Home ownership is one of the most important opportunities of life and it’s not going anywhere. As with any market, the housing market is subject to change, and it will continue to shift over the next few decades. With a lot of people worrying about the housing market, there is speculation about whether it will crash or slump in the last half of 2022.
It is important to know what indicators to watch as you contemplate purchasing or selling a home. One of the best indicators for predicting the housing market is by looking at what might happen in the future.
The current state of the housing market is one of slight decline. After experiencing a period of high volatility and rapidly increasing prices, the market has now reached a point where prices are flattening out, demand is seeing pressure from rising mortgage interest rates, and looming recession. This is a growing concern. The Boise/Meridian markets in Idaho are looking vulnerable to these changing market conditions, and as of this writing, it seems as though this overpriced market is headed for a downturn.
Economic Conditions
The housing market is an incredibly important part of the economy. In many ways, it’s a reflection of the overall economy. When the economy is doing well, people are more likely to have money to spend on housing with prices increasing as more people can afford to buy homes. When the economy is struggling, people are likely to be less likely to be able to afford housing and may be more likely to rent instead. This can cause the prices of homes to drop, as there is less demand for them.
There are several factors that can affect the housing market in 2022. For example, if there is an economic recession, people may lose their jobs, and as a result, may not be able to afford to buy a house. Furthermore, if interest rates continue to increase, people may be less likely to buy a house, as they will be unable to afford the monthly mortgage payments.
The future of the economy of the US, as of this writing (June 2022) is uncertain. This is already having an impact on the housing market. The rise in housing prices over the past few years has been attributed to low interest rates, strong job growth, and pent-up demand. If the further economy weakens, which it very likely will, some of these drivers of housing prices will change.
For example, if interest rates continue to rise or unemployment increases, then housing prices will absolutely decline. This could have a ripple effect on other parts of the economy, such as the construction industry, building materials, etc.
Population Redistribution
Population redistribution has affected the housing market in Idaho in several ways. In the last 2-3 years, the political environment in some (blue) states has pushed out some members of those states into the open arms of other (red) states. There is no clearer example of this with the exodus of Californians to Idaho and Texas during the Covid lockdowns. This is what led to the spike in prices in Idaho.
The math is simple: If a population influx grows more quickly than the number of new housing units built or available, it inevitably leads to an increase in housing prices and a shortage of available housing. The number of people in a city, or larger area, affects how much real estate is available and what prices people are willing to pay.
This redistribution has become tribal, and it is all related to social politics. The way state governments engage in social engineering (Drag shows in public schools, CRT, Gender Pronouns, Covid lockdown restrictions, etc.) is fueling the movement of people wanting to be around like-minded people of their “tribe”. This is not a popular topic, but there is plenty of empirical and anecdotal evidence to support the home sales spike in Idaho.
Housing Inventory
Inventory is a term used to describe the number of homes available for sale. In theory, when there are less homes available for sale than there are buyers, the market will be strong, and prices will go up. To get a good understanding of the inventory in north Idaho, be sure to check out our current market reports and Quarterly Market Analysis. These reports give you quarter by quarter stats on our inventory levels and sales stats. Great stuff.
As you likely know, the housing market is a vital part of the national economy and affects a variety of other sectors. To maintain a healthy housing market, inventories must be kept in balance. However, this can be challenging. By the last half of 2022, inventory is forecasted to increase (and has increased) in north Idaho.
There are several reasons for this increase, but FOMO (fear of missing out) is playing a large factor. Many people watched their neighbors sell their homes for substantial profits over the last two years and want to get in on the bonanza. Unfortunately, mortgage rates have doubled from December 2021to June 2022 and that has put the brakes on demand. These sellers waited too long to jump in.
When you combine the increase in the mortgage interest rates, the declining economy, and the fear that the large profits for sellers in the market is coming to an end (has ended), you can see why the inventory level of homes for sale in all price ranges is jumping 200-300%.
This shift has certainly leveled off the Seller’s Market and is signaling the beginning of a Buyer’s Market. Realtors in the area are posting price reductions every day and advising their new sellers that the days of receiving multiple offers (over asking price) in the first 24 hours on the market has come to an end.
How Interest Rates Affect the Idaho Real Estate Market
The Basics:
When interest rates are low, more people are likely to buy homes because it is cheaper for them to borrow money. Buyers can get more money for their income level; their payments will be lower, and their new house will be bigger. This increases demand for homes, which drives prices up.
When interest rates are high, fewer people are likely to buy homes because it is more expensive for them to borrow money. This decreases demand for homes, which drives prices down.
Obviously, interest rates are an important factor in the housing market. They determine the amount of money that people can borrow to buy a home, and they also affect the rate at which people can refinance their mortgages. In the first half of 2022, interest rates doubled, which has led to a decreased demand for homes and a fall in prices. Basically, the market has peaked, and prices are falling all over the place. Expect to see more of this here in north Idaho, but especially in southern Idaho (Boise, Eagle, and Meridian).
Idaho Water Regulations
The housing market in Idaho comes with a complex ecosystem. In Idaho, the big regulatory issue is… water!
In north Idaho, we live on top of a precious resource, the Spokane Valley – Rathdrum Prairie Aquifer. This is a big deal!
If you want to build your dream house in the middle of the woods and never see your neighbor, you will need a well and a septic system. Meaning, you will need to stick another straw into the aquifer… and there are only so many straws that can go in.
Also, you will need to deal with your own household waste. Meaning sewer and gray water. That requires approval of a septic system. The size of your new home, the conditions of the soil, where on your new 5 acres you want to build… all require considerations related to Water and Sewer.
You NEED to have a knowledgeable realtor helping you navigate these issues. Contact me. Also, be sure to read my article on, the Steps to Purchasing Real Estate in Idaho. This will show you all the legal steps you will need to make (hoops to jump through) and contract forms you will need to become familiar with in order to complete a real estate transaction in Idaho.
Final thoughts…
I hope you were able to get a better idea of what the housing market will look like in the next 6-12 months here in Idaho. There are many factors that could affect the market in the future, so it’s imperative to review them, one by one, when deciding whether to purchase a home.
Thanks for reading and remember: You Should Love Where You Live. Come to Idaho.
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