Treasure Valley Home Supply Shrinks as Sellers Move to the Sidelines

In October, the supply of homes for sale dropped for the first time this year as rising mortgage rates and slowing appreciation continued to discourage potential sellers.

The number of newly listed homes plunged 30% from September, marking the fourth consecutive monthly decline. While it is not unusual to see a slight slowdown in late summer, new listings are also down nearly a third from last October, suggesting more than a seasonal shift.

Months’ supply of homes for sale in Ada and Canyon County slipped to 2.81 and 2.87, respectively, the first monthly declines since January.

As inventory decreased, Treasure Valley home prices increased. Ada County prices rose 5.1% from last October and jumped $21,000 just from last month. While home prices remain lower than the record we saw this spring, that’s the first monthly increase since May, and the largest since March.

In Canyon County, home prices rose 2.7% from the prior year and $8,000 from the month before—the first monthly increase since spring.

While buyers have more options than they have had in years, surging mortgage rates continue to discourage would-be sellers who are locked into low-cost loans.

Additionally, some sellers are pulling their homes off the market after failing to find buyers willing to pay what they think the properties are worth, further reducing supply.

Throughout the Treasure Valley, houses remained on the market for a median of 37 days, up from 14 days a year earlier. While a notable change in percentage terms, by historical standards, it’s a brisk pace for fall.

Considering the speed at which mortgage rates have risen this year, it’s not surprising that price appreciation and sales have slowed. It would be a surprise if they hadn’t.

However, despite a decreasing supply, rising rates will continue to pressure potential buyers and sellers, limiting future home price gains.

Median single-family home price and year-over-year change by area:

• Ada County: $561,000, up $27,050 (5.07%)
• Canyon County: $434,814, up $11,369 (2.68%)
• Boise: $499,900, unchanged
• Meridian: $558,805, up $12,905 (2.36%)
• Eagle: $890,000, up $103,820 (13.21%)
• Nampa: $425,000, down $500 (-0.12%)
• Star: $625,270, up $62,021 (11.01%)

Fewer Sellers Means Fewer Buyers Despite More Opportunities

Year to date, sales remain below what we saw in 2021. That’s partially due to decreased affordability from rising interest rates and partially because fewer people are moving. Trading a low rate for one much higher discourages potential sellers, further reducing the buyer pool.

With saving account rates yielding more than some homeowners are paying on their mortgages, can you blame them?

Also, the reduced competition has created an opportunity for those still looking and there is more supply at every price point than just a year ago, particularly in new construction.

No longer at the mercy of sellers, buyers are also encouraged by the lack of bidding wars and a newfound negotiating power (including on price) than they have had in recent years.

Competition can vary between neighborhoods, but sellers are more likely to accept reasonable offers from qualified buyers, even ones with contingencies—something nearly unheard of last spring.

Believe It or Not, the Treasure Valley Is in a Textbook Seller’s Market

With all the talk about how much the housing market is cooling, the Treasure Valley is still technically in a seller's market.

No matter what metric you consider, whether it's year-over-year home price appreciation, the time it takes for the typical home to sell, or the supply of properties for sale, by definition, the metrics favor sellers.

Even the month-over-month price declines seen in the year's second half are more indicative of seasonal trends than toppling prices.

Granted, it's a far cry from what we saw this time last year—with every listing averaging three offers—but that wasn't normal either.

Months' supply—the time it would take to exhaust the current inventory of homes for sale—would need to increase from the Treasure Valley's average of 2.83 months to between 4 and 6 months to reach equilibrium. At the current sales pace, that would require an additional 1,000 homes for sale. If demand were to rise, we would need many more homes to achieve a true "balanced" market.

As we have seen from the local housing shortage of the last 10 years, houses won't become more affordable until there are (sustainably) more homes available than families looking for places to live.

We expect supply will continue to decline until at least January.

Buyer Demand Continues to Reflect Mortgage Rates

The real estate market of 2022 will be remembered for its volatile mortgage rates.

Rates began the year at close to 3% before rising to almost 6% by June. Then, in August, they fell to just below 5% before rising sharply over the next two months to nearly 7% today.

That August rate dip nudged buyers off the sidelines, leading to the price gains in October. (Sales are due to purchases months earlier.)

At the end of October, the average 30-year fixed mortgage rate rose above 7% for the first time since April 2002.

Over the last 12 months, mortgage rates have more than doubled and monthly payments have risen 50%. A home that would have cost you $2,600 a month a year ago will cost you $4,000 today, and that's with only a minimal increase in prices.

Interest rates have such a significant impact on purchasing power that they can do more to affect short-term demand than home prices themselves. If you could accurately predict mortgage rates over the next year, you would have a good idea of demand in 2023.

Rates below 5% will likely lead to demand outpacing supply, particularly with a sharp drop in new construction inventory.

Regardless of supply, 7% mortgage rates will keep demand in check, limiting price appreciation for the foreseeable future.

List to Sales Prices Widen; New Construction Deals Abound

Buyers have more negotiating power and choice than they have had in years.

That doesn't mean that sellers are giving away properties, but it does mean they can't dictate terms and get away with "fluff" in prices.

In Ada County, the median listing price finished the month of October at $575,000, just 4% lower than May's record high. At the same time, the median sales price has decreased by over 6%.

The gap between sales and listing prices is widening as the market splits between motivated and unmotivated sellers. Homes are either being overpriced and sitting unsold or priced and marketed well, leading to quick sales.

Breaking down supply further shows there are 2.17 months of supply in the resale market and 5.32 months in the new construction market.

Our experiences bear that out; supply is the slimmest in the resale market, particularly for unique properties and sought-after neighborhoods, and most abundant in the new construction market.

There are good values right now for move-in ready homes and ones that are nearly complete, particularly in the middle- to upper-tier price points. However, those deals won't last long, as builders have aggressively tried reducing inventories.

The homes completed in 2023 will also be smaller and offer few upgrades—even if the list prices are lower, the value won't be as good.

Since spring, we have noticed a substantial decline in the number of new housing starts (groundbreakings). If this trend continues, it may lead to a shortage of new construction homes by 2024.

Boise Real Estate Market Summary for October 2022

• Median list price - $507,000 (up 1.02%)
• Median sold price - $499,900 (unchanged)
• Price per square foot - $306 (up 2.68%)
• Total home sales - 245 (down 174)
• Median days on market - 33 days (up 22 days)
• Available homes for sale - 2.37 month supply (up 1.15)
• 30-year mortgage rates - 6.90% (up 3.83)

Boise Metro Housing Markets by Area

• Ada County - $561,000
• Eagle - $890,000
• Garden City - $717,500
• Kuna - $466,212
• Meridian - $558,805
• Star - $625,270
• Canyon County - $434,814
• Caldwell - $389,239
• Middleton - $629,900
• Nampa - $425,000

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Information in this We Know Boise market report was obtained from the Intermountain MLS (IMLS) on November 7th, 2022. 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. Current inventory is calculated on a twelve-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 are much more volatile and can create unreliable comparisons, particularly on a month-to-month basis.