This summertime, the living was easy for Treasure Valley home sellers. Most houses sold quickly, often after receiving competing offers—often above asking price—after a day or two on the market.
But for home buyers, the combination of record-high prices and the lowest inventories in a decade made for a tough market.
Jill Giese, a Keller Williams Realty of Boise agent who works mostly in Boise’s North End, said she preps her home shoppers for a frustrating and sometimes grueling process. “I’ve been telling buyers that the only price negotiating we’re doing right now is negotiating up,” Giese said.
The Ada County median home price—or point where half of homes sell for more and half for less—climbed to nearly $274,000 in June, up 8.7 percent from June 2016, according to the Intermountain Multiple Listing Service. The median price in Canyon County jumped 12.4 percent to $184,000 in that time as more home buyers found themselves priced out of Boise, Eagle and Meridian and looked west.
Jere Webb, an agent for Downs Realty, does most of his work in Eagle, where homes sold in June for a median price of nearly $423,000. With offers coming in fast and furious, Webb coaches his buyers to get pre-approved before making offers and to be ready to pounce when listings hit the market. The ability to make cash offers helps.
“You have to have your ducks in a row,” Webb said.
How much is the market tilted toward sellers? Giese has had buyer clients make seven or eight offers before landing a house. Meanwhile, she’s represented several sellers that received 10 or more offers on their homes.
Giese clients Nadine and Scott Carter were looking for a home with space to build a “Garage Majal,” a four-car garage that the 33-year-olds could store their bikes, beer brewing equipment, rafts, fishing gear and accessories for showing standard poodles. Nadine, a nurse practitioner at St. Luke’s Health System, and Scott, a software developer for iVinci Health, also wanted to build an apartment on top of the garage.
Nadine Carter said the couple wanted to spend less than $400,000 but found most homes in that price range needed expensive work. They wound up looking at homes priced up to $500,000 and, after being outbid on their first offer, bought a North End home after offering $20,000 more than the asking price.
“It was very frustrating because what’s available on the market is so limited,” Nadine Carter said. “Anything in decent shape is $450,000 or $500,000, where five years ago it was maybe $250,000.”
The causes for the “high market blood pressure,” are easily diagnosed, Webb said. Unlike the housing boom that led to the real estate crash in 2008, when eager builders pumped out new houses to record-high inventory levels, building dried up during the recession and was slow to return. Today, builders are crimped by high land, material and labor costs and a subcontractor shortage.
“There’s far too many people in the Treasure Valley for the housing supply,” Webb said. “For four years, we had no building. But people kept moving in, and we kept having babies.”
Escalation clauses on bids—which pledge to beat higher offers up to a price cap—have become more common as the shrinking inventory pits buyers against each other. Sellers tend to favor cash offers, giving another advantage to out-of-state buyers. Webb, who said about half of his buyers come from outside of Idaho, said he recently represented a buyer who sold a house “that could be considered a shack,” in California’s Bay Area for more than $1 million, then purchased a much larger home overlooking Horseshoe Bend for $400,000. Cash offers are simpler and quicker than bank-financed offers, especially those contingent on buyers selling another property.
The market won’t lean so heavily toward sellers forever, Giese said. Historically, market activity drops in the fall with the temperature. But Giese said larger forces are in play than merely the seasonal ups and downs.
High prices have already slowed buyer activity in big West Coast cities, she said. Giese’s colleagues around the country tell her that prices aren’t falling, but homes are receiving fewer offers than a year ago and lingering for longer on the market. That will happen here sooner or later, she said
“I don’t think it’s a bubble that is going to burst. I think it will pop slowly,” she said. “People are ignorant to real estate trends. It typically follows a five- to seven-year cycle. We’ve been recovering in Boise for six. It’s already started slowing almost everywhere around the country.”
In the meantime, Nadine Carter thinks buyers who grow frustrated after submitting several losing offers will make hasty decisions they regret.
“People will end up buying more home than they want or should buy because that’s what’s available,” she said. “That’s how you end up in trouble.”