Caught in a boom

SANDPOINT – Rising home costs priced Mark and Tal Harlan out of Sandpoint.

The couple hoped to buy their first home in this eclectic resort town on the shores of Lake Pend Oreille. But after four months of searching, they gave up trying to find a modest house in their $160,000 to $200,000 price range. They ended up north of town, on the Pack River Road.

“When we found Sandpoint three years ago, we were really attracted to the lower cost of living,” Mark Harlan said. “But by the time we got back here, we stumbled into this housing market. … Almost everything was over $200,000.”

As Sandpoint’s cachet as a resort town grows, other first-time buyers are finding themselves in similar straits. Many are moving to outlying areas to find affordable housing.

In May, Monica Anderson bought a house six miles east of Bonners Ferry. She leaves her home at 6:45 a.m. to commute to her job at Coldwater Creek in Sandpoint. It’s not an ideal drive, especially with a fidgety 4½-year-old who gets dropped off at daycare.

But a “dumpy old trailer” was the only property within her budget in Sandpoint, the single mom said. In Bonners Ferry, she got a newer two-bedroom house, on two acres, for $106,000.

Though home prices have shot up everywhere, they’ve been on a particularly steep trajectory in Sandpoint, whose sleepy charm, local ski hill and laid-back mix of loggers, hippies and professionals have attracted a flood of real estate investors and second-home buyers.

The median sales price for a home in Bonner and Boundary counties rose 42 percent to $183,000 in the last 2½ years, according to the Selkirk Association of Realtors. Within Sandpoint’s city limits, it’s rare to find a home for less than $200,000, said Kyler Wolf, a Realtor with Tomlinson Black. Empty lots are selling for $100,000.

First-time buyers, who haven’t built up equity in a previous house, find themselves in sticker shock, Wolf said.

“They’re competing with investors for those entry-level homes,” he said. “That’s typical for all resort markets, but it’s something new for Sandpoint.”

Flattering national publicity has fanned outside investors’ interest in Sandpoint. In 2002, Smart Money Magazine named Sandpoint as a one of the best resort towns to invest in. It was the beginning of a wave of articles, including mentions in Sunset and Outside magazines.

“A large part of the market for us is retirement homes, vacation homes and second homes, with a very keen eye for investment,” said Jim Watkins, past president of the Selkirk Association of Realtors. Few of the buyers are year-round residents. Bonner County’s population grew only 1.7 percent last year.

Many investors have second-home budgets in the $250,000 to $450,000 range. With limited inventory, and high demand, the prices naturally bid up, Watkins said.

As a result, many first-time buyers end up tempering their expectations, Wolf said. Homes in the $150,000 range still exist, but they’re 20 to 40 miles away in Rathdrum, Careywood or Priest River.

“If they’re already working at the lumber mill in Laclede, we can find them a nice home for better value in Priest River,” Wolf said. “But it requires a change of perspective for those buyers.”

First preference was Sandpoint

Mark and Tal Harlan moved to North Idaho from Colorado last year. Monthly rent payments of $950 convinced them it was time to buy.

Tal, 35, works a teacher, and Mark, 37, runs his own business, Seven Cedars Handyman Solutions. Even with a dual income, the couple had a hard time finding a house they could afford in Sandpoint.

“Our first preference was to be in town,” Mark Harlan said. “We used to walk to city beach all the time, and we liked being able to ride our bikes to the farmers market.”

But the search was discouraging. “It was cutthroat,” he said. “If you went to look at a house and liked it, you had to immediately head back to the real estate office and put in a bid.”

At one point, the couple had four bids and $4,000 in earnest money out on four homes. They lost out on every one.

In May, the Harlans bought a $170,000 house with acreage on Pack River Road. It was originally “off the grid,” built with solar panels and without running water. The previous owners updated it, and cashed in on the rapidly appreciating real estate market.

“Two years ago, this house sold for $55,000,” Harlan said. “We could turn around and sell it for $200,000 tomorrow.”

The couple’s new home is within biking distance of national forest boundaries, and 15 minutes by car from Sandpoint. In retrospect, it’s not a bad tradeoff, Harlan said. “We have moose, deer, rabbits and huckleberries.”

Wage-price gap a concern

The gap between wages and housing prices concerns Mark Williams, executive director of the Bonner County Economic Development Council.

“Forty-five minutes to an hour is a normal commute for people in California and Western Washington, but it hasn’t been normal here,” he said. “If we get too much of an imbalance, we’ll have a work force that says, ‘See you later.’”

Workers might find it more attractive to move to Spokane or Kootenai counties, where wages tend to be higher and housing is more abundant and affordable, Williams said. An out-migration of workers would hinder Bonner County’s efforts to recruit new employers and grow the local economy, he said.

When adjusted for inflation, the average annual wage in Bonner County has actually dropped over the last 20 years, Williams noted. According to federal figures, it peaked around $30,000 in 1980, and it was $21,556 in 2003.

“There’s very little we can do to cap real estate prices,” Williams said. “We’re looking at it more from, how do we create jobs that pay a living wage? … We want to keep a middle class, and preserve a lifestyle that was here when logging and railroad jobs were prevalent.”

Katie Marcus, mortgage lending manager at First Bank in Coeur d’Alene, has worked with several homebuyers in the Sandpoint area. Higher prices are making it harder for young buyers to get their foot in the door, she said.

Bonner County’s median wage is $12.70 per hour. With those kinds of pay stubs, most banks would make a maximum home loan of $94,000, she said.

A couple could qualify for a $165,000 loan on Bonner County’s median family income of $44,300, Marcus said. But they might have a difficult time making the $1,100 monthly mortgage payments on that income, she added.

“If you have car payments and kids in school, it would be tough,” Marcus said.

A couple of new developments are coming online in the Sandpoint area, but neither caters to first-time buyers. Construction is under way at “Seasons at Sandpoint,” a 105-unit luxury condo development on the lake. The project is the city’s largest new housing development in recent memory. Units start at $500,000 and range up to $1 million in price.

Three miles west of Sandpoint, developer Ralph Sletager is planning a 535-unit subdivision in the city of Dover. He hoped to have the lowest-priced units start at $250,000, but construction and development costs will probably push them to $300,000 or more, he said.

“They won’t be starter homes,” Sletager said, but they would be within the budgets of professional, working couples, he said.

Investor demand will continue to be a dynamic in Sandpoint’s real estate market, Realtors predict.

“The market is coming from everywhere now – from Colorado, Arizona, Utah and Washington state,” said John Gillham, a Sandpoint developer. Compared to prices in other communities, Sandpoint is still affordable. And that will continue to drive demand, he said.

“Even though it seems expensive to us, they… would pay two to three times that much for it” in another market, Gillham said.