Where is the Boise real estate market headed in 2019? In a nutshell - a move to a more balanced market.
First a quick recap of what’s happened over the last twelve months:
- Boise area home prices jumped nearly 20%, with most neighborhoods showing flat or declining inventory.
- Construction of new homes increased a bit but not enough to offset the high demand we saw from buyers.
- Mortgage rates have risen from 3.92% to 4.87%, an eight-year high.
Price Appreciation Slows
Home values in the Boise area have been outpacing the national average since 2011. The double-digit appreciation we have seen over the last year will be a thing of the past in 2019.
The combined effect of higher home prices and higher mortgage rates pushed Boise metro home affordability to a ten year low in 2018. More expensive real estate means fewer qualified buyers and ultimately lower demand.
While correctly priced, 'move-in ready' houses are still selling very fast, the bidding wars and the buyer contingency waivers of 2016 and 2017 won’t continue.
We are going to see something we haven’t seen for a while — a Boise housing market that gets a little tougher for both buyers and sellers.
Plateauing Demand Leading to a Rising Supply of Homes for Sale
Over the last four years, we have seen demand far outstrip supply. There has been more and more demand for fewer and fewer homes.
As of October, the number of homes for sale had declined on a year over year basis for 49 months in a row. In November that trend reversed.
Even a slight reduction in demand could lead to a 30% to 50% increase in inventory in 2019. While that may sound like a lot, it isn’t. That won’t even get us back to 2017 levels. In other words, supply is so low it has nowhere to go but up.
While homes may take longer to sell in general, most of the increase in supply will be at the highest price points offering little relief first-time home buyers.
Housing Costs Will Continue to Escalate Reducing Affordability
Home prices and financing costs will continue to rise, albeit at a slower pace.
Many market predictions put mortgage rates somewhere between 5.5 and 6 percent by the end of 2019. The reality is, no one really knows where interest rates are headed in the short term, but in the long run, they are likely headed higher.
Rates impact monthly payments which in turn affect purchasing power. A house that would have cost you $270,000 a year ago will cost $323,000 today. At the same time, the mortgage payment went from $1,149 to $1,530.
No matter what happens to mortgage rates and home prices, there are few scenarios that will result in more affordable housing over the next 12 months.
Ongoing Demand From Out of State Buyers
It’s looking like 2018 will turn out to be a record-breaking year for inbound migration to the Treasure Valley.
For years Boise has been seen as a bright spot in western states. A place where people can escape unaffordable housing, high taxes and a diminishing quality of life. There are no signs of that perception changing anytime soon.
All else aside - for someone that's living in California and bought their house ten years ago for $350,000 and can turn around today, sell that same home for $700,000 and pay cash for a newer, nicer, larger house in Idaho, that's pretty tempting.
Many of the factors that are considered harmful for housing values at a national level are encouraging inbound migration to the Boise area. This, in turn, is leading to more demand and in turn higher home costs locally.
The Seller's Market Will Persist With (slightly) More Realistic Pricing
We have seen a 20 percent increase in price cuts over the previous six months. Not because values are falling (prices are at near record highs), but because sellers are still expecting to get $15,000 more than the identical house down the street fetched last week.
Pricing high and waiting for the market to catch up won’t work anymore.
In 2019 we will trend towards a more balanced market due to higher housing costs, not a meaningful increase in supply.
Unless we see a significant shift in the economy, there's no sign of a buyer's market in the near future.
We will still be in a seller's market, it just won’t be the crazy market we have seen over the last few years. Home values will continue to appreciate, only not at the double-digit rates. There will still be plenty of demand from buyers, but higher prices and lower affordability will make it even tougher for first-time buyers. People will continue moving to the Boise area; there will just be a little less demand at the highest price points.
Boise Real Estate Market
- Median list price - $299,900 (up 20.01%)
- Median sold price - $299,900 (up 19.96%)
- Price per square foot - $178 (up 11.54%)
- Total home sales - 395 (down from 441)
- Median days on market - 15 days (up 1 day)
- Available homes for sale - 1.17 months supply (down from 1.23)
- 30-year mortgage rates - 4.87% (up from 3.92%)
Housing Markets by Area
Median sales price:
- Ada County - $323,000
- Eagle - $455,680
- Garden City - $212,545
- Kuna - $263,995
- Meridian - $345,000
- Star - $340,000
- Canyon County - $218,900
- Caldwell - $197,000
- Middleton - $250,000
- Nampa - $214,900
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Information in this market report was obtained from the Intermountain MLS (IMLS) on December 8th, 2018. 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.