There’s no question Idaho is growing. Fast. The Idaho Department of Labor projects the Gem State’s population will reach almost 2 million by 2025. The bulk of that growth is taking place in Southwest Idaho. The Boise metropolitan area, by some measures, has even been tabbed the fastest-growing area in the country.
The population boom is having an extraordinary affect on the area’s housing prices. It seems that every month Ada and Canyon counties are setting records in Idaho when it comes to the cost of buying a house. According to Boise Regional REALTORS®, in August the median sales price for a single-family home in Ada County soared to more than $334,000 while Canyon County’s average single-family home price reached $220,000. Both of those prices were records for the Treasure Valley.
So why are housing prices so high and what are the factors limiting the supply of homes on the market? According to the Boise Regional REALTORS®, there are few reasons.
Four trends contributing to Idaho’s housing demand
Let’s start with home prices.
It’s simple economics — the demand for housing is far exceeding the supply, meaning there are more people looking to buy than there are homes on the market. In August 2018, the month’s supply of inventory for Ada and Canyon counties was just over a month. This means that if no new homes were built, the area would run out of homes in a little more than a month, according to 2018 Boise Regional REALTORS® President Gary Salisbury. A balanced market, not favoring buyers or sellers, typically has a four- to six-month supply.
The cost to build a new home is also playing into the record numbers. In August, the market share for new construction sales in Ada County was 26.8%. Many times, newly constructed homes sell at a higher asking prices than existing homes. And as construction costs like materials, land, and labor go up, so do the sale prices for new homes. When a quarter of the sales in Ada County are new construction, the median sales price is going to take a leap.
So what about supply?
According to Boise Regional Realtors, inventory for existing homes in Ada County has been on the decline for almost four years. Salisbury says one reason is because people are staying in their homes longer. Seniors are choosing to “age in place” as opposed to selling. Others are choosing to fix their current home rather than buying new. And, those looking to downsize are watching the prices of smaller homes climb and deciding to stay put.
“Ada County is also in a state of catch-up. Builders haven’t been able to catch up with the rebound in buyer demand and population growth since the recession, due in part to limited financing and a scarcity of skilled workmen,” Salisbury said.
The rental market is also playing into the limited supply of housing. Salisbury said that during the recession, many houses were bought by investors. And because the rental market is so strong right now, those investors are choosing to hang on to those homes. There’s also a large influx of people moving into the Gem State. Because these types of buyers don’t usually have a home to sell in Idaho, the traditional “trade-up” inventory is not being created.
Finally, what’s driving demand?
It’s simple: People are moving to Idaho. The reasons are many. The strong economy is providing more employment opportunities. People are choosing Idaho as a place to retire. And, they’re migrating here from higher-priced cities because it’s more affordable. Millennials are starting to consider homeownership, and rising rents and low vacancy rates are enticing some of them to buy a home.
The increase in population coupled with the low supply of homes makes for a competitive market. Salisbury believes the market will eventually come more into balance, but says there are still houses for sale in virtually all price categories today.
“People shouldn’t try to time the market. There’s no perfect time unless the timing is right for you. When you are ready, work with your Realtor and lender to get your ducks in a row and find your next home,” Salisbury said.