Northern Idaho Real Estate Expected to Stablilize

Don’t expect too much of a slowdown in the North Idaho real estate market in the coming years.

The region is still growing, and still seen as a bargain compared to many parts of the country. Combined with the wealth of several generations - retirees, baby boomers and generation X - the fascination with the outdoor life style and attraction to the area’s lakes and rivers is expected to continue to drive growth for about a decade.

Between 2000 to 2004, approximately 1,400 new homes per year were being built in Kootenai County, Pat Krug, managing mortgage broker of Windermere Coeur d’Alene Realty told nearly 700 real estate agents and others involved in the industry last week at the 20th Real Estate Market Forum held in Spokane’s convention center. Projections for the next eight years are expected to double to about 3,000 per year.

The “stabilizers,” who live and work in the area, will require housing in the $130,000 to $300,000 range, she said. They will continue to be the largest segment of the market.

The “baby boomers,” recipients of $40 trillion in inheritances, will be looking here for their final homes. They’ll be coming from the urban centers of the West Coast and rural areas of the Inland Northwest before applying for an Idaho mortgage.

“Vacation home collectors,” earning $200,000 to $500,000 per year will continue to look to the area for luxury homes, Krug said, and since about half will pay cash, interest rates will have little effect.

In total, she said, there will be a need for 25,000 new homes in the next eight years.

The market hasn’t slowed as much as many had thought. How come? Because much of what happened in 2005 and 2006 was a reaction to a sudden demand and the inflation in values of North Idaho real estate.

In 2005 the average time from the time a single-family residence went on sale to closing was 2.8 months, Krug said. In 2006, that increased by 30 days.

“In 2006, only 38 percent of single family listings actually sold,” Krug said. “What happened to the other 62 percent?”

Was that a result of supply exceeding demand, or of overpricing, she asked.

“Data suggest if the home did not sell within four months, there was a high probability that listing expired and probably wasn’t sold at all,” Krug said. “Many sellers think it’s still 2005. They may have been sold if they had been competitively priced.”

Of 2,855 current listings, 1,286 have been on the market for more than four months; that same number is not seriously for sale, she said.

The new home market, in fact, was slow to respond to a slowdown, and that had its own impact on Idaho home prices, said James Diffley, group managing director of U.S. Regional Services, Global Insight, Inc.

“In 2002, we recognized something significant was happening,” he said.

They analyzed how high home prices should go, watching areas such as Las Vegas, San Diego and the Florida housing market where double-digit increases continued for several years before beginning to level off.

He said there was a lot of criticism from the industry of media reports of the bubble bursting, due to the importance of consumer perception.

“In 2006 the real news came in the spring when there wasn’t a price crash,” Diffley said. “New starts fell, but the surprise was how long it took for builders to pull back. Builder discounts were the single biggest factor in the price retreat. As they unloaded, soft prices resulted.”

That’s a temporary cycle, and the housing industry will remain soft for about a year as investors take homes off the market, he said.

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