Idaho's Real Estate Crunch Pumps Prices, Lumber & Labor Costs Pushing New Homes
The housing market in southern Idaho has been on a tear, with low interest rates, high demand and fewer and fewer homes for sale pushing prices to record highs in August.
In Ada County, the median sale price of single-family homes in August hit $400,000 for the first time ever; a 14% increase over last year. Increases were most dramatic in Washington and Valley counties, with median price jumps of 61% and 41% respectively.
“It feels a lot more urgent and exhausting, I guess is maybe a good way to put it,” said Michelle Bailey, President of Boise Regional Realtors.
She said even buyers with all cash offers, no inspection contingencies and an escalating bid clause — meaning a promise to outbid other buyers with better offers — have been turned down.
“[My clients] didn't get the house that they were in love with,” Bailey said. “It didn't logically make sense to them as to why, when they pulled out all the stops possible,” she said.
Different versions of that same story are happening to many buyers in Idaho.
Building a new home from scratch is more expensive than buying an existing home — $60,000 more based on median prices in Ada County this August — but it doesn’t come with the bidding wars, and buyers get to customize.
One concern, says home inspector Stan Audette, is that there’s a labor shortage of tradespeople in the construction industry. Audette owns AAD Inspection Services. When that labor was difficult to come by in the 1990s, he said, home inspections revealed a lot of mistakes.
“I think when home inspectors started adding their two-cents to the transaction,” Ardette said of that time, “builders were starting to use home inspection-type perspectives to guide them. With more training and more tradesmen paying attention to these same checklists, I think that perceptibly raised the bar a little bit, which is good for everybody.”
Audette said by 2000-2006, a good number of skilled tradespeople in the area meant fewer and fewer negative inspection findings on new homes. Then came the housing crash of 2008. Many of those skilled tradespeople bolted for other industries.
Homebuilders today are doing a good job, Audette said. But his inspectors typically have more to point out than they might have before the great recession.
“When we do home inspections on brand new homes, we're finding about the same number of issues as we would find on a home that’s, say, 10 years old,” he said.
A tight construction labor market can compromise quality, but also drives up prices. More significant price increases may be coming. The price of lumber has soared since late July, up 40% for some pieces, said Brighton Homes President Lars Hansen.
It takes about five months for a new home to go from foundation-to-finished, Hansen said. With few exceptions, he said the cost jumps on lumber hasn’t been reflected in the prices of new homes sold.
“It will probably go up about $20,000 next month just from that,” he said.
As demand persists, there seems little doubt buyers will pony up the extra cash. Bailey, of Boise Regional Realtors, says many people assume they can’t afford a home but may not factor in the impact of lower interest rates.
For example, with mortgage rates of 6.5% in August 2006, buyers could purchase a home for $260,000 with a monthly 30-year mortgage of about $1,700. Rates today are 2.94% meaning, that same $1,700 monthly payment buys a $400,000 home — even more if 14 years of inflation are factored in.
A home is the biggest purchase many people will make in their lifetime, and the thought of releasing inspection contingencies concerns many would-be buyers.
“That's a conversation that has to happen between the buyer and their realtor and understanding the pros and cons involved and understanding the house,” Bailey said.
Audette agrees that working with professionals can help make a bumpy real estate ride easier. For those deciding to build a home from scratch, he offers two pieces of advice: Ask for referrals to past clients and ask those people, “Would you have this builder build your next home?” And, make sure communication remains a priority from start to finish.
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