Located near the foothills of the Rocky Mountains, Boise, Idaho consistently ranks highly among other metro areas for its quality of life and fast growth. Boise is a hub for many industries and a growing tech sector has helped boost the small city’s economy.
But like many areas of the U.S., the Boise housing market experienced rapid home price appreciation, high buyer demand and a low housing supply. Consumers and homebuilders are also less optimistic about the current state of the market. While rising mortgage interest rates may push more buyers out of the market, it could give the housing supply more time to recover.
Using information from the U.S. News Housing Market Index, we’ve compiled the data you need for a better understanding of the current state of the market. Here’s what you should know about how the Boise housing market has changed in the last year and looking ahead into mid-2023.
How the Boise Housing Market Changed in 2022
Construction permits for both single-family detached homes and multifamily buildings with two or more units saw a sharp decline in 2022, based on data from the U.S. Census Bureau. Trey Langford, founder at Build Idaho, a home search resource in Boise and the greater Treasure Valley, says that builders stopped building in July as they saw the shift in the marketplace happening.
In December 2022, 221 single-family home permits were approved in Boise – a 66% decrease year-over-year. Permit approvals peaked in March 2022 with 746 approvals, down from a five-year peak of 928 the year before. In the last three months of 2022, 700 single-family home permits were approved, a decline of 62% compared to the same period in 2021, which saw 1,856 single-family homes approved for construction.
Last year saw more multifamily housing permits compared to 2021; however, there was a significant decline in permit approvals during the second half of 2022. Construction permits for multifamily housing hit a five-year peak in July 2022 with 520 unit approvals but declined almost 48% by December with only 272 approvals.
Looking at the last three months of 2022, 997 multifamily housing permits were issued, up by 10% compared to 2021, when 905 units gained approval.
Boise Housing Supply and Demand
The Boise housing supply has improved over the past two years, although it has recently declined. Housing supply refers to the number of months it would take to sell the homes currently on the market at the current listing price. Six months is typically considered a balanced market where supply and demand are about the same.
There were 2.4 months of housing supply in December 2022, which is a 1.45-month increase year over year, based on Redfin data. The U.S. national average is slightly under Boise, with approximately 2.3 months of housing supply during the same period, up 1.26 months year over year.
The improvement and recent decline may indicate a return of homebuyer interest in the Boise housing market. “Buyer demand is picking up and we are already seeing multiple offers on many properties,” Langford says. “We anticipate that supply may get tricky this spring.”
Lysi Bishop, a top-producing Realtor in the Treasure Valley, has also witnessed lower inventory but her team is seeing multiple offers on single properties in some pockets of the market.
“Typically, we see an increase in inventory in the spring. With the demand having already increased, low inventory remains an issue for us in Boise’s existing home market,” Bishop says. “We anticipate inventory to increase in spring, but to remain tight relative to the demand.”
As of Feb. 17, the Mortgage Bankers Association’s seasonally adjusted Purchase Index decreased by 18% compared to the prior week. On an unadjusted basis, the Index decreased by 4% compared with the previous week and 41% year over year. The recent jump in mortgage interest rates led to a decrease in mortgage purchase applications, which the MBA pointed out is at its lowest level since 1995. This is typically the time of year when purchase activity gains momentum, but homebuyers are now back on the sidelines
Consumer sentiment in the U.S. was 59.7 out of 100 in December, according to the Survey of Consumers from the University of Michigan. This is a 10.9-point decrease since the same time the year before. This suggests lower consumer confidence with the current state of the economy as inflation cools faster than anticipated.
Median Home Price in Boise
Buyers can breathe a sigh of relief as the median home price for single-family homes in Boise dropped to $461,000 in December, a 5% decrease year over year, based on Redfin data. However, Boise’s median home prices were well above the national median of $388,000.
“Our market in Boise saw a moderate decline in home values over the past year, but given the rapid increase in demand and subsequently in home appreciation and interest rates we saw during the COVID era, we expected a softening to take place at some point,” says Cody Hunter, strategic construction advisor at Real Estate Bees and a construction professional who specializes in the Boise area real estate market.
While home prices came down slightly, Boise rental prices went up by 2.1% in December over the last year, standing at $1,752 per month, according to Zillow Observed Rent Index data. However, rent prices peaked in August at $1,850 and are now trending downward.
Boise is the most populous city in Idaho, but population increases have been minimal. The Census Bureau’s annual American Community Survey found 295,000 households in the Boise region as of December 2021.
“For the Boise market, people don’t necessarily move here for the best home prices, they move here because of the way of life: family values, safety, adventure and freedoms are a few of the reasons people have migrated and will continue to come to the Treasure Valley,” Hunter says.
Construction costs in December in Boise were 15.4% higher than in 2021, with the U.S. Census Bureau’s Construction Cost Index rating the Boise area at 193.6. This index accounts for builders’ costs when building new homes.
Interest rates were also up 3.27% over the last year, sitting at 6.36% for a 30-year fixed-rate mortgage in December. Since then, Freddie Mac’s Primary Mortgage Market Survey increased to 6.5% for the same mortgage as of Feb. 23, 2023.
Unemployment Trends in Boise
More than 383,000 Boise residents were employed in December 2022, an increase of about 10,400 over the previous year, according to data from the U.S. Bureau of Labor Statistics.
The unemployment rate was 2.5%, a 0.2% decrease during the same time period. Boise’s unemployment rate is lower than the national average of 3.7% in December 2022.
Construction jobs are also up slightly, up to 6,700 in December 2022 from 6,400 the previous year. Over the last five years, 1,700 were added to the Boise area. Hunter notes that there’s been an influx of demand and homebuilders are back to hiring, starting new specs and resurrecting land deals or new phases of their communities.
The low unemployment rate has also contributed to a low number of delinquencies and foreclosures. Data from Black Knight shows that foreclosure activity remained unchanged over the last year in October 2022 while delinquency declined by 0.4%. At the state level, the delinquency rate was 1.6%, which is loans 30 or more days past due but not in foreclosure, and the foreclosure rate was 0.1% as of October 2022.
Builder Confidence in Boise Wanes
The National Home Builders Association and Wells Fargo Housing Market Index reported homebuilder sentiment in the Boise area was rated 25 out of 100 in December, an immense 62-point drop from December 2021 when builder sentiment was 87 out of 100.
The Architectural Buildings Index, an economic indicator for nonresidential construction activity, was rated 45.5 in December, down by two points over the last year. A score below 50 indicates a decline in firm billings from the previous month. While the current rating is lower, it’s still in line with normal fluctuations in the local market.
Boise Real Estate Market: Predictions
As we approach spring, builder sentiment may continue to weaken as consumer sentiment and construction costs continue on a downward trend. Low single-family housing permit approvals point to less development in the city, which could push the housing supply even lower. On a positive note, unemployment rates, delinquencies and foreclosures will likely be low.
The U.S. News Housing Market Index predicts that in the first five months of 2023 will see just under 2,121 single-family homes and under 1,572 multifamily housing units approved for production. Over the last year, single-family housing predictions have been higher than reported numbers; however, predictions were on the low side for multifamily housing.