What some North Idaho residential real estate observers early this year thought would be a momentary market correction has turned into a different beast.
With a national economic crisis hurting consumer confidence and a credit crunch affecting both buyers and builders, home sales and housing construction have dropped dramatically.
New home starts are down more than 40 percent in many areas. Sullivan Homes Idaho, a prominent custom and speculative builder, went out of business last month.
Builders are laying off workers and going “more into the survival mode,” said John Saffeels, president of the North Idaho Building Contractors Association.
“Banks are not lending on specs at all right now,” Saffeels said. “People with really good credit scores aren’t qualifying for loans they should qualify for.”
It could take two or three years for the market to turn around, said Dan Davis, owner of Coeur d’Alene-based Dan Davis Realty, who said he’s observed North Idaho real estate for decades.
“I think they’re all in trouble, because we have so much inventory,” he said. “It’s going to take a long time to absorb that inventory.”
In Kootenai County, there were 1,333 homes for sale on the MLS earlier this week, according to the Coeur d’Alene Association of Realtors.
Prices also have declined across the Panhandle. The average sales price for all residential homes on less than an acre was $225,040 for the six months ending in September, down 3 percent from the same period in 2007. The median sales price was $190,000, down 5 percent from last year.
A couple hundred real estate agents have left since the market’s peak in 2006, said Rick Vernon, executive officer of the Coeur d’Alene Association of Realtors. Yet the slowdown is hitting builders particularly hard. When house prices depreciate, existing homes begin selling more quickly than new ones because there is more room to negotiate, Vernon said.
“The builder is being dinged for interest every day and nobody’s in the house, so obviously that’s not an option,” Vernon said.
In Coeur d’Alene, 179 single-family homes were permitted so far this year, down 43 percent from last year. Post Falls has seen the value of home permits cut in half from last year.
“We’ve never experienced anything like this,” Vernon said. “Up until just recently it was just a market correction. I’ve been in the real estate business for 30 years, and we’ve had one almost exactly on five-year cycles.”
But luxury homes, especially those on lakes and rivers, appear to be a bright spot.
At Gozzer Ranch & Golf and Lake Club, a roughly 700-acre exclusive community on the east side of Lake Coeur d’Alene, Scottsdale, Ariz.-based developer Discovery Land Co. boasts sales this year of more than $52 million – compared with more than $80 million during all of last year. Representatives attribute sales to a limited number of memberships – about two-thirds have sold, the latest for $100,000 – that make land there an investment. The company offers a variety of luxury homes, ranging from new lakefront condos under construction to custom home sites.
“The people who can afford it, they can afford it,” said Don Breidenbach, director of sales. “They could be anywhere. They don’t have to be here.”
Four spec homes on the market earlier this month ranged from $2.3 million to $3.5 million, he said. At the three-story Lakeshore Lodge, 17 of 28 units are spoken for, Breidenbach said. They range from about $2 million to $4.5 million.
Around the lake at The Club at Black Rock, a similar gated golf and recreational community, it’s been an off year compared to recent “very escalated” sales in the market, said developer Marshall Chesrown.
“We had as much traffic as we’ve ever had, but the closing of deals was probably off 40 percent from past years,” Chesrown said.
“We’re not projecting any great things for ’09.”
Luxury homes in the $500,000 to $1 million range, however, have not fared well.
Sullivan Homes Idaho closed last month after going $13 million in debt; it had not sold a home in a year. It had built and sold expensive homes in several exclusive developments in the Sandpoint area. Prices ranged from about $800,000 to $1.9 million.
The company was the “preferred builder” of homes at The Idaho Club, the golf community under development on the Pack River delta between Sandpoint and Hope.
The Idaho Club later released a statement claiming it “remains very strong and vibrant.” Pend Oreille Bonner Development LLC boasts it had 19 transactions closed or pending over the last six months ending in September, totaling $16 million.
But Davis, of Dan Davis Realty, is building the first of as many as 28 condominiums overlooking Lake Pend Oreille near Bayview, Idaho, in that price range – bankrolling the project himself. The first three three-bedroom, two-bathroom Vista Bay Condominiums, which will have private boat slips at an adjacent marina, might be priced at nearly $600,000, Davis said.
He plans to start another three-unit foundation this year. He remains bullish about his project because it’s tied to recreation in a tourist area. The massive Farragut State Park borders it on two sides.
“I also know that lake property, there’s only so much of it,” Davis said. “If you build something sensible, there’s always a market for that. In 40 years, I’ve never seen it change, (although) it might slow down.”
Homes for first-time buyers also might be selling a little bit better, Saffeels said.
Of the sales recorded during the last six months, 82 percent sold for $100,000 to $300,000 – a large increase from the same time a year ago.
The downturn has freed up affordable housing, expanding the number of homes on the market for less than $180,000, Vernon said.
“That’s probably the silver lining,” he said.