The ‘boomtown’ of today: Boise is most-overvalued housing market in country, study says

·3 min read

Boise took the top spot as the nation’s most-overvalued housing market in a new study.

Researchers from Florida Atlantic University and Florida International University determined this by using Zillow data going back to 1996 to project where a local housing market should be today if it hewed to its historic trend.

Boise home prices are 80.7% higher than researchers would expect them to be based on prices of the last 25 years. Most of the 100 markets studied had higher prices than the trend lines suggested, but no other city came close.

Ken H. Johnson found that number “shocking.” Austin, Texas, the second-most-overvalued market according to the study, was 50.7% over the expected value. Third was Ogden, Utah, at 49.7%.

“Boise could perhaps be the most modern example of a boomtown,” said Johnson, a real estate economist and associate dean in Florida Atlantic University’s College of Business, who led the study.

The title comes with a warning.

“Those markets that get the most heated, that exhibit the biggest premium, have the potential to have the greatest fall in prices,” Johnson said by phone.

Johnson predicts Boise will see something of a “Goldilocks” effect. The market is too hot now and may soon get too cold as interest rates go up, before settling into a “just right” price, Johnson said.

“I would probably tell you, if you bought today in Boise and sold in 25 years, you would make out like a bandit,” Johnson said. “But if you buy today in Boise and have to sell in two or three years, you might not do so well financially.”

Jennifer Louis, a Boise real estate agent and relocation specialist with Silver Creek Realty Group, said the problem isn’t so much that Boise homes are overvalued now — it’s that they were undervalued before.

“When I moved here six years ago, home prices were so ridiculously low, it was unheard of compared to other capital cities in nice areas,” Louis said by phone.

Louis doesn’t think there will be a significant drop in prices, but she agrees that the Boise market will likely level out soon as it hits an “affordability wall.”

“I can’t see it continuing to go up as it has,” Louis said. “I think we’ve reached the limit on where home prices can go. I do think houses are going to remain flat, and there’s going to be this cooling off. It’s not sustainable for it to go up 20% to 30% like it has.”

Ada County’s median home price jumped 38.5% in the last year, from $390,000 in July 2020 to $540,000 in July 2021, according to the Intermountain Multiple Listing Service. The price has more than doubled in five years, from $243,000 in July 2016.

Boise was just listed as the 19th-least-affordable housing market in the country by RealtyHop, a property investment company.

If Johnson were to move to Boise, he would rent instead of buy until the market cools down. Then he would take the extra money he would have spent on ownership, like a down payment, taxes, insurance and maintenance, and reinvest it in stocks and bonds.

“When people do that, they tend to outperform ownership on average,” Johnson said.

Johnson said he plans to put out monthly studies on the housing market. He’s trying to bring more attention to real estate data and trends, because he doesn’t want to see people in the same situation they were in during the 2006-08 crash. He doesn’t think there will be another crash but believes “we’re clearly nearing the peak in the real estate cycle.”

“I was here in Florida during the last crash, and I was trying to tell people that we were really exposed, but I was essentially talking into an empty room,” Johnson said. “I had a number of people after the crash talk to me and say, ‘Why didn’t you say something?’ So this time around I’m trying to get more verbal.”

Sally Krutzig covers Treasure Valley growth and development. Have a story suggestion or a question? Email Krutzig at skrutzig@idahostatesman.com.

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