It’s called the “Gem State” for a reason. Idaho by far has some of the most underrated markets across the country, in my opinion. One of the most notable areas within the state is the Boise-Treasure Valley market, which has become one of the most sought-after markets for home buyers and companies across the nation. Not only has the Boise-Treasure Valley market experienced a dramatic increase in out-of-state home buyer activity, many companies have expanded their operations to the market and have helped bolster an already thriving economy.
Prior to the COVID-19 pandemic, the Boise-Treasure Valley market had been creating an average of approximately 13,000 new jobs each year for the prior five years. Once the pandemic hit, the market lost a total of 25,800 jobs as of April 2020. However, based on the most recent numbers released from the Bureau of Labor Statistics (BLS), the Boise-Treasure Valley market has experienced a net increase of 1,300 new jobs as of March. The local economy appears to be healing and expanding at a rapid pace.
One of the other major contributors to the local economy has been the large number of household formations from out-of-state buyers. Thousands of people continue to move into the Boise-Treasure Valley market from other states, bringing jobs and equity with them, which is also contributing to the local economic growth, and stimulating the housing market. During a recent conversation with one of our builder clients, they noted that roughly 50% to 60% of their new-home sales were for out-of-state buyers, and most of them are either paying cash or putting down a significant amount of money on the home. According to deed record transactions, approximately 40% of all home transactions in the Boise-Treasure Valley market have been purchased with cash, which is up from 35% compared with this same time last year. This is also slightly above the average of 37% in 2011 and 2012.
As for the local housing market, it can only be described as “hot as can be.” Not only are out-of-state buyers purchasing homes, but also the local pent-up demand for housing has been surging since the recession, making homes in the market the hottest commodity around. Over the past 12 months builders have started a total of 7,446 new homes in the Boise-Treasure Valley market as of March, which is a 5% increase compared with last year at this time and up 28% compared with 2019. While not quite back to the peak levels in 2006, new-home starts are projected to surpass that peak in the very near future, provided building materials are available to allow. Annual new-home closings in the market have increased 12% compared with this same time last year for a total of 7,216. With the gap of starts and closings being only 5%, there is a very limited supply of finished available new homes on the ground for purchase.
During the process of our quarterly lot-by-lot survey of every subdivision, Zonda tracks all new homes that are under construction and those that are finished and vacant (otherwise known as spec homes). An acceptable level of under construction inventory should range between six and nine months; currently there is a 7.1-month supply of new-home inventory in the Boise-Treasure Valley market, both attached and detached for-sale homes, which is at the lower end of equilibrium. One of the most important numbers we monitor is finished vacant inventory. The number of finished and vacant homes in the market has decreased 53% compared with this time last year and currently is a 0.9-month supply. As a reference, we consider this equilibrium to range between two-and-a-half to three months, therefore the current level is extremely low. While builders have tried to deliver more finished vacant homes to the market, they have struggled because consumers are buying these homes as fast as possible.
While increasing homes sales is extremely beneficial for the overall market, one of the most significant drawbacks are finished home prices. Currently, the median price for a new home in the Boise-Treasure Valley market is $426,100, which has increased 18.4% compared with this time last year and is up 7.5% from just three months ago. While local new-home prices continue to increase and put the squeeze on affordability, out-of-state buyers continue to flood into the market as our home prices are significantly lower when compared with larger metropolitan markets across the country. It will be imperative for the market to embrace more multiuse housing projects, where builders can offer a slightly higher dense product in order to build more attainable homes for the entry-level buyers in the market.
While the Boise-Treasure Valley market may have some hurdles in the future, there is no doubt that it remains one of the strongest markets across the country in terms of housing and economic growth. The Gem State continues to live up to its name, and more people are finding out the secret behind this diamond in the rough market.
