The dog days of real estate are behind us; so sayeth Kootenai County Realtors. After the setbacks of the past few years, it’s a breath of fresh air to drive around town and hear the pounding of hammers and the chattering of nail guns, even if it’s not at the rate that we’ve seen in the past.
Aerial services provided by Big Country Helicopters (www.bigcountryhelicopters.com) and pilot Jim Van Sky.
Local Realtors agree that the market showed improvement in 2013, as the country continued to pull itself out of recession, and promises to do the same in 2014.
According to Jennifer Smock, managing broker at Windermere/Coeur d’Alene Realty in Post Falls, residential sales in 2013 were higher than anticipated and average housing prices went up 3-7 percent, depending on location, which reflects positive, stable, steady growth.
“Historically, we have an annual growth rate of 3.5 percent in Kootenai County, so we’re right on track with that, which is a good sign,” Smock said.
At the end of 2013, the ratio of distressed residential properties — short sales and foreclosures — to regular resales was only 17 percent. That’s down from 30 percent in 2012, so that’s a good sign.
Katie Bane of Northwest Realty Group says 2013 was “fantastic” and 2014 is off to an outstanding start. She’s as busy this January as she has been in any January in the past 20 years.
“In 2013, total sales were up, inventory was down, and sales prices were up,” Bane said. “After so many years of decline in those areas, it was a really nice change.”
John Beutler of Century 21 Beutler & Associates also agrees that the market is rebounding, and he has the numbers to back it up. He’s been gazing into his crystal ball more than usual lately, as he’s been asked to speak at the 27th Annual Real Estate Market Forum in Spokane, covering trends in real estate, construction, and the local economy in the Spokane-Kootenai-Bonner area.
He notes that the sale of vacant lots is a good indicator of the condition of the economy. Sales fell from a normal average of 230/year in 2005 to 75 in 2008. Vacant lots didn’t move at all in 2009-11, but were back up to 82 in 2013. And prices have dropped 50 percent.
“It’s now affordable to buy a lot and build on it,” he said.
Due to the lack of housing starts in 2013, and based on population growth in Kootenai County, we could be facing a housing shortage in 2014, Smock said, until new construction catches up with demand. But the forecast for residential construction is very positive. “Some of the builders we’ve talked to have 24-28 contracts out right now, as opposed to one or two last year. So things are really picking up.”
Beutler noted that new home permits dropped from a high of 313 in 2007 to a low of 116 in 2011, but were up to 269 in 2013.
“It really comes down to supply and demand,” Beutler said. “There’s a pent-up demand for new homes.”
That demand will raise home prices, Beutler said, although they should remain stable for the next couple of years. But by 2015-17, we should see more than the normal 3 percent increase in housing prices, he said. And as the cost of new homes increases, the cost of existing homes will be forced up, as well. A rising tide floats all boats, so to speak.
Building costs — labor and materials — have continued to increase since 2007. And when costs go up, people look toward purchasing existing inventory. But buyers need to compare apples to apples when looking at buying an older home vs. building a new one, as each carries its own hidden costs, Beutler said.
In spite of the changes banks have undergone due to federal guidelines implemented after the crisis of 2006-07, they are still lending money. The reality is that buyers need to meet reasonable guidelines, Bane said — which means a job with decent income, being able to afford a down payment, and having good credit. “It’s a healthier lending environment, much like it was prior to the crisis.”
Interest rates continue to have an effect on real estate sales. For every one percent the interest rate increases, a buyer’s ability to purchase drops 10 percent, Smock said. Decreases in the number of first-time homebuyers and their ability to finance their purchases are directly related to interest rates.
Lower interest rates mean people have more buying power. Beutler remembers 1981-82, when the number of realtors in the area dropped from 775 to 135, primarily due to interest rates reaching 16 percent.
“The norm was 9-10 percent, which people thought was a decent rate,” he said. “With today’s rates, you can afford twice as much home now. Prices are up, but income levels are higher, as well.”
As for commercial real estate, “optimism” is Windermere’s Joe Fabiano’s key word. He sees an increased sense of optimism based partly on the recovery in the residential market and the trend toward a more stable economy. Supporting that optimism are interest rates that are still lower than they’ve been for quite some time, affording investors economic leverage.
The strongest demand continues to be in multi-family products, Fabiano said, especially those with four units or less, since they’re are eligible for residential-type financing, with lower interest rates and longer amortization.
That optimism is also reflected in an increased demand for office-related space, a segment that’s seeing vacancy rates coming down from a high of 8-10 percent to a low of 5-6 percent.
Industrial real estate is also rebounding. “It’s primarily fueled by the ability of business and trade people to expand their businesses,” Fabiano said. When contractors have more work, they in turn help those complementary services — plumbers, electricians, etc. — grow as well.
The only area in commercial real estate that isn’t rebounding quite as strongly is retail, according to Fabiano. While there is still that same sense of optimism, supply generally exceeds demand, so it remains soft.
If you’re considering selling a home, now is the time to do it.
“It’s a great time to beat the competition to market,” Beutler said. “The people who are looking to buy now are serious. And you can’t sell a home if it’s not on the market.”
Overall, Smock thinks we’re continuing to rebound, and are only going to go up from where we were in 2013.
“We’re still going to have a good year this year,” she said.North Idaho Business Journal February 2014 By Beth Hanggeli NIBJ writer