Real Estate Market News Concerning North Idaho – April 2008

Recently, the Coeur d’Alene Association of Realtors sent out a Report showing residential sales for the previous six months. (Download pdf) With a total of 1,027 homes sold, they showed a decline from an all-time high of 1,723 for the same period in 2005. In our MLS area north of CdA, we sold 818 homes between 1/1/07 and 12/31/07. Considering that our market is no greater than one third theirs, our numbers are good. In fact, our sales of homes and properties are comparable with 2003, a year most believe was on the upswing and part of the real estate boom years. Further, our median sales price is up for the county, though it is down for Sandpoint. Still, it is considerably higher than 2005, our best year ever. Land is following the same trend. Anecdotally, we perceive that prices are down, and sales are slower, but the figures are objective, and no amount of subjective opinion can change that. Also, people are still moving to our area. Spokane is one of the areas more people are moving to than any other part of the country, according to U-Haul. I know that we had a busy winter, having several closed sales.

Also, while it is paramount if you are selling your property that you price it right, we are not seeing sales that are gigantically lower than the asking price. What is happening is that when sellers price too high, they get no offers, and eventually price at market rates. Then, when offers are made, the offers are close to asking price. Sure, we see the occasional low-ball offer accepted, but this makes up a very small percentage of sales.

Overall, our market is very good, especially compared to other parts of the country. This is much because we are still lower for land and homes than many areas. Our local economy is good. We had recent layoffs at our largest employer, Coldwater Creek. But this was only 65 people, and that was mainly due to seasonal changes. They are actually going forward with expansion plans as you will read about in the next segment.

We are also continuing to grow. While Spokane and Coeur d’Alene are growing more quickly, we are also in that trend. Growth means more jobs, and more home sales. Continue to read and you will find supporting evidence for why our market is doing well, and other articles about the state of the market in North Idaho.

The State of the Real Estate Market in Sandpoint

The Real Estate market has certainly taken a beating in the press lately. It is true, there are areas of the country that are definitely hurting, but Idaho is NOT one of them. In fact, in the study just released from the National Association of Realtors, they found that neighboring Washington State has experienced a 30% REDUCTION in the number of foreclosures occurring in the state. Spokane was 64^th out of the 100 regional metro areas, even better than Seattle’s ranking of 58. In fact, Seattle went up, then began to decline, whereas Spokane (which includes Coeur d’Alene) simply declined. Our area of North Idaho is even better, and sales are actually ahead of last year, while foreclosures have not yet affected our market, and are virtually only marginally more than in 2004. Let’s use Kootenai County as our example:

Idaho has 264,768 mortgage loans. 3.46% are past due and .07% are ‘in foreclosure’. Idaho’s sub-prime numbers show 14.39% are past due and 5.52% are ‘in foreclosure’.

Kootenai County numbers show 228 properties are currently past due (delinquent over 90 days but no foreclosure proceedings currently filed), 307 are “going into” auction (proceedings have been filed giving the home owner 120 days to either sell or bring current their loan) and 90 are bank owned.

Kootenai County ‘notices of default’ are up in 2007 49.60% to a total of 558 from 2006’s total of 373. This is still lower than our peak in 2001 of 781.

So what is really going on? With all of the risky lending that has been happening in the last few years, it has brought buyers into the market that probably were not really in a position to purchase. They often used adjustable rate mortgages to qualify at lower rates and then when the rate increased there had been enough market appreciation that they could refinance into a new loan and start the cycle all over again. Now that market appreciation has slowed and these loans are resetting to higher rates, many of these homeowners do not have enough equity in their homes to refinance again. This means some of them are facing foreclosure because they cannot afford the new, higher mortgage payment.

Also, in many areas of the country there has been a glut of building which has flooded the market with properties. In the Phoenix area alone, they went from 4,400 properties on the market last year to 44,000 properties on the market this year! Consider our areas. The front page of the Sunday Spokesman Review just a couple weeks ago headlined this regional issue. With a metro population of 600,000, Spokane has roughly 3,000 homes listed for sale. Coeur d’Alene metro area, with only 158,000 people has about the same number! Our two county population of less than 60,000 has roughly 1,000, and many of those are in the Coeur d’Alene area south of our region. Another consideration is that a large portion of the homes and condos we have for sale are vacation homes, or will be purchased as second homes, and from January 1 to December 31, 2007, our market had 936 homes and condos sold. Not bad.

