Decline in Boise Housing Market Leads the Nation, Closely Followed by Utah Markets
The U.S. housing market is currently experiencing a divergence in real estate trends, with prices rising in the East while many areas in the West face a decline.
During the pandemic housing frenzy, the West became the epicenter as low interest rates and remote work opportunities enticed homebuyers looking for affordable, larger homes. However, as mortgage rates increased due to the Federal Reserve’s efforts to curb inflation, the West was the first to witness a dip in home prices, while eastern markets gradually rebounded.
Among the 100 largest U.S. housing markets, one particular city in the West has been severely impacted, leading the nation with the largest year-over-year decline: Boise, Idaho.
According to a recent analysis of the Freddie Mac House Price Index, Boise experienced a negative year-over-year price shift of 10.5% in June, marking a significant drop from the peak in June 2022.
Boise was among the first cities to observe a decline in home values, as indicated by Zillow’s Home Value Index. In August 2021, the city experienced a slight seasonally-adjusted dip of -1.2%, with the average home value decreasing to $515,432 from $521,690.
Prior to the national housing market correction, Boise attracted attention as one of the most “overvalued” housing markets, according to housing researchers at Florida Atlantic University. Moody’s Analytics also identified Boise as the nation’s most “overvalued,” stating that home prices in the city were approximately 72% higher than their market value based on fundamentals. In July 2022, Boise had the highest share of sellers reducing their prices, with nearly 70% of homes on the market experiencing price drops.
As prices started declining in Boise, Fortune characterized it as an “early-inning housing bust,” emphasizing that markets deemed “bubbly” were also at high risk of experiencing home price corrections. These markets also witnessed a surge in inventory levels as homebuilders in Boise rushed to meet demand but later reduced prices when interest rates surged, causing potential buyers to scatter.
Boise, Idaho, experienced a decline in housing prices amidst the double-digit year-over-year growth seen during the peak of the pandemic housing frenzy. In August 2021, the typical home value in Boise reached $506,201, reflecting an impressive 45% increase from $349,505 in 2020, as reported by Zillow’s index. Similarly, Zillow noted that in July 2021, home prices in Boise were up by over 47% compared to the previous year.
A couple of markets in Utah, Ogden and Provo, also observed significant price declines of 3.8% and 3.5% respectively, according to the Freddie Mac House Price Index. While Boise seemed to be at the forefront during the housing rush caused by the pandemic, Utah closely followed suit. The state experienced rapid growth and surged prices, only to witness a subsequent tapering effect.
Salt Lake County, Utah’s most populous county, saw a staggering 60% jump in median single-family home prices from March 2020 to May 2022, reaching a peak of $650,000, as reported by the Salt Lake Board of Realtors. However, a market correction eventually occurred, resulting in a median home price drop, reaching a low point of $535,700 in January, marking a reduction of over 17%.
Since then, prices have begun to climb once again. In June, the median single-family home in Salt Lake County sold for $600,000, reflecting a modest decrease of almost 8% compared to the previous year but a notable 12% increase from January.
In contrast to the West, Eastern markets experienced a more subdued impact from the pandemic-induced housing frenzy and subsequent market adjustments. These markets were the first to slowly recover despite higher interest rates, while the Western markets continue to adapt to new realities.
Aside from Boise, several other markets saw significant price declines, including Austin (-10.2%), Phoenix (-6.5%), Honolulu (-5.1%), Las Vegas (-5.0%), Ogden, Utah (-3.8%), Stockton, California (-3.7%), Provo, Utah (-3.5%), Sacramento (-3.5%), and Spokane, Washington (-3.3%), as reported by Fortune.
The West and its housing markets are particularly sensitive to interest rates, primarily due to the concentration of rate-sensitive industries, especially the tech sector. Additionally, the elevated home prices relative to local rents and incomes render these markets more susceptible to price corrections resulting from mortgage rate shocks, as mentioned by Fortune.