Boise Area Home Prices Edge Below Pre-Bubble Price Trend

When did the real estate bubble begin to inflate in Boise? From what the chart below shows, it began in 2004.

From 1999 thru 2003, the rate of growth for the average and median single-family-home price was steady at 5% per year. Then, in 2004, that rate jumped to 8% and 10% respectively. The bubble continued to grow until mid-summer of 2007.

This April, the average home price was $165,064,and the median price was $135,000. The first time average home prices in the Boise area past through those levels was in mid-2001. So, prices have declined to less than their natural growth path in 2003.

That’s a 40+% drop! But, that really doesn’t mean much because the price levels at the peak weren’t tethered to any economic reality. Let’s go back to the point at which price inflation showed its first effects. That would be Spring of 2003. Prices are now 8% (avg), and 9% (med) below that level.

Click on graph to enlarge

So, that’s where we’ve been, and where we are. But, where are we going, and when? The best we can do to answer those questions is pay close attention to those factors that can have an effect on real estate activity.

Employment growth. There’s no other factor that comes close to having the strength of effect of job growth. It’s a near cure-all. Re-employed home-owners on the verge of losing their homes begin to earn again, thus averting many additional potential foreclosures. The reduction of distressed sale-price homes relieves downward pricing pressure, and the market begins to find its natural price level. As a major economic indicator, growing employment has a strong positive psychological effect on the entire population. Things begin to happen, consumer spending rises, investment of all kinds picks up, and deferred home purchases become an active plan again.

Housing supply. Monthly average listings total half of what they were in 2007. There’s no way to guess the number of home whose owners sidelined their sale until the market showed signs of recovery. If the real estate market picks up quickly, and there is little shadow supply, prices could climb quickly until demand can be met.

Home prices increase. Home buyers only purchase at the bottom of the market through blind luck. The only real indication that the market has hit bottom is when prices begin to climb. That’s when buyers get busy, and demand begins to drive up prices.

We’re at a point where the odds are better for news that would move the real estate market positively rather than negatively - which is like another way of saying “we could be bouncing along the bottom”. If I were a potential buyer, I think I would be checking listings to see if that perfect house is available.

Here’s where the current activity in the market is happening:

For more data on the Boise are real estate market go to my website  http://alansmith-re.info/index.cfm and click on “Market Statistics”