Housing Crunch: Learning from our neighbor - Albuquerque Journal

Housing Crunch: Learning from our neighbor

Sunset over the city of Albuquerque. (Jim Thompson/Albuquerque Journal)

Albuquerque is in the midst of a spike in housing costs that most experts agree is unlike any in the market’s recent history.

Metro Albuquerque, long considered to have a less volatile market than many of its Western neighbors, has seen the median sales price for a single-family detached house rise by more than 25% in a single year, solidifying it as one of the hottest housing markets in the country.

Reilly White

“This is an incredible year-on-year increase in property values,” said Reilly White, associate professor of finance at the University of New Mexico’s Anderson School of Management.

But while this sort of spike is nearly unprecedented in Albuquerque, other Western cities have been through similar growth cycles in recent years.

In Boise, Idaho, the average home price has more than tripled in the past nine years. In Ada County, where Boise is located, the median sales price passed $500,000 in May, after being roughly comparable to metro Albuquerque’s a decade earlier, according to data from Boise Regional Realtors.

Real estate agents credit a growing local economy, good weather and easy access to outdoor activities like skiing and mountain biking for the uptick. These amenities helped to transform the city from a sleepy mountain town to one of the most popular mid-sized cities in the country.

Jeff Wills

“I know if (visitors) come, they’re going to fall in love with it,” said Jeff Wills, president of Boise Regional Realtors.

However, the growth has come at a cost for Idaho’s capital. The rising prices have stretched affordable housing resources, triggered a backlash from residents who don’t want to see the city continue to grow and change, and priced some residents out of the area completely, according to Boise’s former mayor.

“In this particular market, I don’t know where we’re headed,” said Dave Bieter, who served as the city’s mayor from 2004 through 2020.

While experts from both communities cautioned against comparing the two cities directly, they agreed that Boise’s experience over the past decade could offer some lessons for Albuquerque as it goes through its own growing pains.

“People don’t understand how fragile these areas are, how fragile the different pieces are,” Bieter said.

Between 2010 and 2019, Boise added 19,575 new residents, according to data from the U.S. Census Bureau. Albuquerque grew by just 2.6% during the same period.(Courtesy of Boise Convention & Visitors Bureau)

Boise then and now

Coming out of the Great Recession, home prices in Boise and Albuquerque were remarkably similar. In December 2012, the typical value of an Albuquerque home stood at $172,000, compared to $173,000 in Boise, according to housing website Zillow.

But things in Boise had already started to change.

Between 2012 and 2017 or so, Bieter said the city embarked on a five-year run of public and private investment that would make any city jealous.

Bieter said Boise built four new public library branches, finished multiple park projects and finished a convention center expansion during that period. Downtown Boise, once forgotten, became the site of numerous infill projects, Bieter said.

Perhaps the crown jewel was a partnership between the city and wealthy Idaho benefactors that converted a 55-acre parcel west of downtown housing gravel pits and slaughterhouses into a massive park containing a whitewater rafting facility along the Boise River.

Dave Bieter

“People were a lot less averse to new development,” Bieter said. “In fact, in the early going, they were kind of hungry for it.”

During that same period, home prices began to rise, which Wills attributed to a mix of people relocating from other parts of Idaho, and new arrivals from bigger cities in nearby western states.

“Boise is just set up in such a way where we have a lot of bigger markets in proximity to us,” Wills said.

Between 2010 and 2019, Boise added 19,575 new residents, amounting to a growth rate of 9.3%, according to data from the U.S. Census Bureau. By comparison, Albuquerque grew by just 2.6% during the same period.

He said this caused the housing market to shift from one that was favorable to buyers, to a balanced market and finally to one that favored sellers.

Beginning in October 2014, the market began a streak of at least 39 consecutive months where the supply of existing homes across the region declined year-over-year, according to a market report published by the Realtors association in 2017.

Wills said the pandemic exacerbated this growth as remote workers from other cities, newly untethered from the office, flocked to Boise for its quality of life in 2020 and early 2021.

Wills acknowledged that Boise is now a market where most first-time homebuyers can’t afford to live in certain parts of town.

“I think the days of someone being able to buy wherever they want in our valley on their very first purchase have gone away,” he said.

‘Island of despair’

While the home price growth has been a boon to existing homebuyers and wealthy newcomers in the Boise area, it has put a strain on resources aimed at helping vulnerable renters.

Deanna Watson

Deanna Watson, executive director of the Boise City/Ada County Housing Authorities, said more new arrivals means more competition for the organization’s remaining subsidized units.

“It is an area that is no longer even close to affordable,” Watson said.

After the Great Recession, Watson said a number of multifamily developments were sold to out-of-state investors, who kicked out existing tenants, refurbished the units and began renting again at much higher rates. Other properties were repurposed as short-term rentals, taking them off the market for long-term renters. These factors, she said, contributed to a reduction in affordable units across the city.

A new single-family home under construction in Boise, Idaho. The average home price in Boise has more than tripled in the past nine years. (Courtesy of Boise Regional Realtors)

For renters receiving assistance through the Housing Choice Voucher program, Watson said landlords are able to switch to month-to-month rentals after the first year without a cap on what the tenant can pay. She said it’s increasingly common for landlords to increase the price significantly after the first year, forcing tenants to choose between incurring the higher costs or pick from a dwindling pool of cost-restricted units.

“They’re just on this island of despair, really,” Watson said.

Even RV parks, which the housing authority had advocated as an affordable solution for renters, have become increasingly out of the price range for many residents. In one recent case, Watson said a Boise RV owner saw rent and other costs increase by more than $6,600 per year over the course of four months.

“I was stunned by what they’re dealing with,” Watson said.

Bieter said the increasing lack of affordability has helped fuel an anti-development mindset in recent years. He said some residents, often recent transplants themselves, will fight new market-rate developments, which only fuels the shortage of housing.

“You’ve got to have a supply of housing or everything’s going to be worse off,” he said.

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Compared to ABQ?

While Boise and Albuquerque are very different in some respects, White said home price growth in both cities has been buoyed by similar trends since the pandemic began.

People floating on the Boise River.(Courtesy of Boise Convention Visitors Bureau)

The rise of remote work, low-interest rates and broad-based federal and state stimulus programs helped create an environment where homeowners, and those already in a position to buy homes, had more spending power and flexibility.

In both cities, out-of-state buyers from more expensive markets have contributed to the recent uptick in costs. White said the city’s relatively new housing stock, good weather and outdoor amenities have drawn in newcomers, a similar set of priorities to those that fueled growth in Boise.

Still, White said Albuquerque has some headwinds, including a weaker local economy and a high crime rate, that may stymie growth in the city.

While prices haven’t reached the same heights as they have in Idaho’s capital, they’re still starting to have an impact on the city’s supply of affordable housing.

Linda Bridge

Linda Bridge, executive director of the Albuquerque Housing Authority, said the growing housing market has prompted some investors to buy subsidized apartment units and convert it to market rate housing. She said she knows of two apartment complexes in Albuquerque that have opted out of housing assistance.

Whether or not Albuquerque follows in the footsteps of other, less affordable Western cities, Bridge said the city is already seeing a worrying shortage of affordable units.

“The trend we’re seeing right now is certainly concerning,” Bridge said.

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