Treasure Valley home price growth continues to slow as volatile mortgage rates keep buyers on their toes, suppressing demand.
Ada County home prices rose 6.5% from a year earlier, while Canyon County prices gained 7.4%. While below the double-digit price increases we have become accustomed to in the last few years, 6-7% appreciation rates are above the Treasure Valley's long-term average.
Continuing the volatility we saw this summer, the average 30-year fixed mortgage rate increased to 5.89%—the third increase in as many weeks. Rates reached 5.81% in June before declining to 4.99% at the beginning of August.
Record low mortgage rates have been a significant driver of the demand we have seen since the beginning of the pandemic. Population growth, a shift in priorities around homeownership, and a supply crisis that goes back at least a decade have been a recipe for the surging home prices.
In 2022, affordability gains from low interest rates reversed. That combination of higher home prices and rising mortgage rates have squeezed some buyers out of the market this year. The result has been slower price gains, slower sales, and rising inventories.
While the Treasure Valley housing market has seen a slowdown since spring, we haven't yet seen a genuine downturn. We've transitioned from a market of extremes to one of more equilibrium.
We are still technically in a slight seller's market; however, the pressures buyers face from rising rates constrain demand and make it feel more balanced.
In August, the market showed signs of finding its footing with a notable uptick in home viewings and open house traffic, as moderating rates and more choices pulled buyers off the sidelines.
Months' supply of homes for sale began September at 2.93 and 2.83 in Ada and Canyon counties, respectively. Inventory has risen since 2021, albeit from record low levels.
As we enter fall, the supply of available properties is showing signs of leveling off, with the number of newly listed homes for sale declining for the second consecutive month. New listings are also below what we saw at this time in 2021.
We'd usually expect to see a seasonal shift this time of year, generating fewer listings, but this goes beyond what is typical.
In spring, the number of newly listed properties spiked, as many sellers noticed that price gains were beginning to slow.
Since then, the number of new listings has steadily declined, suggesting few potential sellers may be waiting on the sidelines. With the majority of homeowners locked into mortgage rates below 5%, even below 4%, this isn't likely to change anytime soon.
- Ada County's median home price finished the month at $565,000, increasing $34,500 (6.50%) from August 2021.
- In more affordable Canyon County, the median home price rose to $440,990 for a year-over-year gain of $30,490 (7.43%).
- Declining $1,000 (−0.20%) to $509,000, home prices in Boise have remained essentially unchanged since last year.
- The cost of a typical Meridian house rose $35,010 (6.48%) to end the month at $575,000.
- Eagle's home price declined to $899,975, falling $7,346 (−0.81%) from last August.
- Benefiting from buyers' focus on affordability, Nampa home prices rose $34,995 (8.64%) from the previous year to $439,995.
Seller Overpricing Generates More Price Cuts—and Buyer Apprehension
We are still seeing many new listings being overpriced. It's as if sellers had been closely following the market until April but have ignored everything that has happened since. Home prices aren't up 15%–20% from last year, yet sellers continue to price their properties like they are.
Homes nearly identical to those selling for $500,000 last summer are being listed for $600,000—the equivalent of a 20% increase in the asking price. This overpricing leads to price cuts and increases the time it takes for these homes to sell, which often end up selling for less than homes priced right to begin with.
Sellers usually take 6 to 9 months to adjust to changing trends in the housing market, so while it's unsurprising to see, it's counterproductive to their cause.
Overpricing and the resulting price cuts create a lack of urgency and apprehension among buyers who think if houses are overpriced, why rush to buy? Already stretched budgets combined with economic uncertainty and the idea that price cuts will lead to cheaper homes can create a wait-and-see attitude among buyers who ignore the most overpriced properties.
On the flip side, overpricing creates more demand for homes priced correctly. There isn't a lack of buyers; we continue to see what you expect in a slight seller's market: realistically priced properties selling quickly.
The New Construction Market Tips Toward Buyers
Since late 2020, builders, worried about underpricing their listings due to rising labor and material costs, have been waiting until a home is complete or nearly complete before listing it. Traditionally, builders prefer having a buyer lined up much earlier in the construction process.
As nervousness around rising interest rates and the frenzy we have seen over the last couple of years subside, builders have started to list sooner in the process. In some cases, this occurs even before home construction begins. The result is a "new" supply of homes coming to the market just as higher rates curtail excess buyer demand.
Apples to apples, new construction homes are priced at a 10-15% premium to existing homes. Now that people are seeking value, builders who had been requiring people to bid on homes nine months ago are now chasing buyers.
The Treasure Valley is still significantly underbuilt. Local builders hampered by supply chain constraints and labor shortages have made little headway in filling in the gap over the last few years. However, there is more new construction on the market and in the pipeline for 2022 than there is demand.
While the most coveted homes will continue selling with little discounting, there are some great new construction deals if you know where to look and are willing to close by year-end.
As Seasonality Returns, It's a Race Against the Clock
Continuing into the second half of the year, volatile interest rates, seasonal trends, and sellers adjusting to the fact that they can no longer dictate prices will lead to sluggish sales and homes remaining on the market for longer than usual.
As well as a potential new surge in mortgage rates is another wild card: Sellers may wake up to the fact that we are entering the slowest time of year—late October through early January. With less demand than there are homes for sale, sellers could get realistic about values and focus on what their properties are worth today instead of fixating on what they may have been worth six months ago.
With a flood of "priced to sell" markdowns, year-over-year price gains could drop to zero or even go negative. How likely this is to happen remains to be seen. If supply remains constrained and mortgage rates head lower, many resale sellers can pull their properties off the market and relist them in spring.
Conversely, many builders must sell and don't have the same flexibility to wait it out—again, leading to new construction discounts.
The events of the last few years, namely increased affordability from lower interest rates and people prioritizing homeownership, pulled some buyer demand from future years. The result will be lower home price appreciation going forward than we have been used to.
While there will definitely be bargains this winter, as we head into 2023, a drought of resale listings and a slowdown in new home construction that began in May will likely keep supply in check.
Boise Real Estate Market Summary for August 2022
- Median list price - $518,450 (up 3.17%)
- Median sold price - $509,000 (down 0.02%)
- Price per square foot - $317 (up 2.26%)
- Total home sales - 334 (down 84)
- Median days on market - 21 days (up 14 days)
- Available homes for sale - 2.57 month supply (up 1.46)
- 30-year mortgage rates - 5.22% (up 2.38)
Boise Metro Housing Markets by Area
- Ada County - $565,000
- Eagle - $899,975
- Garden City - $390,000
- Kuna - $487,708
- Meridian - $575,000
- Star - $599,500
- Canyon County - $440,990
- Caldwell - $390,500
- Middleton - $557,850
- Nampa - $439,995
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 September 6th, 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.