So what about the Greater Sandpoint/North Idaho area? Our economy remains incredibly strong with a diversified economic base and strong business growth. For our size, we have an incredible number of companies selling nationally and globally, and with the new University of Idaho breaking ground, and our tourist business adding to the mix, our possibilities are boundless. This corporate base has companies like Coldwater Creek growing in leaps and bounds, and others such as Quest Aircraft manufacturing have so many orders that they are in the process of hiring 200 new workers over the next several months. This combined with our geography (mountain ranges surrounding us, with Schweitzer Ski Resort having just come off a record year, and just named as one of the top 25 ski resorts in the nation, and the West’s second largest lake in the middle), and marginal traffic means that there is only so much room to grow here, and that has kept things under control. In the last few years we have experienced staggering appreciation rates, and that may slow down, but it will remain stable and steady. In fact, there has become an increasingly large gap between growths in home prices versus growth in incomes. Huge appreciation is nice when you are a homeowner for sure, but it is also necessary for things to slow down a bit so that incomes can catch up.

One of our area’s biggest employers is Coldwater Creek. Coldwater Creek laid off 65 employees at several of its facilities recently due to lagging sales, but said the action was intended to “position us for sustainable growth,” and the company remains committed to continuing its operations in the Sandpoint and Coeur d’Alene areas.

Despite recent layoffs and a downturn in its sales, Coldwater Creek Inc. is proceeding with an expansion project that includes a $9 million, four-floor office building and a $2 million addition to its call center in northwest Coeur d’Alene.

According to the Office of Federal Housing Enterprise and Oversight which lists appreciation rates for the last five years, our rate of appreciation is 8.42% over last year, and our five year appreciation is 64.43%.

While our region is not a large enough metro area to register on the radar of the Office of Federal Housing Enterprise and Oversight, the Selkirk Association of Realtors shows that homes in the Sandpoint/North Idaho MLS area are still doing well.

Looking at the data below, while the average sales price from 2005 to 2006 went up astronomically, we have drawn back considerably in 2007. Still, homes bought in 2005 have appreciated nicely through October of 2007. The median sales price is in a dead heat with last year’s, and is considerably more than 2005. Add to that that, overall, the numbers of homes sold in 2007 is only down only 16% from our best year ever, and virtually equal to last year. Certainly our most recent numbers are way ahead of 2002. All in all, sales are good, Idaho is one of the top appreciating states, and if homes are priced in keeping with our current market, days on market are also very good.

So where do we go from here? FHA loans will make a comeback for borrowers with low and/or gifted funds for down payments, rents will rise as more renters come back into the market, there may be a short term slow down in home sales, however, there will be a long term gain will be fewer defaults.

If you are a seller? Now more than ever a full service agent is what you need. The days of slapping a price on something and having it sell instantly are gone. Make sure that you have done your home work. That means pre-inspecting your home so that there are not any surprises, staging it to capture buyers the moment they walk in the door, use professional pictures to entice buyers on the internet, and most importantly —PRICE IT RIGHT!

If you are a buyer? Now, more than ever, is the time to buy. There are more choices on the market which means that you may actually be able to negotiate well, and you will be gaining on long term market appreciation.

Home prices expected to rebound in 2008

Real estate trade group expecting bounce back after gloomy 2007 - AP

WASHINGTON - The prices of existing and new homes are expected to bounce back next year after a dreary 2007, a real estate trade group said Wednesday.

The National Association of Realtors also said it expects existing-home sales to rise to nearly 6.4 million in 2008, up from the 2007 estimate of more than 6.1 million. Nearly 6.5 million existing homes were sold in 2006, the association said.

As for new homes, sales are projected at 865,000 in 2007 and 878,000 next year, but the 2008 projection would still be down more than 20 percent compared with the nearly 1.1 million new homes sold in 2006.

More than 1.4 million housing starts, including multifamily units, are forecast this year and in 2008, but that is down from 1.8 million last year.

Existing-home prices are expected to gain 1.8 percent to a median of $222,700 in 2008 after a 1.4 percent decline this year to $218,800, the according said. The median new-home price should rise 2.2 percent to $222,700 next year after a 2.6 percent drop to $240,100 in 2007.

“Markets that sharply reduce new construction in 2007 will generally experience respectable price increases in 2008,” Lawrence Yun, NAR senior economist, said in a release. “Buyers now have an overwhelming advantage given the wide selection of homes available in many markets. But with profit margins coming under pressure, homebuilders will limit new construction well into 2008.”

