Boise housing market slips back into correction mode after modest spring price bump.

Boise housing market slips back into correction mode after modest spring price bump.

The Boise Housing Market: Is the Spring Rebound a Sign of Recovery or Just a Head Fake?

In the wake of last year’s rapid hike in mortgage rates, the housing market in Boise experienced a correction, resulting in a 12.8% drop in home prices between May 2022 and January 2023. However, this spring saw a 1.9% uptick in house prices from January to May, leading to a debate about whether this gain is a genuine recovery or simply a seasonal phenomenon. The recently published June reading for the Freddie Mac House Price Index suggests that Boise’s spring bounce might indeed be a head fake.

According to the repeat sales index, Boise home prices fell 0.2% in June after rising just 0.1% in May. Among the nation’s 100 largest housing markets, only three saw month-over-month price declines in June: Austin, Texas (-0.1%); Boise (0.2%); and Honolulu (-0.3%). While a decline of 0.2% may seem insignificant at first glance, a deeper analysis of the data reveals a pattern that suggests potential further declines.

Typically, when regional housing markets experience a month-over-month decline in June, it sets the stage for further declines as the housing market navigates the seasonally weaker second half of the year. Furthermore, it’s worth noting that Boise’s home prices have declined on a month-over-month basis in June just six times over the past three decades, and in all of those previous years, Boise’s home prices went on to decline in the second half of the year.

So why is Boise at risk of further house price declines? It comes down to fundamentals. Industry experts, such as Moody’s Analytics, voice concerns about Boise’s housing affordability, which has veered significantly from local economic fundamentals, even factoring in income gains. The influx of remote workers, while driving demand, has disrupted the market’s equilibrium and pushed prices beyond sustainable thresholds as of spring 2022. The sharp escalation in mortgage rates has only intensified the affordability challenge.

According to Moody’s Analytics, Boise’s housing market was 54% “overvalued” at the end of Q1 2023, down from a peak of 71% in Q2 2022 but still significantly higher than Q1 2019’s overvaluation of 28%. Being “overvalued” doesn’t necessarily mean home prices have to decline further, as historically, housing markets can remain “overvalued” for years. When fundamentals do improve, it’s often through rising incomes rather than falling home prices. However, when a market is “overvalued” by as much as Boise was during the height of the pandemic (71%), outright price declines often follow.

• SVB’s collapse hasn’t affected trust in traditional ban...
• Argentina secures $775 million loan from Qatar for IMF repayment.
• US job growth moderate in July; strong wage gains

Additionally, markets like Boise and Austin, which are considered overheated, have a relatively higher inventory. On a national level, active listings on Realtor.com in June 2023 were down 47% from June 2019 levels. However, in Boise, active listings were only down 13% from June 2019 but up 80% from June 2021. This presence of existing inventory for sale in Boise suggests that the market is more prone to experiencing price softening as the transition occurs from the seasonally robust first half of the year to the seasonally milder second half.

At the end of June, Boise’s existing home prices were down 11.2% from their May 2022 peak, but they still remained up by an impressive 44.6% since March 2020. The housing market in Boise is certainly at a critical juncture, with the aftereffects of a correction and the balance between affordability and demand. It will be interesting to see how the market moves forward and whether the spring rebound is indeed a sign of recovery or just a temporary blip before potential further declines.

Stay updated on the housing market by following me on Twitter at [@NewsLambert](https://twitter.com/NewsLambert).