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Boise has a big housing shortage. So why are fewer homes being built this year?

IS  John Starr  2022  hero

The biggest driver of soaring Boise-area home prices in recent years has been high demand and low supply. Building more houses is a key way to remedy that. But so far in 2022, fewer homes are being built.

Zonda, a real estate consultant company, reports construction began on 1,637 single-family detached homes in the first quarter of the year in the Boise market. That’s a 20.7% decline from 2,065 in the first quarter of 2021. “There’s a lot of reasons it’s down,” Zonda Senior Vice President Eric Allen said by phone. “It’s not like the market is starting to contract.”

Several factors are contributing to less building, experts said. Supply-chain issues have made it harder to acquire materials. Staffing shortages have made it harder to get work done. And after two years of big increases in costs and sales prices, some builders may fear overbuilding and might prefer to slow down.

“These builders are coming off of a two-year period where pricing has been pretty much rising constantly and out of control,” said John Starr, a land associate and partner in Boise with Colliers, a commercial real estate services company. “And at some point, they just have to say, ‘You know what, I’m going fishing.’”

In the first three months of the year, the number of lots submitted to local governments for construction stayed about the same as the previous quarter, according to a report from Colliers. The number of permits declined for two quarters in a row before that. Uncertainty in costs means uncertainty in profits. So that’s why some builders might be deciding to finish the projects they’re working on and then wait for their increasing costs to settle down, Starr said. In an inflationary market, producing less inventory means less inventory is exposed to those increases.

Rising costs have been caused by supply-chain problems. A year ago, Starr said, an estimated quote for building materials would stay in place for 30 days. Now, it might last only as long as the phone call before it increases. “That’s a very natural thing for builders to do … to simply build fewer homes, because they are uncertain about their cost inputs, and therefore uncertain about their profits,” Starr said.

CONSTRUCTION TIMES TAKING LONGER

Boise Hunter Homes co-owner Travis Hunter said his company isn’t trying to slow down. Its goal this year is to build and close on 200 homes. Last year, Boise Hunter Homes closed on 183 homes. But because of economic factors, Hunter said the company is on pace to match last year’s output rather than exceed it. That’s a result of materials taking longer to arrive, and thus homes taking longer to build — 50 to 100 days longer on average, he said. “That’s the biggest crippling factor right now,” Hunter said by phone.

COVID-19 sparked a boom in Boise’s housing market and the ensuing labor and materials shortage. By now, though, it’s that boom, not the pandemic, that has held up projects and driven up costs, Hunter said. Hunter isn’t aware of any builders intentionally trying to build fewer homes. But because of the longer time it’s taking to build, they may not have a choice. “That naturally constrains their output as well,” Hunter said.

Elizabeth Campbell, Lysi Bishop Real Estate’s vice president of training and growth, has watched newly constructed homes sit on the market longer as interest rates have spiked recently. To keep demand high, builders would have to lower prices, but Campbell said she doesn’t expect that to happen because their costs have soared. Meanwhile, builder confidence nationwide remains high but has dropped for four straight months, according to the National Association of Homebuilders.

On top of all this, there are fewer house lots available for construction, Allen and Starr said. Less available land leads to less building. That in itself makes it harder to match the numbers from previous years. Starr said cities could speed up their approval process, which would result in more houses being built. He added that a new, local stud plant creating wood for houses, for example, could ease supply issues. Local colleges investing in construction programs could help the labor pool, too. The number of homes that started construction in the Boise market increased each year from 2015 to 2021, according to Zonda. In 2015, construction began on 3,822 homes. In 2021, that number was 7,755.

“It’s pretty clear that the counterintuitive drop in supply is directly related to the experiences over the last couple of years that have to do with rising cost,” Starr said.

To read the full article, visit the Idaho Stateman article HERE

For further information, please contact:
Amie MacKinnon | Director of Marketing & PR, Idaho
208 472 1662 | amie.mackinnon@colliers.com

About Colliers

Colliers (NASDAQ, TSX: CIGI) is a leading diversified professional services and investment management company. With operations in 62 countries, our 17,000 enterprising professionals work collaboratively to provide expert real estate and investment advice to clients. For more than 27 years, our experienced leadership with significant inside ownership has delivered compound annual investment returns of 20% for shareholders. With annual revenues of $4.1 billion and more than $50 billion of assets under management, Colliers maximizes the potential of property and real assets to accelerate the success of our clients, our investors and our people. Learn more at corporate.colliers.com, Twitter @Colliers or LinkedIn. Colliers Paragon, LLC.


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John Starr

Land Brokerage Services

Boise

John began his real estate career in Nampa, Idaho, buying and remodeling residential properties while still in high school. After college, he spent two years in Seattle working for Seattle Pacific Realty in leasing and land acquisition. John was selected as a 2021 Everest Club honoree, an award honoring the top 10% producers in the United States.  

Upon his return to Boise, he worked for the Idaho Housing Agency as their Commercial Loan Underwriter and was the sole underwriter for the Section 42 - Low Income Housing Tax Credit program.  He also helped write the manuals for that program in the state of Idaho.  During the 1990’s, John built up a thriving property management business, managing 350 residential units and 40,000 square feet of commercial space. He sold the business after six years and did consulting work for multi-family properties in Boise, Montana, Wyoming, and Utah.

Prior to joining Colliers, John was the Director of Land Acquisition for the Hubble Group’s land development branch, Providence Development Group. Hubble is consistently the number 2 home builder in Idaho.

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