The supply of homes for sale in the Treasure Valley continues to rise as buyers are forced to contend with volatile interest rates.
Over the past year, Ada County home prices have risen 9.26%, while Canyon County’s are up 6.57%.
Even as prices remain well above last year’s levels, June’s sudden increase in mortgage rates sent July sales tumbling by one-third from the same period a year ago. While that is a notable decline, it appears to be more a result of recent interest rate fluctuations than a long-term trend.
Since the end of May, mortgage rates have bounced from 5% to over 6% and back again. At one point in June, rates rose 0.55% in one week, the biggest seven-day surge since 1987.
As you would expect, that's taken affordability and demand on a roller coaster.
More recently, mortgage rates have dropped below 5%, offering a lifeline to buyers and coaxing some off the sidelines.
Median days on market, or the amount of time listings remain for sale before receiving an acceptable offer, are up from the record lows seen this time last year but remain in line with the two weeks seen in 2020.
At the beginning of August, months' supply of homes for sale rose to 2.81 in Ada County and 2.74 in Canton County, both of which are up 20% from the beginning of July. Economists consider 4 to 6 months of supply to be a "balanced" market, which favors neither buyers nor sellers.
While we are still technically in a seller’s market, this is the most balanced supply we have seen in six years. Before now, we have simply been in degrees of extremes strongly favoring sellers.
The additional supply has benefited buyers, who now have more choices and the newfound ability to negotiate as the Treasure Valley transitions to a more balanced market.
- The median single-family home price in Ada County rose to $589,990, increasing $49,990 (9.26%) from 12 months ago.
- Canyon County ended the month at $441,995, up by $27,245 (6.57%) from this time last year.
- In Boise, the median price grew by $40,000 (7.58%) from the year before to $525,000.
- With a home price of $596,900 in July, Meridian prices have risen by $56,905 (10.54%) over the last 12 months.
- Rising by $48,157 (5.93%) year over year, Eagle finished the month at $859,950.
- A Nampa home’s cost rose to $437,107, with an increase of $12,207 (2.87%) in the past year.
There is more buyer demand in the market than you would think by reading some of the recent headlines. However, there is not demand for every home at any price.
The most sought-after homes are those that offer something special—the view, location, condition, or something equally appealing. If it's unique, it will command a premium.
With so many sellers still shooting for the stars, just pricing at the market value also encourages quick sales.
The biggest decline in demand has been for entry-level new construction and cookie-cutter resale homes, particularly in neighborhoods that combine the two.
Even so, it's not that people have decided that they don't want to own homes anymore; it's that they are struggling to justify (or afford) the higher monthly payments that come with higher rates.
When you saw a slowdown in buyer demand in the past, it usually started at the top, the highest-priced part of the market, and worked its way down. Now, due to inflation and rising interest rates pressuring budgets, demand is slowing at the lowest priced part.
Currently, we see less of a shift in people's priorities away from homeownership and more of a struggle with affordability and a strong desire not to overpay.
How Shifting Mortgage Rates Create a Roller Coaster of Demand
In the first four months of 2022, a lot of demand was created from buyers trying to get ahead of higher interest rates. People know that you can always refinance to lower your payments, but if you miss out on a low rate by failing to act, it may be gone forever.
In the last few months, there has been a clear ebb and flow in demand tied to mortgage rates. As rates rise, buyers pull back, and as rates fall, demand picks back up again. It's not too surprising once you consider the fact that even a 0.25% rate change can have a meaningful impact on affordability.
Between the end of May and mid-June, the average mortgage rate surged by 1%, reducing the typical buyer's purchasing power by more than $60,000.
Mortgage rates that jump practically overnight have an immediate and significant impact on affordability, and thus, purchases. For some potential homeowners in recent months, that even meant being forced to back out of contracts. Others simply don't want to pay more per month than they would have had to the week before, so they try to wait it out.
Mortgage rates have rarely been so volatile or risen so quickly. There will be ripples, and this impact is part of why supply jumped so quickly between May and July.
The housing market can handle 5–6% mortgage rates, which are still well below the long-term averages, but we will still face some disruption in the near term.
The Inventory Rise Is Likely to Reverse Heading Into Fall
Some national articles referencing Boise make it sound like an undiscovered sleepy little town before the pandemic began and a place where homes were low-priced and easily affordable on any salary. Then, in the last two years, we benefited from the “Zoomtown” effect of mass inbound migration as we were finally discovered by the work from anywhere crowd.
While historically low mortgage rates and a change in people's priorities around homeownership helped supercharge our market in 2020–21, we have been dealing with rapid growth and a housing shortage for many years.
With 130,000 people moving to the Treasure Valley in the last decade, we remain significantly underbuilt. Even though we will likely see lower buyer demand in the next few years compared to the previous few, our area's supply challenges won't improve anytime soon.
This summer, we saw seasonal trends and some one-off situations that sharply boosted our inventory, which won't likely be repeated.
In addition to erratic rates, there was a surge in listings from sellers trying to time the market.
Seeing headlines about the rising rates and reading about the weakening demand, sellers rushed to get their properties listed before it was too late. This summer, every experienced real estate agent in the Valley got a call from a panicked seller worried about missing the top.
Rising rates also create a strong incentive for people to stay put. Many homeowners are already locked into low-interest rates. They will be reluctant to give those up to buy a new home. When "move-up" sellers postpone their move, it further reduces the supply of lower-priced homes.
Signs of a Sustained Slowdown Remain Elusive
If there is one data point to pay attention to, it's months of supply. Typically referred to as "months' supply," it tells us how long in months it would take to exhaust the current inventory of homes for sale if no new homes are listed.
Many other metrics are more backward-looking. They tell you where we've been. But supply is one of the best predictors of where we are headed.
So far in 2022, the supply has been increasing. The summer and historical seasonal trends are telling us that supply will continue to grow in the near term, likely peaking in September or October and then heading lower.
There has already been a noticeable slowdown in new listings. In July, the number of newly listed homes declined 13% from the same month last year and 24% from June.
In the last couple of weeks, we’ve seen a rebound in demand as more choice and declining rates, now below 5% for the first time since April, pull buyers off the sidelines and bring some new people into the market.
It's all in the numbers. They are telling us that the days of double-digit price appreciation are over, but they aren't forecasting sustained price declines. This looks and feels like a typical late summer market (before COVID-19) in the Treasure Valley, albeit with a little more fluff in listing prices.
If there is a noticeable rise in local unemployment, there might be a sustained drop in demand for homes, but we are just not seeing it yet.
You can expect interest rates to continue to rise and fall, at least in the short term. If you are planning to buy, the best things you can do are be prepared and know your options. There are good deals out there if you know where to look, including for financing.
For sellers, it's important to remember that 2020–2021 was a once-in-a-generation market, and we are not there anymore. Buyers have a lot more to choose from, and they will not overpay. They don't have to.
Boise Real Estate Market Summary for July 2022
- Median list price - $540,000 (up 13.56%)
- Median sold price - $525,000 (up 7.58%)
- Price per square foot - $326 (up 8.30%)
- Total home sales - 295 (down 116)
- Median days on market - 13 days (up 7 days)
- Available homes for sale - 2.58 month supply (up 1.61)
- 30-year mortgage rates - 5.41% (up 2.54)
Boise Metro Housing Markets by Area
- Ada County - $589,990
- Eagle - $859,950
- Garden City - $582,500
- Kuna - $471,000
- Meridian - $596,900
- Star - $604,885
- Canyon County - $441,995
- Caldwell - $424,592
- Middleton - $506,582
- Nampa - $437,107
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 August 5th, 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.