This study examines the influence of existing housing inventory on home prices in Idaho, considering other confounding factors. Idaho’s housing market has experienced a significant price surge over the past three years, raising concerns about the state’s economic future. The analysis, based on a Spatial Durbin Model of 49 cities from 2011 to 2020, reveals a statistically significant relationship between housing inventory and prices. A 1% decrease in inventory leads to a 0.5% rise in prices the following year. Moreover, spillover effects indicate neighboring cities experience a 0.45% price increase one year after a 1% inventory decline in a given city. Policy implications suggest supply-side strategies to address the soaring housing market, including diversifying and increasing housing supply, particularly entry-level homes for Millennials.
