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North Idaho is open for (real estate) business

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North Idaho is open for (real estate) business

The national real estate market may still be reeling from a series of blows, but the local market shows signs it’s already beginning to recover.

It’s no secret now that the national housing market took a nosedive and managed to drag a large part of the economy down with it. You can buy a house in Detroit for $1,000 (not down, that’s $1,000 total) and given the media coverage, the average American might assume that just about everybody and their neighbor is staring foreclosure in the face. As of April 2009 there were 6 million unemployed, Chrysler was hovering at the edge of bankruptcy, GM was planning to take a “summer off” from building cars and the stock market only looks attractive to those whose only concern is to “buy low.” A trillion is the new million and the feds are printing money like there’s no tomorrow. It’s almost enough to make you give up your license to sell real estate.

But wait. The late Steve Van Horne, for decades a powerhouse in the local real estate market, used to say that bad news for the country is generally good news for the northern Idaho/western Montana real estate market, and recent trends suggest that might still hold true.

“It’s definitely a buyer’s market right now, but I’ve seen a big uptick in people looking for rural, alternative energy properties,” said Tom Renk, owner/broker of CM Brewster Real Estate in downtown Sandpoint and a 30-year veteran of the local real estate market. That’s because turmoil at the national level generally makes a place like North Idaho, with its abundant natural resources and relatively scattered population, look very attractive to residents of urban areas.

Carol Curtis, a Realtor with Century 21/Riverstone, says, “Unfortunately, in some ways, that’s probably true. For example, if what’s currently going on with swine flu gets worse, we’ll likely be writing a lot more closings.

“Over the last 6 to 9 months it looks like the median price is up,” she added. “Could that be the start of a recovery? That may well be. Most of the activity is in property under $200,000 with some at the top.”

North Idaho and western Montana didn’t contribute much to the issues that created problems nationally—a vicious cycle of high risk loans leading to property foreclosures, leading to a huge increase in supply plus tighter lending standings which in turn leads back to both a higher foreclosure rate and therefore bigger supply—but the local market was impacted by what was happening nationally. A remarkable (and ultimately unsustainable) real estate ‘bubble’ grew quickly in the first years of the 21st century as out-of-the-area investors with access to ready money ‘discovered’ what the locals already knew—this is an attractive place to invest in real estate. Low prices and a desirable location quickly turned into high prices and a desirable location—prices so high that many long-term locals were driven out of the market.

“People were able to borrow money left and right,” Renk explained. “And we saw a lot of purchases of second and third homes, of investment properties that buyers planned to subdivide, and properties purchased just to ‘flip.’ [Short term purchases where buyers sell much higher than the purchase price.] We’re not seeing people do that now.” Though Renk says there’s still some interest from investment buyers (as opposed to buyers looking for a home to live in), “... they’re not looking in a high price range.”

What’s happened nationally is “hitting here pretty hard,” Renk said, because out-of-area buyers no longer have the same resources available to spend on property here, due to lost stock market investments, lower personal home values or even job losses. Still, Curtis points out, “we’ve seen a slowdown, but not a rejection (from buyers). A lot of people have postponed making a decision about buying property in order to see if the market has really bottomed out. In our office, we’ve already seen a pick up (in interest).”

In addition, Renk says, given what’s happened with the economy alongside a high local unemployment rate, there are “some foreclosures happening here,” along with “imminent danger sales—they’re not in foreclosure, but it’s close; in some cases, they’re trying to do short sales,” getting the mortgage holder to agree to a sale for lower than what’s owned on the home as a way to stave off foreclosure. (If you’re considering this, be aware that you’ll have to claim as income, for tax purposes, the difference between what you sell for and what your mortgage was.)

Which means there’s a lot of property available locally to buy. “Right now we have about 3,000 active listings in the MLS,” Renk stated, “which is high for this time of year.”

It also brings those prices down. “An appraisal on a house is based on what comparable houses are selling for,” explained Renk. “If foreclosures and short sales bring those prices down, then it’s going to bring down the appraisal on any comparable house.”

Add a high supply to lower prices and you get a buyer’s market. “Interest rates are low, and lenders are lending,” he said. “If you have good credit and aren’t in hock up to your eyeballs, it’s a great time to buy. Interest rates are at historic lows.” (With good credit you can expect an interest rate around 5 percent as we go to press.) And there’s deals to be made. “In some cases we’re seeing prices we haven’t seen in 15 to 20 years,” said Renk. “For example, there’s a property on ten acres with a 3,200 sq ft home and a shop, selling for $219,000. That’s an incredible price. You can’t build a 3,200 sq ft house for that.”

In the period from January 1 to March 15, the average sales price on a residential property last year (2008) was $315,590. For that same period this year, the price is $259,659.

Of course, that amount still seems high to anyone who’s been here a while. For example, Sandpoint Magazine’s “Marketwatch” for the summer of 1999, a period when Y2K worries made the Pacific Northwest particular attractive to out-of-area buyers, listed the average sales price on a residential property as $106,359... and just $119,200 in Sandpoint proper. (Adjusted for inflation, $120,000 in 1999 dollars would equal $153,675.57 today.)

“We weren’t hit as hard here as elsewhere,” Renk offered, “and as confidence returns, I believe we’ll be one of the first to benefit.” Renk said in the region, first-time homebuyers are driving a recovery in the market—that doesn’t have as much impact here because first-time buyers are generally looking in the $150,000 range, and “there just isn’t a lot available at that price,” right now. But “the $8,000 tax credit is helping some people to buy.”

Part of the spring stimulus package, Washington is allowing first-time home buyers and those home purchasers who have not owned a home in the last three years a ten percent tax credit on their 2009 tax bill (or on 2008 if they have not yet filed). A credit is fully refundable, so it either comes off the amount you would owe, or if you don’t owe (or don’t owe that much), it’s returned to you as cash. Three caveats—you must purchase a home by November 30 this year, the credit is limited to ten percent of the purchase price, up to a maximum of $8,000, and you must live in the house at least three years or pay the money back.

In addition, there are income limits. You must make less than $75,000 per year (single) or $150,000 for a couple; higher income purchasers may get a partial credit.

Renk’s gut feeling, which he hastens to add is neither scientifically nor statistically supported, is that “this year will be better than the last two. There is a lot of pent up buying energy and much to chose from.”

And as Will Rogers said when he encouraged people to “buy land... they’re not making any more of it.”

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Landon Otis

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Sandpoint Magazine, North Idaho, real estate market, Steve Van Horne, Tom Renk, Carol Curtis

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