First-time home buyers return to Boise market despite high prices, lender says. This is why
Jared Olsen has seen a big jump in first-time home buyers returning to the Treasure Valley housing market in the last few months.
That’s despite higher home prices, a 30-year fixed mortgage rate that still hovers near 7% — more than double what it was just two years ago — and low resale inventory in Ada and Canyon counties, which is down about 50% from a year ago.
So, how are first-time home buyers making it work?
Borrowers struggling with a low credit score, history of bankruptcy or limited savings who may not be eligible for a conventional loan are taking advantage of Federal Housing Administration loans instead, said Olsen, a mortgage loan officer with Zions Bank in Boise. The loans are issued by private lenders and insured by the FHA.
He said the loans fell out of favor in the era of bidding wars and low interest rates but are now making a comeback.
Sweetening the deal
The Department of Housing and Urban Development made some changes in February to make the loans more attractive, like raising the maximum amount you can borrow under the program and lowering mortgage insurance premiums.
“It’s helping a lot more people qualify for a mortgage and afford a home,” Olsen told the Statesman by phone. “We get inquiries about it all the time.”
This year, FHA loan limits increased by about 24% in Ada County, allowing buyers to shop around with a much larger budget. The limit was $472,000 in 2022. Now it’s $586,500.
The federal government also lowered required mortgage insurance premiums by 30 basis points, or three-tenths of 1%, saving an average of $800 a year for borrowers with an FHA-backed mortgage. Mortgage insurance protects lenders if a borrower misses payments and defaults.
“Most first-time home buyers are going to reach out to see what they could qualify for before finding a home,” Olsen said. “They want the best rate and the lowest monthly payment. Our loan officers are able to say, ‘Hey, this is an option for you.’”
FHA loans aren’t limited to first-time buyers, but they appeal to them for a number of reasons:
The loans require down payments as low as 3.5%.
It allows for a higher debt-to-income ratio than most conventional loans.
Lenders are limited in how much they can charge in closing costs.
Existing home inventory drops off
The median sales price of an Ada County home in July was $540,000. That’s about 8% less than in July 2022, but substantially higher than in March, when it was $483,450 — the lowest monthly median in the county in two years.
In neighboring Canyon County, the median was $404,990, also about 8% less than a year ago but a small bump from June.
The inventory of resale homes in both counties is down significantly from a year ago.
Mike Pennington, of John L. Scott Real Estate in Boise, noted in an email on the latest data from the Intermountain Multiple Listing Service that there were 781 existing homes for sale in Ada County in July, down 46% from July 2022. There were 277 available homes in Canyon County, a decrease of 53%.
One of the factors contributing to low inventory is homeowners who years ago locked in low mortgage rates of around 3% or 4% and aren’t looking to sell when buying a different house could require a new mortgage with an interest rate nearly twice as high.
“Buyers are patiently waiting for more options to become available, while sellers are hesitant to abandon their attractive interest rates from purchases during the pandemic,” Boise Regional Realtors President Debbi Myers said in a July news release.
Check your ZIP code with interactive map to see house prices in Boise, Treasure Valley
Idaho’s largest homebuilder ready to ‘overcome the challenges’ with 600 homes in 3 months
More coffee, more soda. Town houses for young adults. A wider highway. Coming near you
