Regional economy in a building phase

All those new subdivisions are pumping up the Inland Northwest’s economy.

Prolific construction of new homes and commercial buildings drove job growth on both sides of the Idaho-Washington border during the past year.

According to state figures, the construction industry accounted for 30 percent of North Idaho’s new jobs. In Spokane County, 21 percent of new jobs were tied to construction.

“The growth we’re experiencing is just phenomenal,” said Bob Grossglauser, president of the North Idaho Building Contractors Association. “Thousands of new lots are coming online in 2005 …Contractors can’t keep up.”

State labor analysts computed the industry’s job gains by comparing construction employment from the second quarter of 2003 to the second quarter of 2004.

Idaho’s five northern counties added about 1,400 new construction jobs during that time. Spokane County added about 700. Kathryn Tacke, the labor analyst who computed North Idaho’s figures, can’t recall another period where the construction industry accounted for nearly one-third of all new jobs.

Luxury homes in Sandpoint, a new factory for Buck Knives, and the march of subdivisions across the Rathdrum Prairie all contributed.

In Kootenai County, contractors built 1,871 new single-family homes this year. Spokane County added 1,844 single-family homes and issued permits for 1,300 new apartment units.

Contractors will work through the winter months, according to Grossglauser. He plans to start six new houses in the next two months.

Other industries also benefited from the building activity

“It’s had a huge impact on our sales in both markets,” said Troy Varness, general manager of Fred’s Appliances, which has stores in Coeur d’Alene and Spokane. “We’ve had to add a few delivery guys.”

He’ll be hiring again next year, when Fred’s opens a Spokane Valley store, and moves into a larger building in Coeur d’Alene.

According to Tacke, another 12 percent of North Idaho’s job growth came from construction-related industries, including real estate, title companies, building supply centers, and appliance stores.

“It’s a little nerve-wracking to have so many new jobs attributed to a source we know will not last forever,” Tacke said.

The construction industry is inherently cyclical. Every upward inch of mortgage interest rates generates predictions of a market cool-off.

But Varness isn’t worried. The large contractors who are his customers are planning projects several years out.

According to National Association of Home Builders projections, Idaho contractors should have plenty of work next year. It’s one of 10 states expected to generate between 8.5 and 21 housing starts for every 1,000 residents. NAHB lists Washington among states with a recovering economy.

“I’m not concerned about a construction meltdown,” said Randy Barcus, Avista Corp.’s chief economist. “I don’t think we’ll see that until interest rates are back in the 9 percent range.”

Barcus expects mortgage interest rates to hit 6.5 percent to 7 percent by the end of 2005. From a historical perspective, those are still attractive rates for homebuyers, he noted.

Rising interest rates could even create a short-term stampede for housing, Barcus said. Procrastinators “will want to get in while they can.”

At the moment, the market remains brisk. “We just don’t have that much unsold inventory,” Barcus said. “Realtors are complaining that they don’t have enough houses for sale. Everything is sold, or there’s a sale pending.”

Staff writer Tom Sowa contributed to this report.