Boise, ID

Paradox in Boise: Local Buyers Can’t Afford the Escalating Home Prices

Stuart Gustafson
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One might think that an increase in housing prices would be a good thing. After all, as the value of your home goes up, you have more equity that you could access through a re-finance, a home equity loan, or a home equity line of credit, commonly referred to as a HELOC. And with interest rates remaining at historic low levels, borrowing money is easier than ever.
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While housing prices are escalating in Boise, Idaho, at rates faster than most of the country, it is the local who are feeling the brunt of the higher prices. The growing supply of new construction has not kept pace with the influx of new residents to the Treasure Valley, as the area in and around Idaho’s capital called is called.

I spoke with one real estate agent who only wanted her initials used, L.B. She said that “business as bad,” while adding, “even locals selling a home at higher prices are having a tough time affording a newer home. They are being outbid by out-of-staters.”

I don’t know who is buying the homes near me, but two homes recently went on the market and then had a PENDING SALE sign up within a couple days. The homes are sixty-year-old one-owner homes listing at $265 - $315 per square foot! And I’ve seen some new construction, 1,000 square foot homes on postage-stamp sized lots listing for over $300,000.

So what are would-be buyers supposed to when rents are increasing while wages remain stagnant? Unfortunately, there is no panacea unless the supply of “affordable” homes increases rapidly. But then the definition of affordable depends on who is talking. If out-of-state buyers continue their influx, with a boatload of cash from the sale of their homes, locals will not be able to penetrate the market without bidding up the prices, which, of course, leads to higher comps for the next house that goes on the market.

Well … if people can’t afford to buy a home, what about renting. Rental rates in the area have also been increasing , but this time it is more of a direct relationship between supply and demand. More people looking for apartments have driven up the demand while the supply of apartments has been slow to respond.

Even with micro apartments being built on small lots isn’t a big help. These small apartments, some at 338 square feet, have rental rates over $1,300 per month. That $1,300 per month would pay principal and interest on a $330,000 mortgage at 2.5% (even a bit higher than current rates).
Stuart Gustafson

The question then becomes why rent for the same as a mortgage payment? There are many reasons for this predicament. A person, or a small family, might have the income to afford the $1,300 per month, but not enough cash for a down payment. Or perhaps they have a bad credit history because of losing their jobs during the pandemic. Or that $1,300 is just the principal and interest; it doesn’t include insurance, property taxes, utilities, etc.
Stuart Gustafson

Living in your own home is part of the “American Dream” that should be open to everyone, although we know that will never be the case. Many of the jobs in Idaho are low-wage positions, although there are many high-paying jobs through big companies, such as Hewlett-Packard, Micron, Albertsons, Idaho Power, and many of the local startup businesses.

It would be nice if everyone who wanted to “own” a home was able to. The pride of ownership is typically reflected in the upkeep of the home and in the satisfaction that a homeowner generally displays.

But, for now, if locals want to buy a home, they need to be ready to offer top dollar -- or even more than top dollar -- to get the home of their dreams.

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Articles on Monday, Wednesday, and Friday about travel, relevant local/regional items, some finance. Always with a slant to ask you to think.

Boise, ID

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