A cooler housing market

Spokane and North Idaho homebuyers may get a welcome breather this year from runaway increases in residential real estate prices.

Local experts predict that the pace of price increases will slow in 2007. During the last two years, residential real estate values rose at double-digit rates, outpacing most income gains and dampening the hopes of many homebuyers.

Dan Flanagan, past-president of the Coeur d’Alene Multiple Listing Service, said the influx of out-of-town homebuyers should slow. That in-migration fueled property-value increases of nearly 30 percent in 2005 and 13.3 percent last year.

“We still have a tremendous amount of people who want to come up here, but they’re having trouble selling homes in other places,” said Flanagan, who predicts that home prices will increase by about 5 percent this year.

In Spokane County, Rob Higgins of the Spokane Association of Realtors, said the residential real estate market is stabilizing. He forecasts that Spokane will return to a more normal rate of appreciation in 2007 — about 4 percent to 6 percent compared with 14.5 percent in 2006.

In the past few years, Kootenai and Spokane county markets have taken a twist: While low-to-middle income homebuyers have struggled to find reasonably priced houses, an emerging population of affluent residents are spending upwards of half a million dollars to live in condos and upscale housing developments, such as Black Rock.

Old mill sites in North Idaho are being revamped into mixed-use developments and historic buildings in Spokane converted to condos.

Last year, Spokane issued building permits for 79 condos in a half-dozen complexes. Spokane is starting off 2007 with permits pending on about 200 units — including projects in the former home of Joel Inc. and the City Place condos, going into the Ridpath Hotel’s former Executive Court.

“I think 2007 is going to be a defining year in terms of how deep that market is,” said Dave Black, CEO of Tomlinson Black Commercial, speaking about the higher-end downtown condo market.

Although national trends don’t always apply to Spokane and Kootenai counties, financial experts predict less activity from short-term investors, who some blame for the rampant price increases in North Idaho in 2005. With the stock market rebounding, interest rates rising and some property values dropping, experts say that speculative investing isn’t quite as attractive.

Local developer Jim Frank, owner of Greenstone Corp., explained in an e-mail the impact of speculative investing.

“When the market slows — as is now the case — the speculators become sellers depressing the market. The result is that the speculative activity distorts the markets in both directions, helping to cause a boom and then bust cycle,” Frank said.

A number of communities are grappling with issues related to affordability, said Chris Venne of Community Frameworks. The Spokane-based nonprofit, which plans, finances and builds affordable housing, held workshops on creating affordable housing in high-priced markets for audiences in Kellogg, Boise and Sun Valley, Idaho. Attendees ranged from city and county officials to developers, he said.

A solution that’s gaining popularity in western Washington, Venne said, is creating community land trusts. Nonprofits own and lease land to people who own homes.

While affordability is an ongoing issue, Venne said, it’s encouraging to see indicators that current home prices are stabilizing.

“The best thing, I think, is that the period of really nasty, unpredictable price increases seems to be largely behind us.”