The newest sales data shows that prospective buyers in the Treasure Valley who hesitate are costing themselves dearly, with home prices up more than $36,000 in Ada County just since last month. The year-over-year data paints an even starker picture of this once-in-a-lifetime seller’s market.
Treasure Valley home prices blew past two new records in May. The median sales price in Ada County hit a record of $518,215 (up $156,000 or 43% from last year). This marks 12 straight months of pricing records and the first time across the half-million-dollar threshold. Meanwhile, Canyon County also set a median sales record of $407,225 (an annual increase of $131,500 or 48%). The county marked new price records for every month except one in the last year.
To refresh your memory, just last August, Ada County hit a median price of $400,000 while Canyon County reached $300,000. Overall, real estate prices have doubled since February 2016.
These new price records are a direct result of the valley’s continued supply shortage (a story that’s being echoed in markets across the nation). Throughout the Treasure Valley, homes are selling in mere days – a median of five days in Ada County, Boise, Nampa, Meridian and Eagle, and six days for Canyon County. Some homes are snatched up within hours.
Despite this, we aren’t seeing as many sales as you would expect given the demand. Only 940 homes sold in Ada County last month, while Canyon County recorded 515 sales. Instead of the annual sales peak we traditionally see in May, the total number of homes sold this year actually dropped from the month prior. This is the direct result of our incredibly scarce supply.
Available homes on the market are hovering at levels so low, they would’ve been unthinkable a year ago – we’re talking a little over two weeks of supply for Ada and Canyon counties. In other words, if we had no new listings from today onward, we’d run out of homes for sale in the Treasure Valley before the end of June.
The factors that have been generating high demand for the past year are still at play in the valley – low mortgage rates (currently 2.99% for a 30-year fixed) and our nationwide shift to remote work.
Local Politics May Hamstring New Treasure Valley Home Supply
On May 17, the Caldwell City Council declared a four-month moratorium on residential development. The new rule suspends review and approval of all residential plats, new planned developments, new residential land annexations and new residential special use permits – exactly the kind of permissions you’d need to build new homes.
The unusual move was prompted by a new state law that could impact cities’ abilities to tax new development to pay for public services.
While this moratorium is well-intentioned, it will negatively impact new housing supply in Caldwell, and potentially the greater Treasure Valley if cities like Meridian and Nampa follow suit (which they’re considering). It translates to fewer new properties coming online and potentially higher prices for homebuyers and renters.
It’s also worth noting that much of what we’re seeing in the Treasure Valley is playing out across the nation – home prices across the U.S. have skyrocketed thanks to limited supply, record-low interest rates and increased buyer demand.
Existing U.S. home prices have increased by 19.1% over the last year, according to the National Association of Realtors. Yet thanks to the same supply constraints we’re seeing locally, total homes on the market declined by nearly 30%, driving home sales down for the third consecutive month.
There’s not a lot of hidden inventory in the Treasure Valley – in other words, there aren’t a huge number of sellers who are still “waiting it out” to list their homes. This lack of existing stock, exacerbated by our population boom, has caused demand for new construction to soar (as well as construction-related costs).
For instance, in the first half of 2017, newly built homes made up 25% of Ada County home sales. In 2021, it shot up to 36%. Yet even that sizable increase hasn’t come close to meeting demand and isn’t likely to for some time. Builders' lots are scarce, lumber prices have tripled in the past year and we’re experiencing a labor shortage.
In many neighborhoods, the starting price for homes is now $400,000. And yet, homes continue to reliably sell above their listed sales price, which is why each month we see our inventory become less affordable to the average buyer.
At What Point Does Affordability Come Into Play?
In Ada County, the typical home currently costs a little less than eight times the median income. An income/home price ratio that is in line with Denver and Seattle.
Given our current mortgage rates, lenders generally say that a mortgage balance over four times median income is a stretch for most people's monthly budgets. At today's prices, affordability is stretched, to say the least.
But in our current situation, the housing supply is so constrained that we have many more buyers than homes to buy, which continues to push prices up. Theoretically, this cycle could go on indefinitely – just ask anyone who lives in Silicon Valley or any other major metropolitan area.
However, at our current rate of appreciation, Ada County's median home price will be approaching the mid-$600s, or ten times local median incomes by this time next year. That may just be more than our local market can bear – i.e., what most buyers, with local incomes, can afford.
While that's not a guaranteed outcome, it's a possibility. If that happens, a correction in prices is more than likely – but how dramatic a correction we'd experience remains to be seen.
Boise Real Estate Market Summary for May 2021
- Median list price - $471,240 (up 38.6%)
- Median sold price - $484,100 (up 42.4%)
- Price per square foot - $297 (up 40.58%)
- Total home sales - 407 (down 46)
- Median days on market - 5 days (down 2 days)
- Available homes for sale - 0.53 month supply (down 0.65)
- 30-year mortgage rates - 2.96% (down 0.27)
Boise Metro Housing Markets by Area
Median sales price:
- Ada County - $518,215
- Eagle - $820,114
- Garden City - $415,000
- Kuna - $441,725
- Meridian - $530,450
- Star - $525,000
- Canyon County - $407,255
- Caldwell - $382,900
- Middleton - $470,000
- Nampa - $400,500
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 June 4th, 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.