Many builders have slowed down or stopped new projects, and are just finishing what they had in the works while they wait to see what the market will do.
BOISE, Idaho— This article originally appeared on the idaho press.
On the road to Meridian’s Sky Mesa subdivision, a sign advertises new homes and large lots. A family on floats and floats crosses the street into an infinity pool.
Construction workers, contractor vehicles and portable toilets line the streets as workers lift boards over their heads. Several houses are wrapped in Tyvek behind the backyard of a newly built $1.3 million home for sale.
It’s this higher end of the market that is still moving pretty fast in the Boise area, as people who buy million-dollar-plus homes don’t have to worry about interest rates that have nearly doubled in just a few months.
But builders are holding back on other projects at the lower end of the market as buyers, with new options, take their time to shop around.
“Ironically, if you price it competitively, I see that the luxury market, which is that inventory, is actually going a little faster than some of the others,” said RE/MAX Capital City realtor Sheila Smith. “I think it’s because they’re a bit isolated.”
Deep-pocketed homebuyers can use private financing or cash, which are not as affected by rising interest rates.
Inventory continues to increase at all price points, but “we’re really moving those (luxury homes),” Smith said.
When it comes to construction, though, production builders are holding back on building homes at the lower end of the market, said Matt Weston, director of Amherst Madison-powered Weston Real Estate Services. The company focuses on the development and construction of landfills in Boise.
Many builders have slowed down or stopped new projects, and are just finishing what they had in the works while they wait to see what the market will do.
However, the increase in supply in June led to falls in home prices in Ada County, the Idaho press previously reportedd.
For example, Smith listed a condo for $315,000 this winter. Another comparable unit in the same building is for sale right now, but for $290,000, a drop of about $25,000 for similar units with the same number of bedrooms and square footage.
Some people react too quickly, Smith said, and aren’t used to being patient. Houses used to sell much faster and now, sellers think a house is overpriced because it doesn’t sell right away. But the reality is that people have options now.
Homes are on the market for an average of 14 to 30 days, Smith said. But in an even market, houses can be on the market for 60 to 90 days, she said.
“There is this kind of precipitation, which I think is part of what we’re seeing,” Smith said. “We’re seeing values drop because we’re doing all these price drops in reaction to this increase in supply.”
But affordability remains a major issue. Even if prices were to drop 10%, Smith said, with interest rates rising, buyers are being left behind. Additionally, those who want to move from their current home to their next home may have a 3% rate locked in and are reluctant to purchase another home.
“Until interest rates go down or prices go down, there are more and more people who are still priced out of the market who are Boise’s workforce,” Smith said.
Smith believes the market will correct itself. Either there will be a massive increase in rent and a corresponding increase in multi-family units, or the market will adjust lower, he said.
But right now, there are more opportunities than in the overheated seller’s market that Boise has experienced in recent years. VA loans, for veterans, and FHA loans, which require lower credit scores and down payments, are being honored. FHA loans are popular with first-time homebuyers.
“I am very happy that these buyers finally have a voice again,” he said. “I don’t think people should be scared…this is a healthier market.”
Weston agreed. He said the market has changed, but sales rate numbers show Boise isn’t too far off from where it was between 2016 and 2018.
“That might not be a bad thing,” Weston said. “I don’t know if the market was very sustainable in the last two years. Our poor local shoppers have just been hit in the last two years.”
There’s a lot of inventory in western Ada and Canyon counties, Weston said, but production home builders are also holding off on new starts in those areas. The relationship between supply and demand is changing.
Weston said builders delaying new construction hit some price points more than others, particularly the low end and the extremely high ends.
“We’re scared to do anything above $1.2 million because that market has gotten pretty weak in all areas,” Weston said. “The COVID years, those price points exploded due to low inventory and high demand and the influence of out-of-state money.”
There is a silver lining to the Boise market right now, Weston said. The market is recalibrating. The nation as a whole is short of millions of housing units. The Boise area is growing and will continue to grow and attract people.
“This is a fantastic time for our local buyers to find their homes, their dream homes and make the investment for the future five to 10 years from now,” said Weston. “This could be the window for next year.
As soon as we recalibrate and our market adjusts again, we’re going to see surges in out-of-state buyers again.”
This article originally appeared on Idaho Press, Read more at IdahoPress.com.
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