A Word About “Appreciation”

Not so long ago (2006 to be specific), real estate investors rushed to Boise, Vegas, Phoenix, etc to buy up property.  Budget friendly places?  Yes.  After looking into it, I discovered the goal was to buy and then sell in a year or two and harvest huge gains.  Free money!

These “investors” planned to rent out the homes to help cover the cost of ownership, but the spreadsheet calculation didn’t support the purchase.  The rents in the Boise market simply did not support the escalated values.  The hope was there, and the easy money/financing was there, but the fundamentals weren’t…  and of course, we all know what happened next.

In my opinion, appreciation (or potential to appreciate) should absolutely be included when evaluating a property.  Appreciation is a strong motivating factor for most, as it should be.  I’ve been known to say things like:  “Path of Progress!” but I also say things like “Safe Harbor”…  (I’ve been using this a bit more lately).  Buying in the growth path of a city is truly valuable to catch those rising prices, but finding safe and sound properties is also valuable should things level off.

Yeah, yeah, the Boise market has been appreciating for a solid 4 years, I know.  Many folks have been predicting a market correction for at least 2 years (and one of these days they might actually be right!)  In the meantime, let’s stay focused on the “other” fundamentals.

The Anfield Realty Team recently attended an Economic Forum where economist Matthew Gardner, Windermere’s Chief Economist, presented some very interesting data.  He informed the ~350 attendees that national home prices may well be ebbing, but he also highlighted that the metrics of the Boise market remain largely unaffected.  He’s predicting continued growth through 2019, and illustrated that Ada County will add nearly 13,000 households in the coming 5 years.  (well below the current build rate.)

However, not all is rosy.  Mr. Gardner cautioned that Boise might well see a slowing in the growth rates because Boise’s low unemployment rate is not sustainable.  The Boise rate is currently at 2.3% and while having the nice benefit of pushing up wages, this low unemployment rate will also slow the rate of companies hiring and expanding.

There were too many “take aways” from the presentation to list here, so please reach out to us for more specifics, , but if I were to summarize…

• Nationally, home inventory is at it’s lowest level in a generation.
• The Boise housing market will continue to appreciate for the coming year, although the rate of growth may come down slightly (from ~15% to ~8%).
• Best to lock in long-term interest rates if you can.
• Boise remains a great “Safe Harbor”!

Walk on!