Boise’s Pandemic-Driven Housing Boom Begins To Crack
Cracks in one of the nation’s hottest housing markets could be an early indication that the virus pandemic work-from-anywhere housing boom could cool as mortgage rates soar and affordability become an issue.
In a weekend op-ed, Bloomberg’s Jonathan Levin wrote, “If you’re wondering where the U.S. real estate market might start to show its first cracks, keep an eye on Boise, Idaho.”
Levin is right. During the pandemic, Boise saw a massive influx of Californians purchasing homes in the region. Now the rush could be stalling.
Zillow data shows the average home price in Boise rose just 0.4% in March, down from 4.1% in June.
“The slowdown is hitting some Western mountain towns now, but it’s also likely to catch up with Austin, Texas; Phoenix; and Tampa, Florida, among others,” Levin noted.
He spoke with Oxford Economics economist Oren Klachkin about Boise home prices being a staggering 70% over what prices are deemed affordable to the median household income in the area. Thank Californians for this bubble.
“It’s making it harder for first-time homebuyers and locals to afford houses,” Klachkin said.
The incredible pace of gains is not sustainable, and slowing demand could suggest prices will eventually reverse.
Zillow Senior Economist Jeff Tucker said the cities that experienced the largest house price gains due to migration flows would be hit the hardest in a downturn.
Last week the average 30-year mortgage rose above 5% for the first time in a decade, threatening to cool the nation’s red-hot housing market by inducing an affordability crisis.
BofA economist Alex Lin recently showed clients that housing affordability is now at the lowest level since 2007, about a year before the housing bubble imploded.
The National Association of Realtors recently estimated that 9 million homebuyers had been priced out of the market this year because of higher interest rates.
In March, we discussed the “Housing Affordability Is About To Crash The Most On Record” and “Biggest Housing Affordability Shock In History Incoming.”
We even pointed out that cracks have already shown up in overall markets as sellers reduced asking prices this spring season. There’s also a slowdown in pandemic-driven second-home buying.
Maybe mortgage rates provide some insight into what may happen next to housing prices…
Boise’s cooling may suggest some of the hottest housing markets post-pandemic could be due for a slowdown, or worse: a reversal in prices.
Tyler Durden Sun, 04/17/2022 – 21:00