BOISE, Idaho — This article originally appeared in the Idaho Press.
On the way into Meridian’s Sky Mesa subdivision, a sign advertises new homes and large lots. A family with floats and pool noodles crosses the street to an infinity pool.
Construction workers, contractor vehicles and portable toilets line the streets as workers lift boards over their heads. Several homes are wrapped in Tyvek behind the backyard of a newly constructed $1.3 million home for sale.
It’s this higher end of the market that is still moving pretty quickly in the Boise area, since people buying million-plus-dollar homes don’t have to worry about interest rates that have nearly doubled in a few months.
But builders are holding back on other projects in the lower end of the market as buyers, with new options, take their time looking and buying.
“Ironically, if you price it competitively, I’m seeing the luxury market, which is that inventory, to actually be going a little bit more quickly than some of the other ones,” RE/MAX Capital City Realtor Sheila Smith said. “I think it’s because they’re a little bit insulated.”
Homebuyers with deep pockets can use private financing or cash, which aren’t as affected by rising interest rates.
Inventory is still rising in all price points, but “we’re actually getting those (luxury homes) moved,” Smith said.
However, on the construction end, production builders are holding off on building homes in the lower end of the market, said Matt Weston, principal at Weston Real Estate Services powered by Amherst Madison. The company focuses on infill development and construction in Boise.
Many builders have slowed down or stopped new projects, and are just finishing up what they have going on while they wait to see what the market will do.
However, rising supply in June led to drops in Ada County home prices, the Idaho Press previously reported.
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 feet.
Some people are reacting too quickly, Smith said, and aren't used to being patient. Homes used to sell much more quickly and now, sellers think a home is overpriced because it doesn’t sell immediately. But the reality is people have choices now.
Homes are sitting on the market for an average of 14-30 days, Smith said. But in an even market, houses may be on the market for 60-90 days, she said.
“There’s this kind of jumping the gun, which I think that that 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 increased supply.”
But affordability is still a major issue. Even if prices dropped 10%, Smith said, with the increased interest rates, buyers are coming out behind. Plus, those who want to move from their current house into the next one may have a rate locked in at 3% and are reluctant to buy another home.
“Until interest rates come down or prices come down, there are more and more people that are still priced out of the market that are Boise workforce,” Smith said
Smith thinks the market will correct itself. Either there will be a mass increase in renting and a corresponding increase in multifamily units, or the market will adjust down, she said.
But right now, there are more opportunities than in the overheated seller’s market Boise has experienced the last few 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’m so happy for these buyers to finally have a voice again,” she said. “I don’t think people need to be frightened … this is a healthier market.”
Weston agreed. He said the market has changed but numbers for sales rates show that Boise is not too far off from where it was from 2016-2018.
“That might not be a bad thing,” Weston said. “I don’t know if the market was very sustainable the last couple years. Our poor local buyers have just been hammered the last couple years.”
There’s a lot of inventory in western Ada and Canyon counties, Weston said, but production home builders are holding off on new starts in those areas as well. The supply-and-demand ratio is changing.
Weston said builders holding off on new construction affects some price points more than others, particularly the lowest end and the extremely high ends.
“We’re afraid to do anything over $1.2 million because that market has softened quite a bit in all areas,” Weston said. “The COVID years, those price points exploded because of the low inventory and high demand and the out-of-state money influence.”
There’s a silver lining to the Boise market right now, Weston said. The market is recalibrating. The nation as a whole is missing 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 five- to 10-year future,” Weston said. “This could be the window over this next year.
Soon as we recalibrate and our market tightens right back up, we’re going to see surges of out-of-state buyers again.”
This article originally appeared in the Idaho Press, read more at IdahoPress.com.
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