Experts concerned high-priced development was too much, too fast for Valley now in market downshift

By Cynthia Sewell - Idaho Statesman

Edition Date: 03/21/07

If you are in the market for a high-end house, you're in luck. If you're in the market for a low-priced house, take a number and stand in line. If you are a builder or developer, you might want to re-read the above sentences before deciding what kind of house to build.

That's the message from local and national real estate experts in response to the recent downshift in the Treasure Valley housing market. Following more than a decade of boom, the Treasure Valley housing market this year will continue to undergo a market correction that started last year.

"We've been through a heckuva transition period," from decades of stagnant growth to an unprecedented valley-wide boom to a minor bust in the form of a housing market slowdown, John Starr told an audience of more than 200 people Tuesday at an Urban Land Institute conference in Boise.

Local and national experts had some advice for the sold-out crowd to build more affordable housing, monitor the glut of high-end homes, and pace development with city services to support it.

Idaho is ranked third nationally for growth. Experts predict the Gem State will hold that spot through 2030, provided key players developers, lenders, business and political leaders pay careful attention to the market.

LACK OF AFFORDABLE HOUSING

The Ada County median household income has stayed flat for the past few years at about $56,000, while home prices soared 50 to 60 percent during the same period, said Starr, with Colliers International Boise office.

"You cannot have a workforce live in Ada County if all they can afford is a Canyon County home," he said.

The solution is multi-faceted: Income must go up, housing prices must come down and developers must build more affordable homes and fewer high-end homes.

Ada County has a 2.3 percent unemployment rate; Canyon County's is 3.1 percent. While this is a good incentive for people to move to the Valley, it may not be an incentive for large businesses to move here.

That's the downside to a low unemployment rate, Starr said, a lack of employable workforce. Starr said a community college is critical to bringing higher-paying jobs to the area and keeping Idahoans in Idaho.

"Idaho has never sustained job growth for its children," panelist Jim Adair said. "You have exported your children for decades."

LACKLUSTER MARKET

The local housing market in 2006 ended with a more than 40 percent drop in permit activity and a glut of high-priced homes and lots. (Registered Users view permit trends)

Experts expect this year to be the same or slightly worse than last year.

"The market is going to punish you if you are building above $380,000 homes, said Michael diVittorio, director of business development for Group One in Boise.

The Treasure Valley market still is holding its own enough that developers and builders are not holding distress sales, but Langston cautions, "If the market continues to soften and inventory doesn't move by summer, there will be more price reductions and concessions."

Langston said the survival key is "discipline to avoid creating an oversupply."

He also said planned communities and condominiums should be approached with caution.

Thirteen planned communities covering 18,000 acres with 72,000 homes are in the works for Ada County; about 2,000 condominiums are in the pipeline for Downtown Boise alone.

"Be sure people want to live in planned communities," Michael Chernin, founder of Las Vegas-based LandBaron Investments, said. "Be sure people want to live above retail."

Since few condominiums are for sale in Downtown Boise, but hundreds are under construction, experts cannot determine how much the market will embrace condominiums.

Source: Idaho Statesman

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