National Summary (U.S.)

Existing-home sales are projected to trend up in 2008, with pending home sales showing a slight near-term rise, according to the latest forecast by the National Association of REALTORS^®. However, a recovery for new-home sales is unlikely before 2009.

Lawrence Yun, NAR chief economist, said the worst part of the credit crunch has already worked its way through the data. "The unusual mortgage disruptions that peaked in August were clearly seen in lower home sales that were finalized in September and October, so the market was underperforming," he said. "Now that mortgage conditions have improved, some postponed activity should turn up in existing-home sales over the next couple of months, and I expect sales at fairly stable to slightly higher levels."

The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in October, increased 0.6 percent to an index of 87.2 from an upwardly revised reading of 86.7 in September. It was the second consecutive monthly gain, but remained 18.4 percent below the October 2006 index of 106.8. "The broad trend over the coming year will be a gradual rise in existing-home sales, but because sales are exceptionally low in the final months of 2007, total sales for 2008 will be only modestly higher than 2007," Yun said.

The PHSI in the Northeast jumped 16.0 percent in October to 80.6 but is 11.1 percent below a year ago. In the West, the index rose 8.4 percent to 87.3 but is 16.9 percent lower than October 2006. The index in the Midwest slipped 1.4 percent in October to 85.5 and is 11.7 percent below a year ago. In the South, the index dropped 7.8 percent in October to 91.6 and is 25.3 percent below October 2006.

"The improvement in the Northeast reaffirms a trend apparent for some months now that shows signs of recovery, noteworthy because that was the first region to slump, and the gain in the West indicates some easing of interest rates for jumbo loans," Yun said. "Lawmakers need to understand that raising the loan limits on FHA and GSE-backed conventional loans will markedly improve mortgage availability."

Existing-home sales are likely to total 5.67 million this year, the fifth highest on record, rising to 5.70 million in 2008, in contrast with 6.48 million in 2006. Existing-home prices should be down 1.9 percent to a median of $217,600 for all of 2007, and then rise 0.3 percent to $218,300 in 2008.

"Home price growth in the vast affordable midsection of America will help raise the national median existing-home price slightly in 2008. I then expect price appreciation to return to more normal patterns in 2009, perhaps rising one or two percentage points above the rate of inflation," Yun said.

"Even with a modest decline in the national aggregate price this year, it's important to keep in mind that nearly two-thirds of the metro areas in the U.S. are showing price increases," he said. "The apparent disparity results from fewer sales in high-cost markets, so a change in the mix of sales is dragging down the national median home price."

Areas showing healthy price gains include disparate markets such as Gary-Hammond, Ind.; Binghamton, N.Y.; Corpus Christi, Texas; and Spokane, Wash. "We can't emphasis enough how much local conditions vary, even within a given area, so it's important for consumers to make decisions based on local market conditions."

New-home sales are forecast at 788,000 this year and 693,000 in 2008, down from 1.05 million 2006; no sustained improvement is seen for new homes until 2009. Because builders have correctly adjusted production, housing starts, including multifamily units, will probably total 1.36 million this year and 1.16 million in 2008, down from 1.80 million last year. The median new-home price is projected to drop 3.0 percent to $239,100 for 2007, and then decline another 0.2 percent to $236,600 in 2008.

The 30-year fixed-rate mortgage is estimated to rise slowly to the 6.4 percent range by the end of 2008, with additional cuts in the Fed funds rate lowering short-term interest rates.

Growth in the U.S. gross domestic product (GDP) should be 2.1 percent in 2007, down from a 2.9 percent growth rate last year; GDP growth is forecast to improve to 2.4 percent in 2008.

The unemployment rate is likely to average 4.6 percent for 2007, unchanged from last year, but rise to 5.0 percent in 2008. Inflation, as measured by the Consumer Price Index, will probably be 2.8 percent this year and 2.7 percent in 2008, down from 3.2 percent in 2006. Inflation-adjusted disposable personal income is estimated to grow 3.1 percent this year, the same as in 2006, and then grow 2.2 percent next year.

*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 parallels the level of closed existing-home sales in the following two months. There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.

Existing-home sales for November will be released December 31; the next Forecast / Pending Home Sales Index will be released January 8.

The National Association of REALTORS^®, "The Voice for Real Estate," is America's largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.

Bonner/Boundary County Real Estate Trends, October 2006 to October 2007