Housing Shortage and Rising Construction Costs Plague Boise Market
Posted by Lisa Kohl on Friday, May 7th, 2021 at 4:24pm
Boise area home prices hit new highs in April, thanks to strong demand from homebuyers and continued near record-low supply.
If you’ve spent any time online looking for homes, or have taken a drive looking for “For Sale” signs, you’ve noticed: we are suffering from a stark lack of inventory in the Treasure Valley. This continues to limit the number of homes for sale – and help drive prices up.
While the number of available homes is slowly recovering from the height of the pandemic, total home sales remain well below levels you’d expect to see. Especially when you take into consideration that Ada and Canyon counties added 23,890 residents in the past year.
The combination of record-high prices, record growth, and near record-low sales is striking:
- The median sales price in Ada County hit $482,208 (up 29.6%) in April, marking the 11th consecutive month of new record-setting prices. Only 962 homes sold in a county with a population closing in on a half-million residents.
- Boise also reached a new record sales price of $478,500 (up 36.7%). It marked 372 home sales last month – its highest monthly total since last December.
- Canyon County recorded a median sales price of $395,450 (up 44.8%), also hitting new records in 11 out of the past 12 months. Meanwhile, only 494 homes sold in the county, despite its population of roughly 230,000 residents.
In general, the supply of homes for sale in the Treasure Valley bottomed out at the beginning of 2021, hitting new record lows. Simultaneously, demand jumped as mortgage interest rates steadily declined to all-time lows and languished there (the current rate for a 30-year fixed mortgage is 3.06%, as of May 5)
As you can imagine, this surge in demand coupled with limited supply creates a situation where homes remain on the market for far less than any time in history – a median of five days in Ada and Canyon counties, and just four days in Boise.
Boise Area Listings Are Likely To Increase Soon – But Not Significantly
Spring tends to be one of the busiest times of the year, as families scramble to move before the beginning of the next school year. In 2020, the number of resale listings declined by 33% from years past as potential sellers held off listing due to pandemic-related health and economic concerns.
While it’s doubtful we’ll see a significant increase from 2019 numbers, we’ll most likely see a seasonal bump in new listings as Covid-19 restrictions continue to loosen up and people slowly embrace their pre-pandemic routines.
- Ada County had just 392 active listings in April, or less than two week’s supply of inventory. Still, this represents a steady uptick in inventory since bottoming out last November.
- Boise only had 119 active listings in April – also less than two weeks of inventory.
- Canyon County is slowly climbing up with 294 active listings (a little more than two weeks of supply).
As you can see, for buyers, it's still a very fast-moving seller's market but it's not quite the same level of insanity we saw in 2020. Last year was unlike anything we’d ever seen in local markets – it made buying a house into an extreme sport. So while the current market is not at that level, if we could wipe 2020 from our collective memory (a common fantasy, I’m sure), the 2021 market would be record-setting.
New Construction Prices Skyrocket in the Treasure Valley
The lack of home inventory we’re seeing at all price points has sent demand for new construction up to record levels across the Treasure Valley. And like resale homes, prices are soaring.
In addition to being highly competitive, the market has changed how new construction is sold. Until recently, most builders were pre-selling homes 3-6 months before they were completed.
However, this wasn’t ideal for builders because at that stage in construction, many building costs aren’t yet cemented. Locking in a price too early could eat into their profits. And in our fast-paced market, with housing prices surging literally by the day, this also meant that builders were leaving money on the table.
So late last year, many companies changed how they do business. To recoup their building costs and lock in home prices closer to the actual market value, they’re waiting until construction is almost complete.
This tactic partly explains why prices have risen so quickly over the past few months. New construction homes that were reported as sold in January may have actually been priced last June.
As with resale homes, we should start to see more new construction inventory this summer – but it won’t be cheap.
Building Costs Also Jump, Kicking Prices Up Even Further
Complaining about the rising costs of everything used to be a leisurely hobby reserved for the elderly. “Back in my day, a quarter cost a nickel,” a grandmotherly type might say after offering you a Werther’s Original.
Not anymore. The scarcity of building lots, lumber, and other building materials are adding tens of thousands to the cost of the typical new home.
Lumber prices have tripled over the past 12 months, causing the cost of an average new single-family home to increase by $35,872, according to a new analysis by the National Association of home builders.
We’re not just talking about framing and roof trusses. Wood products in everything from flooring, to trim, cabinets and doors are pushing prices higher.
Prices for other materials, including copper and steel, have risen by double digits in the last 12 months as well. Even drywall prices are up.
Builders are coping with these rising costs in several key ways:
- Raising prices upfront
- Selling later in the construction process (as we explained above)
- Including price escalation clauses in their purchase contracts.
What is a price escalation clause? It’s a clause that gives the builder the option to renegotiate after the initial purchase contract is agreed to – even months later. Locally, around half of new construction contracts now include some form of escalation clause.
Lots and Labor in the Treasure Valley Are Scarce, Causing Major Delays
Let’s not forget that with new construction, you need a place to build. For many builders, finding an available lot in the Treasure Valley right now is like winning the lottery.
Reports show that when taking current demand levels into account, the Boise metro area has the smallest supply of residential building lots compared to most major metro areas. By our estimate, the cost of a typical building lot has increased more than 15% since last year (if you can find one).
Labor costs are also rising – again, assuming you can find qualified workers. In March, unemployment dropped to 3.3% in Ada County, which is below the 5% threshold many economists consider to be "full employment." A number of the builders we work with have said that many positions are going unfilled, even with sizable wage and benefits increases.
All of these elements continue to compound and impact Boise area housing prices. But prices aside, demand is still far outstripping supply. We’re seeing long delays regarding building permits in the Treasure Valley – especially in Canyon County. A number of large developments that were slated to become available this spring are now being pushed back 4-6 months, with many not expected to come online until fall.
Boise Real Estate Market Summary for April 2021
- Median list price - $459,950 (up 31.04%)
- Median sold price - $478,500 (up 36.71%)
- Price per square foot - $291 (up 40.58%)
- Total home sales - 372 (down 46)
- Median days on market - 4 days (down 1 day)
- Available homes for sale - 0.30 month supply (down 0.92)
- 30-year mortgage rates - 3.06% (down 0.25)
Boise Metro Housing Markets by Area
Median sales price:
- Ada County - $482,208
- Eagle - $715,000
- Garden City - $445,000
- Kuna - $416,000
- Meridian - $479,445
- Star - $490,000
- Canyon County - $395,450
- Caldwell - $370,000
- Middleton - $440,500
- Nampa - $386,640
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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Information in this We Know Boise market report was obtained from the Intermountain MLS (IMLS) on May 5th, 2021. 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.
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