Green Real Estate in Idaho

While you might not know that we’re already deep into spring time here in the Treasure Valley based on the weather, the calender doesn’t lie and neither does the bump we’re seeing in the market. Historically, the Treasure Valley real estate market is very cyclical with slower times in the late fall and winter months and a vigorous revitalization in the spring and summer which peaks in late July.

This year is no different, in fact early spring sales got a terrific shot in the arm with home buyers seeing the expiration of their tax credit incentives drawing to a close. The vast majority of home buyers taking advantage of this opportunity were focused on the $110,000 to $180,000 price points and they came out in droves before the end of April (2010) at which time they had to have an executed contract on their property of choice to qualify.

Some agents and analysts lament this activity and appear to anticipate a dramatic drop in activity post tax credit. While this opportunity for buyers did accelerate many first time buyer time lines I do not anticipate closings to plummet. Buyers late to the party will be closing throughout May and June. Individuals and families that are buying up or buying down were less likely to be affected by the tax credit and are more likely to be focused executing their move later this summer. While activity in the entry level housing market (sub $200,000) has probably peaked, sales will continue and likely we’ll see homes at higher price points coming under contract during the summer.

The issue that continues to plague this and every market is the amount of distressed property that must be absorbed. The number of distressed homes for sale, short sales or REO/Bank Owned, outnumber traditional resale and have for months. This continues to put downward pressure on prices. Prices have stabilized considerably but the “fire sale” pricing of short sale and REO homes will likely depress prices for the foreseeable future, at least the next several years.

Why will things continue for the next several years you may be asking… well, the reason is simple. Before the sweeping mortgage reforms, most home buyers opted for 3, 5, or 7 year ARMs meaning that in X number of years the fixed mortgage APR becomes adjustable. Since most homes purchased in the last 5+ years are now underwater these homes will likely wind up as future bank owned or short sale listings. Thankfully, interest rates continue to be at all time lows, realistically there is no way they will stay here for ever. I’m the first to admit that I am no financial guru, but to see rates at 6% or higher in the next 12 months doesn’t seem at all unrealistic. 6% is still a fantastic interest rate, but when buyers become used to 5% there will be a crunch when rates rise.

It will all work itself out. Bottom line is that prices are down, interest rates are fantastic, and the amount of home that your money will buy is downright incredible. While many sellers will not like what the market will support in the sale of their home, if they are buying up the returns (in the form of savings) can far outweigh them.

So, several weeks ago, January 7th to be exact, an interesting article by Deborah Orr was published by Forbes about the 25 weakest housing markets in the US. Surprising to some, Boise was named in this list, but as you may imagine, there is more to the story.

Firstly, as I am sure many of you do as well, I spend some time now and again looking around in print and online publications to see what kind of press Boise, the Treasure Valley, and Idaho are getting at any given time. For the most part, the last few years have been especially good media wise when it comes to Idaho and real estate in general. Favorable climate, affordable housing and cost of living, along with a growing economy and abundant recreation/outdoor activities were some of the items featured in these stories. Some online commentators have speculated that we’re perfectly content to bathe in the good press but unable to accept the bad. The problem however is that this article doesn’t seem to have much substance.

Outlined in the beginning are the criteria used to identify potential areas.

To find them, we asked Moody’s Economy.com to compile a list of the country’s real estate markets that are furthest from recovery. Moody’s looked at the country’s Census-defined metro areas–including metropolitan and micropolitan statistical areas–with populations over 500,000 and prepared forecasts through 2011. They then compared them with prices in the second quarter of 2008, the latest figures available, to calculate how far prices will likely fall before reaching bottom.

My biggest issue with the article is that Ms. Orr and or Moody’s (where the data came from) seem to think that Boise is a big second home market, lumping us in with Salt Lake and Provo UT as major declining ski home sales areas. Wait… What?? No one buys ski homes here in Boise or the “Boise Metro Area”. The one exception to this “No one buys ski homes in Boise” rule I suppose could be someone who buys their PRIMARY home in Boise and happens to ski. The census map of what is the Boise Metro Area is HUGE. Here locally, the Boise Metro Area (in discussing real estate) is generally accepted as Ada & Canyon County (Boise, Eagle, Meridian, Kuna, Nampa, Caldwell, Star, etc).

Tamarack, Brundage, and Sun Valley are all within a few hours drive and the skiing is fantastic. To say that these areas with such fantastic skiing are a part of the Boise Metro Area, when considering real estate, is an extreme reach. To lump their housing issues into ours is downright laughable. Tamarack and Brundage (McCall) are served by a completely separate MLS (Multiple Listing Service). They are indeed resort communities with some year round residents, but like Sun Valley, the bulk of the market is in second home sales.

Now, as a REALTOR here in the Treasure Valley I would like to point out that I am not a member of either of these outside MLS organizations, but as an Idaho native I’m fairly confident saying that McCall/Sun Valley are mostly second home markets and are probably hurting badly for buyers.

While we continue to explore the chaos and confusion that is the economic turmoil of today it would seem normal and even expected for second home markets to suffer. Tightening mortgage requirements, economic uncertainty, rising unemployment and employment uncertainty cause consumers to seriously re-think their spending habits and jumping into a half million dollar mortgage on a second home is probably the last thing on their minds.  In the end, I suppose that the article is “accurate” because they are focused on the “Metro Area”, but the problem remains that the communities that are hurting the most (second home markets) are so far removed geographically that they really don’t play any part in the real estate market in the heart of the Treasure Valley here in Idaho.

Real Estate markets are getting enough negative press these days for issues, going out of your way to make up issues to throw fuel on the fire seems irresponsible to me.  You can check out the full article here.