Is Idaho Housing Market Up or Down?

John M. Foster of the Idaho Business Review asks that question today. The conflicting sides:

1. A story in today’s Idaho Press-Tribune says the city of Caldwell issued 25 percent more residential building permits in 2006 than were issued in 2005.
2. A story in today’s Idaho Statesman says almost 50 percent fewer Treasure Valley homes were sold in November 2006 compared to November 2005. So what’s happening? There are a few explanations…

The Press-Tribune story, written by Mike Butts, quotes a Caldwell leader who makes it clear that community shows no signs of a bursting housing market bubble:

“If building is slowing down, it hasn’t done it here,” Mayor Garret Nancolas said.

The Statesman story, by Joe Estrella, quotes an economist who makes it clear that the Treasure Valley segment of the Idaho housing market as a whole is actually going through a correction: “I don’t know that you need to panic yet. There’s still an awful lot of construction going on around here,” Boise State’s John Church said.

The Statesman story is actually a pretty thorough accounting of something the Idaho Business Review has been reporting, too. The residential real estate boom is done, but it hasn’t crashed – home sales have just returned to levels from earlier in the decade.

According to the Statesman: Meridian issued 43 permits in November, 79 percent less than in 2005. Boise authorized 35 single-family permits to home builders this November, 61 percent less than in 2005. And Nampa issued 43 building permits, 58 percent less than 2005.

Yet Caldwell, for the entire year (according to the Press-Tribune) had an increase in home price appreciation. Why the difference?

Well, as reported last month, new home starts in Eagle and Meridian have dropped dramatically, while Caldwell is among the few Treasure Valley communities still expanding. Residential real estate is tied to a commercial real estate boom there, not traditional factors such as the cost of home loans. More businesses are building in the Caldwell area, so residents have more reasons to live in that area.

Also, as we’ve been reporting since the summer, the Treasure Valley’s housing market hasn’t really burst as much as it has shrunk to a more realistic level. Prices and permits have dropped dramatically in recent months, but it’s all relative.

Remember that the decline in mortgage loan activity and the slower market that followed is compared to the last year or two. Compared to the years before that, it looks like we’ve returned to normal.