We Know Boise Real Estate

Mortgage Rates Skyrocket: The Impact on the Treasure Valley's Housing Momentum

Posted by Lisa Kohl on Friday, September 8th, 2023 at 6:53pm

Rising Mortgage Rates and Their Effect on the Treasure Valley's Housing Market

After a surge earlier this spring, home prices in the Treasure Valley have begun to show signs of moderating. This shift can be partly attributed to the return of pre-pandemic seasonal trends and the looming threat of rising interest rates.

From July to August, the median single-family home price in Ada County fell by $20,000, settling at $520,000. This decrease can be credited to the re-emergence of seasonal patterns and a variation in the types of homes sold during the month. Conversely, the median price in Canyon County saw a slight increase, reaching $405,000.

Since January, home prices are up 7.2% in Ada County and 2.4% in Canyon County. However, prices in both counties are still 8% lower than in August 2022.

After a slowdown last fall, homebuyers returned to the market this spring and summer. Demand has been particularly strong from entry-level and "right-sizing" buyers, both looking for similar types of properties: newer, low-maintenance homes priced below $700,000.

Despite an increase in home prices in 2023, home sales have declined. After dipping at the start of the year, mortgage rates have climbed back above 7%. Three-quarters of homeowners have rates below 4%. The thought of swapping their current lower rate for a higher one has discouraged many from considering a move this year.

Almost counterintuitively, with so many existing homeowners staying put, interest rate hikes have done more to lower supply than demand.

There are 2,334 homes for sale in Ada and Canyon Counties, fewer than during this time in 2019. Less than 60% of those are existing homes. As homeowners have pulled back, builders have rushed to fill the gap. As a result, new construction accounts for 40% of all active listings versus a historical share of less than 20%.

At the current sales pace, there is a 2.36-month supply in Ada County and a 2.19-month supply in Canyon County. Economists consider a supply of 4 to 6 months to be indicative of a balanced market, or one favoring neither buyers nor sellers. Anything less than 4 months indicates there are more buyers than available properties.

The supply of homes for sale typically peaks between late September and early October. Even with builders increasing production, seasonal trends will lead to fewer listings this fall.

Historically, home prices tended to rise in the first half of the year and drop in the latter half. Many homeowners would time the listing of their property accordingly. However, the increased demand for homes that came during the pandemic turned that relationship on its head.

Between June 2020 and July 2021, there were 14 price records set in as many months. In both years, prices peaked in December. If you had followed the old wisdom of listing in spring, you would have left money on the table.

As we've moved through 2023, there's been a return to this historical seasonal pattern, which seems to be continuing into the fall. Despite a limited supply, rising interest rates will likely keep demand muted and price increases in check for the rest of the year.

During the week ending August 17, the average 30-year fixed mortgage rate surpassed 7% for the first time since last fall. The following week, it climbed to 7.23%, the highest rate in two decades.

Homes typically go under contract 30 to 45 days before the sale closes. Hence, August sales data primarily reflects purchase decisions made between mid-June and the end of July, when rates were in the 6s.

The week of September 7 finished with a mortgage rate of 7.12%. As rates have climbed, mortgage applications have fallen to a 27-year low.

Given the rising homeownership costs, many buyers are now less willing to compromise. Increasingly cautious buyers often sidestep high-priced properties requiring significant updates or renovations.

This year's housing market is primarily influenced by people who don't need to sell a current home, first-time purchasers, and those least impacted by rising interest rates—buyers paying mainly or predominantly in cash.

Younger buyers are capitalizing on a strong job market, improved wages, and the added boost of down payment assistance from family members. In contrast, the largest buyer demographic, baby boomers, has significant cash reserves. The National Association of Realtors reports that half of older boomers make all-cash purchases when buying homes. In the Treasure Valley alone, one in four home sales is an all-cash transaction.

Considering the growing population and a decades-long supply crunch, home price growth isn't solely dependent on a return to historically low interest rates. Still, more affordable financing wouldn't hurt.

The direction of mortgage rates is notoriously difficult to predict, even for experts. In April, the Mortgage Bankers Association speculated rates would be around 5% by now. In August, Lawrence Yun, chief economist for the National Association of Realtors, suggested that rates could be anywhere from 6% to 8% by year's end. That's a remarkably broad range, considering that between 2010 and the start of 2020—from their highest to lowest points—rates never moved more than 2%.

There is usually little benefit gained from trying to time mortgage rates. If rates drop by more than 1% after your purchase, refinancing is straightforward, and the process often pays for itself. Conversely, if rates move higher, and you have been sitting on the sidelines, you will have missed a money-saving opportunity. If rates stay the same, waiting won't make a difference. And home prices generally rise, meaning you could still end up paying more.

Rather than betting on the direction of rates, you are better off focusing on what you can do, such as improving your credit score, saving for a down payment, and finding a home that fits your finances and lifestyle. Making informed, timely decisions based on your financial situation will serve you better than trying to predict market fluctuations.


Chart comparing median house sales prices in Ada County, Canyon County, and Boise, ID, from August 2022 to August 2023

Boise Real Estate Market Summary for August 2023

  • Median list price: $499,000, down $19,450 (-3.8%)
  • Median sold price: $495,000, down $14,000 (-2.8%)
  • Average price per square foot: $300 (-5.4%)
  • Total home sales: 255 (down 79)
  • Median days on market: 12 days (down 9)
  • Available homes for sale: 1.91 month supply (down 0.66)
  • 30-year mortgage rate: 7.07% (up 1.85)

Treasure Valley Housing Market by Area

  • Ada County: $520,000, down $45,000 (-8%)
  • Eagle: $870,000, down $29,975 (-3.3%)
  • Garden City: $578,500 (*fewer than ten sales)
  • Kuna: $455,000, down $32,708 (-6.7%)
  • Meridian: $500,000, down $75,000 (-13%)
  • Star: $537,500, down $62,000 (-10.3%)
  • Canyon County: $405,000, down $35,990 (-8.2%)
  • Caldwell: $388,995, down $1,505 (-0.4%)
  • Middleton: $451,990, down $105,860 (-19%)
  • Nampa: $400,000, down $39,995 (-9.1%)

Boise Real Estate Agent Lisa Kohl

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.

Email Lisa

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Select information in this We Know Boise market report was obtained from the Intermountain MLS (IMLS) on September 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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