As most of us are well aware, the Idaho housing market became a madhouse of activity and competition over the last nine months. Driven by the powers of supply and demand and record-low interest rates, the local housing economy was able to defy broader economic uncertainty during one of the weirdest years our country has ever experienced. With several small changes occurring currently or on the horizon, what can we expect for buyers and sellers? Have we arrived at the peak?
Over the past year, sellers have had the luxury of leveraging an inventory crisis in their favor. This has resulted more often than not in bidding wars and dropped contingencies, all to the seller's benefit. Nobody would argue it hasn't been a fantastic time to list, but that only matters to those who want or need to move. Few homeowners have opted to sell and repurchase in the Treasure Valley, as they see the lack of options on the market and the intensity of the competition for listings. Casual upgrading has been less common as selling prices soar. Less Idahoans have needed to leave the area for work-related relocation during Covid-19. Those fortunate to already own in our beautiful state aren't overly anxious to give up that position, as tempting as cashing out might sound.
Buyers in turn have had to reconcile a growing urgency to own a home in Idaho with the difficulty of the market. Competing with out-of-state, cash-equipped buyers and the heavy presence of investors, many first-time home buyers or those needing financed have felt at a substantial disadvantage. Even regardless of budget or access to cash, the pickings have been slim for those needing to purchase. This has resulted in many wanting to postpone or relocate their home search in hopes of a better set of circumstances in another time or place.
As we enter spring, we are seeing a few factors coming together to create what we hope will be a more advantageous market for buyers, while undoubtedly remaining a seller's market. It could end up creating a window of opportunity for those on both ends of a transaction, where everyone can come away ahead.
Spring typically is when most people choose to list their homes. There are more buyers looking in the spring than the winter, so sellers often hold off on listing until this time. While this winter has been exceptional for activity and we have not seen the usual slow-down during the cold months, we can still expect there will be an increase in inventory in the spring and early summer. This could naturally result in less of a frenzy for each individual listing. Less immediate offers can keep prices from being bid up so high above asking price. While all indicators point to a continuation of the hot market, we hope for buyers' sake that the level of competition due to lack of inventory is alleviated at least somewhat this spring.
We are also seeing the expected, gradual rising of mortgage interest rates. This in no way means they are high, as a slight increase from the lowest in history still ends up a favorably low rate. But, the mad rush to purchase during the record-setting lows may be quieting some. Buyers who could only barely afford the payments at sub-3% rates may have to postpone their purchase. While this might seem like bad news, it could cause a calming in the housing market over time, making purchasing more feasible in other ways.
Idaho's hidden gem status has changed, whether long-time Idahoans like it or not. The attractive cost of living and purchasing a home here has definitely seen a shift with the population growth. Not many are thrilled to see that, but it can also result in a normalization of the market from what we've seen this past year. If Idaho is no longer a bargain, many buyers (particularly investors) will look elsewhere. We might see a steadier level of growth as a result, which most of us can agree would be welcomed.
Overall, these small changes over time can serve to help buyers have a more satisfying experience while looking in Idaho. There could be more to choose from and potential for an easier process to acquire it. Gradually, there could be shorter time frames again for new builds. Thankfully, none of these factors are inherently harmful to sellers. Although there are many indicators suggesting we will continue to see a hot housing market for at least the next two years, we may be inching toward a time when both sides are in a favorable position in Idaho. We are still expected to have interest rates in the 3-4% range for the foreseeable future, which is considered excellent for any time historically. Idaho remains a steady place for real estate long-term investment, and an excellent place to live, work, and play. Development continues at a staggering pace, which continues to strive to meet the demand. Continued growth is expected from out of state, leaving sellers with strong standing. In other words, this isn't likely to be the peak but the incline might become more manageable.
We are thinking positively for our beloved buyers, and joining everyone in wanting the best for our state long term. Time alone can tell for sure.
By Anne Gould
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