Homebuyers Squeezed As Western States See Prices Double Or More In Last Decade

May 28, 2021
Originally published on June 1, 2021 4:26 am

This time last year, amid the pandemic lockdown, Marissa Lovell's landlord offered to sell Lovell her current rental house in Boise, Idaho, for $256,000.

Lovell and her fiancé are first-time homebuyers — she's a freelance writer and publicist for a local music festival, and he's an arborist. So it took them until July to get all their paperwork together and loan secured. By then, her landlord had raised the asking price to $300,000. Today, one year later, it's for sale for almost $400,000.

"In the last 30 days, according to Zillow, our house has gone up $15,000," Lovell says. "You can't keep up with it."

The house isn't exactly palatial either: 730 square feet, two bedrooms, only one bathroom and no space for laundry or even a dishwasher.

"It's like a tiny home, like the original tiny home," Lovell says, laughing.

The couple loves the neighborhood, though. It's a quick bike ride downtown to a show or to bars and restaurants. But if they tried to buy this place now, they'd go way into debt, with their mortgage payment possibly double what they're currently paying in rent.

Lovell's dilemma as a first-time homebuyer in what's now one of the nation's hottest housing markets to buy or even rent in is hardly unique. According to new figures from Zillow, home values in Boise, population 226,000, have risen a staggering 32% in the past year.

She hasn't given up looking altogether. But every time she goes to a showing, there are at least 30 other prospective buyers, and her real estate agent tells her that she and her fiancé will need to offer at least $20,000 over the asking price.

"There's kind of just a feeling of panic-buying almost, which I don't want to do. It's hard to know whether we should be buying now or wait, or if we wait, are we going to be completely priced out," Lovell says.

Will it only get worse for Lovell, or should she ride it out and wait for some sort of correction or even crash? That's a question real estate economists like Vivek Sah are getting a lot right now.

An open-space trail above Boise, now one of the tightest markets in the U.S. when it comes to buying or renting.
Kirk Siegler/NPR

"The boom is sustainable. The growth in prices is not," says Sah, director of the Lied Center for Real Estate at the University of Nevada, Las Vegas.

Sah says that as the coronavirus pandemic eases, so will some of the supply chain troubles, such as lumber and labor shortages. That should make the housing market less tight in the next few months to a year.

"This whole bubble thing will slow down to become a more normal market where prices increase probably between 5 and 10 percent," he says.

As for the chances of a crash?

Sah sees a big difference between this current boom and the events leading up to the 2008 meltdown, which was mostly fueled by fraught lending schemes, speculators and home-flippers. Some investors are buying up properties in markets like Boise, Phoenix and Las Vegas, Sah says, but the lion's share comprises people actually moving into these cities with jobs and living in the homes.

It's an almost cliché headline in the West right now: pandemic buyers fleeing West Coast cities for the roomy interior.

If this trend sticks, Ed Coulson, an economist at the University of California, Irvine, doesn't expect much of a correction in the housing market in the next year.

"It's going to be interesting to see whether or not the changing preferences that we seem to have observed during the pandemic are permanent changes," says Coulson, director of the university's Center for Real Estate.

In other words, does that guy who left Southern California for the rural north last through another Montana winter? Or as Coulson puts it, do major employers begin restricting work-from-home rules and call everyone back to their downtown offices after the pandemic?

Regardless, economists predict the housing market in Boise, with all of its amenities, will probably stay hot, like what was seen in cities such as Denver even amid the 2008 meltdown. They say the only real way to begin chipping away at the soaring-costs issue is to build more housing supply, particularly dense housing. That has been a tough sell in libertarian-leaning states like Nevada and Idaho, which are routinely listed as the two fastest per capita growing states in the nation.

So what's Marissa Lovell to do? Well, she's stuck for now in her tiny rental, hoping her landlord doesn't sell it. Lovell moved to Boise 10 years ago, when the housing market was at rock bottom. Since the recovery, median income has gone up in the area by about 20%. But the median housing price has shot up by more than 250%, according to data from Boise Regional Realtors.

