'Flat' home prices expected in Idaho

Article published Oct 6, 2006
by Joe Estrella @ Idaho Stateman

'Flat' home prices expected in Idaho
Construction industry job growth could shrink, but report sees state doing better than many areas of the U.S.

Two reports released this week produced some good news for the slumping single-family housing sector in Idaho, but not so good news for the state's surging employment market.

The good news is that the current dip in Idaho real estate activity will be "less painful" to home sellers than to those in other parts of the country. The bad news is that fewer residential real estate transactions threatens to undermine construction industry job growth that has been fueling the economy.

Mark Zandi, chief economist at Moody's Economy.com, said Idaho home prices will be "flat" next year, compared to other parts of the country. Elsewhere housing values could fall as much as 3.6 percent in 2007, the sharpest decline for an entire year since the Great Depression.
A 195-page report co-authored by Zandi is forecasting lower housing values next year in 133 of the nation's 379 metropolitan areas.

"Idaho was late to the (housing) boom. It has only seen rising prices for the last few years, compared to other areas that have seen double-digit increases for the last five or six years," Zandi said. "So I expect that the market there will go nowhere, and a year from now, we'll see Idaho prices where they are right now."
Zandi said flat home prices actually will be a blessing for the Idaho industry. If housing prices were to continue to rise at a time when sales stalled, then the homeowner would have to slash prices to attract buyers, which in turn would drive down housing values.

The Treasure Valley has already shown signs of a real estate slowdown, with overall home sales falling 13 percent in July and 25 percent in August when compared to the same months a year ago.

Helping to keep area housing in the doldrums for sellers is a growing inventory of unsold homes on the market. According to Housingtracker.net, there were 6,938 Treasure Valley homes on the market on Monday, an increase of 88 percent in the last five months.
Boise State University economics professor Don Holley predicted that the glut of homes will initially hurt the small homebuilder "who has everything tied up in eight or 10 unsold homes."

But George Tallabas, a local realtor with ReMax Advantage in Nampa, said even large builders have had to resort to concessions that would have been unheard of last year. One of the most recent instances involved a large area builder who is offering realtors an additional $10,000 for finding a buyer willing to close on a new home, he said.
John Eaton, government affairs director for the Idaho Association of Realtors, said current sales should not be compared against 2005 figures. Those were skewed by an influx of outside investors looking for undervalued homes to convert into rental properties.

"We're seeing less of that now, so we're returning to a more normal, but still very hot, cycle," Eaton said.

But the recent housing retreat threatens the state's robust job market, according to a Federal Deposit Insurnace Corp. State Profile of Idaho released Thursday.
In its quarterly snapshot of economic activity in the state, the agency reported that Idaho led the nation in job creation during the second quarter of 2006.

Between June 2005 and June 2006, a total of 31,367 jobs were created in Idaho, led by 8,200 construction industry spots, said Shayna Olesiuk, a regional manager with the FDIC regional office in San Francisco.
However, the report said that a second quarter decline of 5.6 percent in building permits from the same period a year ago has "possible adverse implications for overall job growth and the demand for construction financing."

"But Idaho has a lot going for it. It has a high in-migration of people from other states, as well as a high level housing affordability," Olesiuk said.