With the release of our latest annual Local Leaders list—the ranking of the top 50 new-home markets ranked by closings, and the top 10 builders in each market—BUILDER takes a closer look at a few of this year's fastest-growing markets on the list. Today we focus on the sixth fastest growing area in the country, Boise City, Idaho.
There are many reasons why people are moving to Boise City, Idaho, say Katrina Wehr, president of the Boise Regional REALTORS, but in addition to the area’s low cost of living, one of its major selling points is the mostly temperate climate year-round.
The city’s housing market, though, can only be described as “hot.”
The area saw 3,814 closings of for-sale single-family and attached housing in 2016, up 95% from 1,951 closings in 2015, and Wehr says Boise is still a major sellers’ market with multiple offers on each property, especially those with asking prices below $350,000. “Our inventory is way down so prices have been going up steadily and the builders just can’t keep up with the demand,” she says.
Metrostudy regional director Eric Allen, who oversees markets in Utah and Idaho, says Boise is an up-and-coming market. “There’s a lot of good job growth, still a lot of land available,” he says. “(It’s) small but sophisticated, safe, (and) housing is pretty affordable compared to rest of the nation.”
In fact, experts predict that the entire state of Idaho will soon experience a surge of new residents. A new forecasting model suggests the state’s population will grow at three times the national rate between now and 2025 – and predicts that nearly all the newcomers will be retirees.
Young people, too, find the area attractive. The City of Trees was recently ranked No. 2 on Forbes list of America's 25 Best Cities for Young Professionals, thanks in part to its 4.2% unemployment rate.
Unlike most of the other fastest-growing markets, the most dominant builder in Boise is not a large production firm. Founded in 1992 by Corey Barton, local builder CBH Homes earned 26.7% of the market share last year with 1,019 closings. Barton says Boise is returning to its prerecession levels, but nowhere near its peak in 2005 when closings “were off the Richter scale.”
During the recession when many builders retreated, CBH took a different approach and went on the offensive. “It just seemed like things were on sale so we started gobbling up as much (land) as we could get our hands on, “Barton says. The company started buying up land in 2008 and 2009 and still has lots on its books from that time. “Because Boise is such a modest area we’ll probably have it on our books for the next 10 to 20 years,” he says of the land purchases.
That means CBH has plenty of land on which to build new homes. It focuses on entry-level and move-up homes and also started building townhomes in recent years. “Custom home building is not what we want to be good at,” he says. “So anything over a price range that allows a buyer to think that we just do custom building is (the cutoff), probably over $400,000,” he says.
The market’s second biggest builder in terms of market share, Coleman Homes (8.2%), was acquired by Toll Brothers late last year. Toll’s Group President Gary Mayo, who oversees the company’s operations in Las Vegas and Reno, Nev. and Boise, says the acquisition reflects Toll’s initiative to expand its operations further west.
“We identified different markets where we felt the markets were being underserved with a lot of potential, a lot of job growth, decent housing activity from a permit standpoint, and Boise was one of the cities on the list,” he says.
Coleman offers three product types ranging from entry-level to second move-up or luxury. Although Toll is well known for being a luxury builder, Mayo says Toll’s intent is to leave Coleman’s operation and name untouched. “All of the people are staying in place,” he says. “We’re not trying to change the housing product. The biggest thing that would change for Coleman in that market…would be access to additional capital.
“Toll is known for its luxury brand, but we are trying to diversify our product offerings with the addition of T Select in certain markets,” he adds. “This kind of seemed like a natural growth in that direction for the company.” Toll unveiled its T Select line, which offers homes at a lower price point, earlier this year.
With a public builder entering the market for the first time since the downturn, Barton says CBH’s approach won’t change, but he is anticipating even more competition for land and labor.
Of course, as competition heats up, costs will rise. One of Barton’s main concerns is passing those additional costs onto the buyer. “We’re a little bit concerned that the land market is getting overheated,” he says, which can then hurt CBH’s efforts to provide “good value for the home buyer.”
According to Barton, CBH is looking to grow its market share in the coming years and will continue to build more homes. But, he points out, if more framers or roofers start building homes, CBH’s market share will dip without it doing anything.
It’s challenging to maintain market share, he says, because “in the Idaho market you can start a home building company with just a tool belt and a dog.”