Destination locations, whether the beach or the mountains or other attractions, took it on the nose in the housing bubble. Those locales bubbled up more than the country as a whole, and thus had a greater distance to fall. And when they fell, think auger in. Deep.
In a recent blog I wrote about Southwest Florida – specifically Punta Gorda. In today’s installment let’s head northwest, focusing on Boise, Idaho (where I spoke two weeks ago).
Jobs are everything to an economy, and the Boise Metropolitan Statistical Area (MSA) — which is known officially as Boise City-Nampa MSA – is growing. From a jobs perspective, Boise has done well, adding 5,000 net new jobs in the prior 12 months.
The following chart illustrates the job growth in the Boise MSA based on the total number of jobs on a seasonally-adjusted basis. While the U.S. is putting up a 1.65 percent annual job growth rate, the Boise MSA notched 1.86 percent. Not a rocket launch, but at least better than the lower-gaining U.S. rate.
So goes jobs so goes housing. Jobs are everything. That said, Boise has shown a marked recovery in housing—both in the number of sales and prices. The next chart shows housing sales for Ada and Canyon County on a 12-month moving average basis. [The 12 month moving average removes much of the seasonality effect plus allows the direction of the trend to be better viewed.] Since bottoming in September 2009, sales have surged back 49 percent. While they remain significantly less than the peak in May 2006, most will admit that the peak was a level not sustainable over the long run.
Median prices peaked at $208,500 in May 2007 (a year after sales peaked – which supports my axiom that wherever homes sales trend, 12 to 24 months later prices follow). Prices hit a low of $115,900 in December 2011, and have increased each and every month since (on a 12-month moving average). The 12-month moving average median price was $164,000 in the latest month. Since the trough, Boise home prices have jumped 41.5 percent. Is this a new bubble? No, not at all since current prices are in line with historical norms and typical inflation. The change in Boise home price increase in the previous 11 years would indicate an annual compound growth rate of 3.2 percent per year (going back to 2003). The Consumer Price Index (for all consumers) in that same period grew at a compound annual rate of 2.17 percent. Hence housing in Boise, for the period from December 2003 to January 2014, outgained inflation by approximately 1 percent annually. Current prices are definitely not a bubble.
Construction is increasing at a rate, however, that should slow home price appreciation. While economists often look at 1.25 to 1.5 net new jobs per new dwelling unit as normal, in the past 12 months Boise has seen 5,000 new jobs versus 4,477 new dwelling permits issued. Is this too much new construction? At this time probably not, but anticipate a definite slowing in rent and home price appreciation.
All in, a recovering U.S. economy, and the resulting increase in hospitality demand and general economic growth, bodes well for the Boise economy and real estate markets.
Add the fact that region is a beautiful place to visit, invest and reside, points to continuing improvement in the region.
If you have never been to the Boise area, consider a visit.