"It used to be really affordable with housing," Lovell says. "We're the people that are priced out of Boise, and I'm afraid that people are going to start moving because of that, and then what happens?"

Everything that drew people like her to Idaho's more progressive capital city — cheap living, the creative economy, the city's success — she says, is in jeopardy if housing is so far out of reach to locals.

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STEVE INSKEEP, HOST:

It's a good time to be selling real estate in Boise, Idaho. It is now one of the hardest markets in the country to buy in or even rent in. According to new figures from Zillow, home values in Boise have gone up 32% in a year, which is part of a trend in the Mountain West. Here's NPR's Kirk Siegler.

KIRK SIEGLER, BYLINE: This time last year, Marissa Lovell's landlord offered to sell her her current rental house in Boise for $256,000. It was the lockdown, and she and her fiance are first-time homebuyers - Lovell's a writer and publicist; he's an arborist - so it took them until July to get their loan secured. By then, the price had risen to $300,000. Today, it's for sale for almost $400,000.

MARISSA LOVELL: And this is a 730-square-foot home - two-bedroom, one bath, no laundry, no place to put laundry, no dishwasher. It's like a tiny home (laughter). It's like the original tiny home.

SIEGLER: Lovell loves the neighborhood, though. You can ride your bike downtown to a show. There are cool bars and restaurants. But...

LOVELL: In the last 30 days, according to Zillow, our house has gone up $15,000. Like, it's just - you can't keep up with it.

SIEGLER: Now, she's still half-looking around in Boise, but every time she goes to a showing, there are at least 30 other people, and her realtor tells her they'll need to offer at least 20 grand over. Oh, and do that in 24 hours for a house you don't even really like.

LOVELL: There's kind of just, like, a feeling of, like, panic-buying almost, which I don't want to do. So...

SIEGLER: Will it just get worse, or should she ride things out and wait for a crash? That's a question real estate economists, like Vivek Sah at the University of Nevada, Las Vegas, are getting a lot right now.

VIVEK SAH: The boom is sustainable. The growth in price is not.

SIEGLER: He says as the pandemic eases, so will some of the supply chain troubles, like lumber and labor shortages, and that should make the housing market less tight.

SAH: This whole bubble thing will kind of slow down to become a more normal market where prices increase probably between five to 10%.

SIEGLER: As for a housing crash, though, Sah sees a big difference between this boom and 2008, when it was mostly speculators and home-flippers. Now, there is some of that today. But he says mostly people moving into Nevada, Arizona, Idaho have jobs and are living in these homes. It's an almost cliche headline in the West right now - pandemic buyers fleeing West Coast cities for the roomy interior. And if this trend sticks, University of California, Irvine economist Ed Coulson doesn't expect much of a correction in the housing market in the next year.

ED COULSON: It's going to be interesting to see whether or not the change in preferences that we seemed to observe during the pandemic are permanent changes.

SIEGLER: Does the guy who left Southern California for the rural north last through another Montana winter? Or, Coulson says, do major employers begin restricting work-from-home rules and call everyone back to their downtown offices? Regardless, he says the housing market in Boise, with all of its amenities, will probably stay hot, just like we saw in cities like Denver even during the 2008 meltdown.

LOVELL: Our neighborhood's pretty awesome, too. Like...

SIEGLER: So what's Marissa Lovell to do? Well, she's stuck for now in her tiny rental, hoping her landlord doesn't sell it. Lovell moved to Boise 10 years ago when the housing market was at rock bottom. Since the recovery, median income has gone up here by more than 20%, but the median housing price, more than 250%.

LOVELL: And it used to be, like, really affordable with housing.

SIEGLER: Now, she says, everything that drew people like her here - the cheap living, the creative economy, the city's success - is in jeopardy if housing is so far out of reach.

Kirk Siegler, NPR News, Boise.

(SOUNDBITE OF WATER FAI'S "TO THE GREEN TOWN") Transcript provided by NPR, Copyright NPR.