North Idaho real estate behind the headlines

“Generally speaking, home prices are lower in expensive markets and higher in affordable markets, implying greater mortgage rate sensitivity for high-priced homes.” — National Association of Realtors Chief Economist Lawrence Yun

It has not been a slow period recently for headline-grabbing news. The disastrous mass shootings in our country, the political farce of our governments, the war in Ukraine, and so on are unfortunately always with us, but this week I have been getting a lot of coverage from my curated news feeds about the housing market. This is likely because spring is the time where housing comes to the fore and gets real traction in the economy.

Housing markets, which are the synthesis of buyers and sellers, are a local phenomenon. How “local” is defined depends on the scope of analysis. There are certain neighborhoods or areas within a city that command a price premium, so the average price of a home in any given city still has a wide latitude from the lower to the more expensive properties.

But it is interesting to compare trends as the analysis gets broader in geographic terms: where does the housing market in North Idaho stand compared to regional and national markets? Over the past seven years, the housing markets that showed the most appreciation were mostly in the West. For some of those years, the state of Idaho was the fastest growing state, with prices in North Idaho reflecting this surge in demand. The city of Coeur d’Alene made national news as it became one of the most sought-after destinations.

But there has been a shift at the national level: the most recent data from First Quarter 2023 indicates the Western states that saw the greatest price increases are now seeing prices rolling back, in some cases significantly so: Boise, which had seen a 67% increase over three years, has dropped 10% year to date. The top 10 metro areas with the largest year-over-year price increase of gains of at least 12% are:

• Kingsport-Bristol, Tenn.-Va. (19%)

• Oshkosh-Neenah, Wis. (17%)

• Warner Robins, Ga. (16%)

• Burlington, N.C. (15%)

• Elmira, N.Y. (15%)

• Oklahoma City, Okla. (15%)

• Milwaukee-Waukesha, Wis. (14%)

• Appleton, Wis. (12%)

• Hickory-Lenoir-Morganton, N.C. (12%)

• Santa Fe, N.M. (12%).

It’s interesting there are three places in the top 10 in Wisconsin. My preliminary research into this suggests it is driven by affordability, the ratio of average home price to the median employment income. Plus, it’s a nice enough Midwest setting to live in. Also true for Carolina, as Florida has become prohibitively expensive and politicized. The South Region had the largest volume of sales, with 46% of the national sales recorded from the fourth quarter of 2022 through the first quarter of 2023, and the Midwest Region showed the greatest price increase of about 4%. Overall, prices declined 5% throughout the West Region including North Idaho, and remained flat in the East.

While it’s true that markets are local, mortgage rates are not, and hovering around 6.5% right now has dampened a lot of buyer enthusiasm. Compounding this, the inventory shortage continues to create an imbalance in supply which artificially keeps list prices high in the face of slack demand, especially in the sector of individual sellers who are reluctant to try to sell in these turbulent times. I recently acted on behalf of a buyer where we looked seriously at seven different homes, all pretty much comparable in square footage and lot size. My clients got the best deal by far from a builder-developer: the individual sellers could not grasp the market realities and compete.

Within each local market there are sub-markets that don’t have the name recognition, but the value proposition is better for buyers who don’t mind a short drive. Smaller communities like Rathdrum, Athol, Priest River and Bonners Ferry are all very active and growing, and commercial uses like grocery stores and other services are popping up to serve this population. These places are no longer simply satellite or bedroom communities to Coeur d’Alene or Sandpoint, they are communities with their own distinctive identities. Growth follows infrastructure: look at the Spokane Valley to Coeur d’Alene corridor, it is one seamless metro area now. (By “infrastructure” it’s not just road networks, sewer and water utilities: supportive infrastructure is employment based, high speed reliable internet service, affordable housing, and so on).

It is not important to make the media Top Ten lists. We have been there, done that, and it is debatable if the popularity served the best interests of the local residents. There’s also top 10 lists for places where home values are plunging (Phoenix, Austin, San Francisco) or where foreclosure rates are climbing, and North Idaho will not appear on any of those lists. It’s OK to have the media spotlight shine on Wisconsin and Carolina while we quietly go about our business of enjoying life here.

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Raphael Barta is an associate broker with an active practice throughout North Idaho, in residential, vacant land and commercial/investment properties. raphaelb@sandpoint.com