Since early last year mortgage interest rates have doubled and everything has gotten more expensive, but why have home prices not just collapsed in the Boise Idaho area? Affordability conditions are the worst in many years.
Our local home prices did fall over the winter (they almost always do in the off-season), but then prices jumped 10.5% in Ada County and 8.2% in Canyon County just during the second quarter. Even after the great quarter, the median existing home price in Ada County was still down 9.3% year over year and Canyon County was down 8.2%.
Why such a small adjustment in prices in response to such major changes?
1) Nearly 30% of all homes nationwide are free & clear, no mortgage. Higher rates don't hurt them unless they move up.
2) Any homeowner who bought more than 2 years ago in the Boise area has huge equity. Ada County home prices are still 50% higher than when Covid hit 3 years ago and up 250% in the last 12 years. Most owners have massive equity that they can move to the next home. They won't need to borrow as much as new buyers do.
3) Any homeowner who bought more than 2 years ago also has a 3-4% interest rate and will be more reluctant to move to a 7% rate. This will help to keep inventory low and prop up prices for some time.
Most importantly we have low inventory- an ongoing housing shortage in SW Idaho after all the population growth. As of September, we have only a 1.5- month supply of homes based on the current pace of sales. This scarcity will support home prices until supply levels double or triple from here.
As of July 1st, our median home price of $480,800 was $66,000 below Salt Lake City, $55,000 below Reno and nearly $40,000 below Provo so why can't Boise home prices go higher? I think they will when mortgage rates settle back down.