The gap between median home prices in Ada County and median income has widened to a gulf over the past decade.
Between 2010 and 2020, the county’s median income increased 20 percent while median home prices ballooned 152%. The combination of high demand as people flock to the Treasure Valley from other parts of Idaho and the country and low numbers of homes on the market boosted home prices to record-breaking heights quarter after quarter for the past several years.
Idaho’s wages have grown steadily, but not enough to keep up with the rapid growth in housing prices. Starting in 2010, the median income for a family of four was $55,710, according to data from the U.S. Department of Housing and Urban Development. Now, it has grown to $67,320. The minimum wage remains at the federal minimum of $7.25 per hour.
Median home prices in Ada County just crossed the $400,000 threshold for the first time last month, according to Boise Regional Realtors. This is only roughly two and a half years after the county crossed the $300,000 threshold in March 2018. As prices have shot up, inventory continues to decline. Only 239 existing homes were on the market in August, the lowest amount available since BRR started tracking the statistic in 2006.
Record low homes on the market in August
Part of the low inventory comes from people not putting their homes on the market as often as they did before, Boise State University Associate Economics Professor Michail Fragkais said. With prices being raised through the roof, even if residents were to sell their home, they might not be able to find another open house to move to.
“People just don’t want to move at this point,” he said. “They understand they are extracting a lot of benefits from staying put, compared to where are you going to go? What other options are you going to have available?”
Potential homebuyers are not the only ones feeling the pinch. A study from Vermont-based consulting firm Burlington Associates found rents in Bosie rose 30% between 2015 and 2018. The average rent in Boise for a one-bedroom is $1,194, according to RentCafe.com. This is a 5% increase from last year.
Michelle Bailey, current president of BRR, said the current housing market is highly competitive for buyers. She described a recent situation with a client where they offered over $700,000 in cash for a home, a three week closing and a promise to exceed any other offer by $3,000, but they still were not accepted.
But despite the aggressive market, Bailey said residents should not be discouraged by the high prices and seek out a realtor to talk to about their options. She said although prices are much higher than they were a decade ago, interest rates are also much lower. Bailey said for each 1% interest rates decrease, it means residents should have 10% more purchasing power.
“I did some numbers on someone earning $55,000 a year and if I remember that was $4,500-ish a month and if you take a third of that, let’s say $1,500 for their housing costs then they can afford based on a payment a $300,000 home, which you can still buy in the Treasure Valley,” Bailey said. “I think sometimes there’s all of this conversation, but when you actually sit down and look at numbers and you look at someone’s specific circumstances there are solutions out there.”
‘It’s all connected’
Samia Islam, an associate professor of economics at Boise State University, said the growing disparity between housing costs and wages can have a ripple effect on the economy in multiple ways. She said if households have to spend more and more of their paychecks on their mortgage, property taxes or rent, they will have less money to spend at retail stores, restaurants or other purchases to drive the economy in other ways.
They will also be forced to leave areas near their jobs, social services and their neighborhood schools due to high prices.
“One of the consequences of not being able to afford housing is they are being pushed out of the area where the jobs are, so what happens to these other opportunities that are associated with that access too?” Islam said. “It’s all connected.”
This story has been corrected to reflect a decrease in interest rates results in more purchasing power, not a $10,000 increase in price the purchaser is able to afford.