Boise, Idaho
The City of Trees Still Has Room to Grow
By Carole VanSickle Ellis
Boise, Idaho, has long been a center for travel and trade. Since the city’s founding in 1863 at the intersection of the Oregon Trail and trade routes connecting Idaho City and Silver City, it has played a central role as a meeting place for merchants and business operators.
Today, Boise, also known as the City of Trees, is home to three Fortune 500 headquarters (Micron Technology, Boise Cascade, and Albertsons Companies), six colleges, and more than 749,000 residents with a population growing faster than all but one other metro area in the United States.
Boise has made headlines for several years now thanks to that rapidly growing population. In the Realtor.com “Top Housing Markets for 2022” report published in January of this year, Realtor.com chief economist Danielle Hale noted a “concentrated influx” of residents streaming into Boise from West Coast cities including San Francisco and San Jose, California, in particular. “The strong local economy…attracts outsiders,” she observed, noting that Boise is particularly attractive to individuals seeking remote work opportunities and STEM (science, technology, engineering and mathematics)-related jobs, of which Boise has a slightly higher share than most other markets nationally (6.9 percent vs. 6.5 percent). Hale also pointed out Boise remains more affordable than comparable cities with its median asking prices just over $500,000 in late fall of 2021 compared to Seattle’s median asking price of about $767,000 and Silicon Valley’s median asking prices nearing $1 million.
Relative Affordability and Inventory
Thanks to relative affordability in Boise compared to the places from which many out-of-state buyers are moving, the city is likely to remain “hot” in 2022 despite already experiencing astronomical growth in 2019, 2020, and 2021.
“We are still bringing so many more people in [than are moving out] and the people moving in have such a higher buying power than our locals,” observed local broker Brett Hughes in a December 2021 interview. Hughes said that inventory is the biggest stumbling block for anyone hoping to participate in the Boise boom because it is so difficult to access housing of any type. In December, inventory levels were actually up 150 percent year-over-year, but that simply meant that there was about one month’s supply of housing available for purchase. For comparison, “healthy” housing markets are generally considered to have between four and six months’ worth of inventory. Because of buyers’ much higher buying power compared to local buying power and the steady influx of new residents into the area, most local analysts agree that Boise has at least one more year of rampant growth before the market starts to cool – and more than that if the housing inventory can be increased during that time.
However, not everyone agrees with this analysis. Professors at Florida Atlantic University and Florida International University published an article in December 2021 stating that Boise is, in reality, America’s “Number One Overvalued Housing Market.” These researchers calculated homebuyers paid a premium of 80.51 percent in 2021, followed by Austin, Texas; Ogden, Utah; Provo, Utah; and Phoenix, Arizona, with premiums of 50 percent or lower. The team predicted that a “pricing crown” would develop in their top-five overvalued markets in 2022 and, when that happened, home values would level off. Ken Johnson, a real estate economist at Florida Atlantic University and one of the authors of the study explained, “A crowning in prices is common when markets reach the peak of their current housing cycles. It does appear that several areas around the country are at an inflection point.”
For investors considering acquiring assets in Boise, this information should not necessarily mean that they steer clear of the city until the inflection point hits. After all, many of the area’s newer residents are in a position to pay premium prices thanks to the sales of their own West Coast homes, and a city boasting more than 200 days of sunshine annually, low corporate and personal tax rates, a cost of living that is nearly 1 percent lower than the national level, and a vibrant arts community is likely a compelling place to get into a bidding war. The key to success will be predicting just how much of a premium those buyers will be willing to offer and for how long. Fix-and-flip projects and renovations on rentals should be budgeted and timed to get them to the market as quickly as possible in order to take advantage of current market conditions.
