Boise Housing Market More Likely to ‘Self Correct’ Than Crash in 2022

  • The Boise housing market was named most “overvalued” in the U.S.
  • Home prices in the area have more than doubled in the past five years.
  • But a Boise real estate market crash seems unlikely in 2022 or 2023.
  • A self-correction with slower price growth is the more likely scenario.

There has been a lot of recession talk in the news lately. And whenever that happens, we usually start seeing a lot of real estate market crash speculation as well.

Most of us are old enough to remember the Great Recession of 2007 – 2009, which was partly fueled by real estate bubbles and the resulting housing market collapse. So it’s only natural to wonder if we’re headed toward another downturn.

In theory, overheated and overvalued real estate markets like Boise, Idaho would be more vulnerable to a major downturn. But these are not normal times. While some fear that a Boise housing market crash might be coming in 2022 or 2023, it just doesn’t seem likely at this stage.

Boise Ranked as ‘Most Overvalued’ Housing Market

For years, the real estate research team at Florida Atlantic University (FAU) have been monitoring real estate markets nationwide with an eye on home values. Among other things, they maintain a list of housing markets that are considered to be overvalued when compared to underlying economic factors.

In other words, these are cities and metro areas where home prices probably shouldn’t be as high as they are, based on local wages and economic conditions.

In 99 of the 100 metro-level housing markets surveyed by FAU, rising home prices are forcing buyers to pay higher premiums. The researchers define a premium as “the amount of money above what they should be spending based on past pricing trends.”

The larger the premium, the more overvalued the real estate market.

For quite some time now, the Boise, Idaho Metro area has been considered the nation’s most overvalued real estate market, among major metros. And that’s not surprising, when you look at how much house values have risen over the past few years alone.

According to FAU Professor, Associate Dean, and real estate expert, Ken Johnson:

“For several months, Boise has been the most overpriced housing market in the US, making it the market most exposed to a turn down. Thus, it’s reasonable to expect rising mortgage rates would first slow prices and premiums in Boise.”

Other housing markets that are considered to be overvalued in 2022 include Austin, Las Vegas, Atlanta and Phoenix.

Housing Market Crash Seems Unlikely in 2022

The Boise real estate market is considered to be overvalued. But that doesn’t necessarily mean it will crash in 2022 or 2023. We would have to see some major changes for that to happen.

For one thing, supply levels would have to rise considerably from where they are right now, in order for a major downturn or crash to occur. And that doesn’t appear to be on the horizon.

During the early days of the COVID pandemic, the Boise area real estate market experienced a major influx of buyers from more expensive areas. As a result, the number of homes for sale plummeted, starting in the second half of 2020.

And while we are beginning to see some signs of inventory growth, the supply and demand situation will likely remain imbalanced for many months to come.

As of April 2022, the Boise, Idaho housing market had about a one-month supply of homes for sale. That is well below historical norms and indicates a strong seller’s market.

Given these conditions, it’s no surprise to see homes selling quickly within the Boise-Nampa metro area. As of last month, houses listed for sale in the area spent a median of just 10 days on the market. So there’s still a high level of competition among buyers in the Boise area.

Slower Home-Price Growth This Year and Into 2022

At this stage, the most likely scenario is that home prices within the Boise metropolitan area will begin to rise more slowly as demand declines. This is what economists refer to as a “self-correction.”

Inflation, higher mortgage rates, and a general sense of economic uncertainty could cool the real estate market into the second half of 2022. Meanwhile, the rapid home-price growth in and around Boise could reduce demand from buyers.

These and other factors could lead to smaller (and more “normal”) price growth in the months ahead. In fact, many housing analysts and economists have predicted this very thing.

The Zillow chart below shows the median home value for Boise, Idaho, going back several years. Two things should jump out at you. First, you’ll notice the steep acceleration of price growth that occurred during (and despite) the pandemic. You’ll also notice how prices now appear to be leveling off a bit.

Chart: Median home prices for Boise, ID | Source: Zillow.com, May 2022

Relative affordability is one of the main factors that has brought home buyers from elsewhere in the country into the Boise real estate market. But as the above chart shows, this metro area isn’t as affordable as it used to be. So we could see a decline in buyer demand going forward.

Here’s the bottom line: The red-hot Boise housing market has to cool down at some point. This could occur during the second half of 2022 and into 2023. But a full-blown real estate “crash” doesn’t seem likely at this stage. The lopsided supply-and-demand situation in the Boise area will put upward pressure on prices for the foreseeable future.

Disclaimer: This report contains predictions and forecasts that are based on current housing market conditions. Such views are the equivalent of an educated guess and should be treated as such. The Home Buying Institute (HBI) makes no claims about future economic conditions.