale - 1.13 month supply (up 0.70)
- 30-year mortgage rate - 6.26% (up 2.50)
Treasure Valley Housing Market by Area
- Ada County: $491,057, down $58,933 (-10.7%)
- Eagle: $829,900, down $97,550 (-10.5%)
- Garden City: $592,700 (*fewer than ten sales)
- Kuna: $404,990, down $100,010 (-19.8%)
- Meridian: $474,000, down $74,400 (-13.6%)
- Star: $632,450, up $66,455 (11.7%)
- Canyon County: $389,945, down $44,505 (-10.2%)
- Caldwell: $345,495, down $34,495 (-9.1%)
- Middleton: $562,155, up $13,983 (2.6%)
- Nampa: $392,450, down $52,540 (-11.8%)
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 March 8th, 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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