Barron’s contributor and portfolio manager Ken Shinoda called Boise a “magical destination” and designated it a “Covid Metro” to which “homebuyers flocked…in expectation of living close to nature, free from the office.” However, he warned, some Covid metros are already showing signs of softness as “today’s world is calling people back to the office, at least part-time.” The key in a market like Boise will be to closely monitor trends in its West Coast “feeder markets” and react quickly if it appears that influx of high-powered buyers is starting to slow.
“Easy, Non-Stop Access” in the Boise Valley
Speaking of “back to the office,” one of the things that has made Boise so attractive to so many people from around the country is its proximity to many other 18- and 24-hour cities. The Boise Airport is located only about five miles from downtown Boise, plays host to more than 3 million travelers each year, and is not quite a five-hour flight away from New York City and just over four hours from Atlanta, Georgia. Boise is a tempting single hour from Spokane, Portland, Seattle, Salt Lake City, and Everett, Washington, and just two hours from Denver, Las Vegas, Los Angeles, Oakland, Palm Springs, Phoenix, San Diego, and San Jose. For those potential residents whose companies may be inclined to, as Shinoda described it, call employees back to the office in 2022 or 2023, Boise represents a good fit for once-weekly or -monthly commuters with the income or company funding to pay for travel.
The city is also located in a hub that brings more than four dozen motor freight companies through the area along 1,600 miles of rail line that connect to Canada, Mexico, and most of the continental United States. While Boise, like the rest of the country, has certainly encountered supply-chain issues during the COVID-19 pandemic, its location and local infrastructure ensures that not only will its jobs market benefit from the need for inland transport but that residents will also benefit from its status as a transportation hub for a wide variety of freight.
In fact, Boise boasts such a prime location particularly for young professionals and the coveted Millennial buying population that Business Insider reported in 2020 that the only “major downside” to living in Boise is that residents will “likely need to own a car.” With more than half of U.S. adults reporting in August of last year that “easy access to the outdoors for activities like hiking, fishing, [and] camping” is either “very important” or “extremely important” to them according to the Washington Post and George Mason University, the need for a car is likely to detract relatively little from this market’s outdoor appeal. The area boasts plenty of golfing, fishing, hiking, mountain biking, and skiing opportunities along with kayaking, whitewater rafting and other water activities. Boise has nearly 2,600 acres of skiable terrain, noted the Boise Valley Economic Partnership (BVEP) in 2021, and is just three hours’ drive from Sun Valley.
A Thriving Workforce & Strong STEM Foundations
Worried landlords concerned tenants might not be in a position (or feel the inclination) to pay rising rents rest a little easier in Boise thanks to a highly competitive jobs market with a firm foundation in STEM sectors like healthcare, I.T., engineering, and finance. Fortune 500 company Micron Technology is one of the region’s largest employers with about 6,000 employees in the Boise Valley. As Micron CEO Mark Durcan explained, Boise employers like Micron “look for people that are high-energy, entrepreneurial, and able to go out and create new lines of business because our business is always changing.” He added, “There is a lot of talent in Boise.”
For rental owners, current double-digit hikes (year-over-year around 35 percent) in Boise rents may seem compellingly attractive, but it is important to realize that these accelerated increases are unlikely to last because even a thriving market like Boise cannot sustain this type of appreciation along with housing demand because wages simply cannot keep up permanently. At some point, the discrepancy will cause some degree of cooling – just not yet in Boise.
“Wages did grow nicely in a lot of parts of the U.S. – right around 8 percent, on average,” said ATTOM Data Solutions chief product and technology officer Todd Teta. However, compared to rent and home-price increases of between 30 and 40 percent since early 2020, “No wages are going go to go up that much. It just doesn’t happen that quickly,” he added. Toward the end of 2021, Boise rents fell slightly month-over-month (by just over 3 percent), but the decline is not likely to be substantial in coming months. Some Boise natives say they are considering moving elsewhere to find more affordable housing, but others say that increased access to remote work, often a higher-dollar and lower-cost alternative especially in STEM fields, makes Boise a good place to stay.
Talent Spark recruiter and partner Alison Bruce explained, “Boise’s labor market is especially ripe for national employers to recruit from because of the imbalance between our cost of living and what Idaho jobs typically pay. Now those [national] companies can recruit out of Boise because they do not need to be in New York, LA, or Atlanta.” Bruce went on to explain that just as Boise’s cost-of-living is lower than the national average, attractive high-skill jobs may be compensated at highly competitive but relatively lower rates when employees are located in a market like Boise. “Part of the appeal is [national companies] do not need to pay quite those New York wages to get similarly talented people with experience out of Boise,” she said.
As we move forward into 2022, investors looking to acquire properties in Boise should keep their focus on assets that will appeal to buyers or renters who are likely to find the ability to earn relatively lower industry wages as long as their dollars will stretch farther. They should also closely monitor the progression of single-family home appreciation and days-on-market compared to the end of 2021. By closely watching market conditions, investors will be able to optimize opportunities in Boise without getting caught in the cooling that could come if West Coast companies go “back to the office” en masse (at time of publication, this seems unlikely) or if Boise’s own housing market manages to outpace itself. Thanks to that limited inventory, however, there should be plenty of time to spot the warning signs as long as investors remain vigilant and flexible with their investment strategies.
Sidebar 1
Boise’s Best-Of Rankings Since 2019
Most-Moved-To City
2020 Business Insider
3rd Best-Run City in America
2019 WalletHub
5th Best City for Starting a Business
2019 Inc. Magazine
6th Best Performing City 2021
Miliken Institute
5th Best State (Idaho) 2021
US News & World Report
1st Moving Destination 2020
National Movers Study
14th Best Work Life Balance 2021
SmartAsset
5th Surge Cities 2022
Inc. Magazine
SIDEBAR 2
Why Boise has been a Successful “D*mned Accident” for more than 3 Decades
In 1989, J.R. Simplot, founder of the Idaho-based J.R. Simplot Company, an agricultural supplier specializing in potato products (read: “The French Fry King” of his day), informed the New York Times as part of an interview on Boise, Idaho, and its emerging success as a business hub in the west, that Boise was nothing more than a “d*mned accident.” At the time, Simplot’s company offices were located in Boise, and the Idaho “maverick” was considered one of a trio of unstoppable businessmen based in Boise. The others, Micron’s CEO at the time, Joe Parkinson, and Albertson’s CEO at the time, Gary Michael, credited Boise entrepreneurialism, creativity, and “solid core of American values” for turning unlikely Boise into a national business center. The article was titled, “Unlikely, but Boise Means Business.” More than three decades later, the city clearly still means business. Furthermore, at this point, it’s clearly neither unlikely nor an accident.
The Boise Valley Economic Partnership (BVEP) reports a vast array of pro-business and investor-friendly programs designed to bring business both to Boise and to the state of Idaho at large. Companies that bring high-wage jobs to the area may receive as much as 30 percent reimbursement on sales, payrolls, and corporate incomes taxes for up to 15 years. Investments in machinery and equipment may qualify for investment tax credits, and real property development can also bring tax credits and advantages through the Idaho Business Advantage program. Smaller employers may also receive exemptions or credits on property taxes, and public-private partnerships are available for new projects in the area.
As Happy Family Brands CEO Jessica Rolph, who runs Lovevery, a Boise-based toy company, and is a co-founder of Happy Family Brands, an organic baby food company, explained, “Boise is a really easy place to start a business. Costs are generally low; the airport is convenient, and it is easy to be here.”
With major companies offering public endorsements like that one, it is not surprising that Inc. Magazine named Boise a “Surge City” for 2020, meaning the publication considers the metro one of the “best American hubs [in which] to start a business.” Rolph chimed in on that recognition, too, stating, “I don’t know if I could have co-founded two companies, had three babies, and been a daughter, wife, mother, and CEO if I had lived somewhere else.”
