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'Real trouble': Valley home sales, construction plummet
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"Is it a Buyer's Opportunity"

Downturn could hurt builders, suppliers, retailers, workers
Lisa M. Collard / Idaho Statesman

Large and small businesses such as Aslan's Siding stand to lose in the housing slowdown that has started in the Treasure Valley. Owner Aslan Mankied worked Wednesday on a home in builder Don Hubble's Charter Pointe subdivision near Maple Grove and Lake Hazel roads in Meridian. Meridian last month issued the fewest single-family building permits for any month since November 2002.
Treasure Valley residential home sales showed signs of weakening in July, spurring fears among industry officials that the local housing boom has finally run out of steam.

July '05 July '06 % change
Ada County 1,167 987 down 15%
Canyon County 549 506 down 8%
Total 1,716 1,493 down 13%

Joe Estrella
Idaho Statesman
The Idaho Statesman | Edition Date: 08-24-2006
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Six months into a nationwide slowdown, the Treasure Valley's runaway residential-housing market finally hit the wall in July, taking a dramatic downward turn, say area builders, real estate agents, mortgage brokers and economists.

Economists say it's too early to say how severe the housing downtown will become, but it could hurt builders and their suppliers, curb retail spending and force layoffs. The July data "means real trouble," Boise economist John Church said.

"There is going to be a reduction in (construction) employment," said Don Holley, professor of economics at Boise State University. "And as construction employment goes down, you'll see lost jobs among building suppliers, on down to retail stores, grocery stores and gas stations."
Statistics compiled by the Intermountain Multiple Listing Service and local governments show:

• Meridian last month issued the fewest single-family building permits for any month since November 2002. That ended a 2-1/2-year boom in what was once the hottest market in the state.
• Total sales of residential housing in the Treasure Valley fell 13 percent from July 2005 to July 2006.

• Sales in Ada County fell 15 percent, and in Canyon County 8 percent.

• The number of homes for sale has risen dramatically, from 1,779 in January to 5,500 in mid-August.
• Residential building permits in Boise were off 21 percent from July 2005.

The decline is taking a toll on home sellers, too — to the benefit of some buyers. Nampa real estate agent George Tallabas said the growing inventory, coupled with a dwindling number of qualified buyers, is forcing some sellers to slash asking prices.
Especially hard hit have been sellers with homes priced over $250,000 and those who need to sell a house before buying a new one, he said.

"Our agents are constantly coming in and saying, 'I've got another price reduction,'" Tallabas said. But median prices continued to rise in July, to $246,900 in Ada County, up from $236,500 in June, and to $164,900 in Canyon County, up slightly from May and June.

Nampa construction seems to be still going strong. The city issued $19 million in residential building permits last month, compared with $15 million for the same period a year ago.
But Tallabas, of ReMax Advantage, said the contracts for those permits were probably written 60 days ago. With 1,033 homes for sale in Nampa alone, the true state of the Canyon County residential market will become evident in the next few months, he added.

"It's just simple economics," Tallabas said. "Contractors have over-supplied the market. And it's going to take more than 30 days to wash all of that out."
The change is most telling in Meridian, where building officials have spent the last year scrambling to keep pace with requests for residential building permits. This July's $17 million in single-family permits was 74 percent below July 2005.

"I think we're going to see a correction — a significant correction," said Daunte Whitman, city building official.

A correction is already under way nationwide. The U.S. Commerce Department last week reported that construction of new homes fell in July for the fifth time in the past six months. The National Association of Realtors said July sales of existing homes dropped to the lowest level in 21/2 years.
The slowdown in Treasure Valley home sales came suddenly after a record-breaking first half of 2006.

According to the MLS, which tracks housing transactions in the area, there were 9,378 homes sold in the Treasure Valley during the first half of the year, a 21 percent spike over the 7,732 sales during the same period a year ago.
But the slowdown in July hit virtually every sector of the residential market:

• Sales of new homes in Ada County plunged 22 percent from July 2005, while sales of existing homes were off 11 percent.

• New home sales in Canyon County managed a 4 percent increase year-over-year, but existing home sales plummeted 14 percent.
Analysts attributed the rise in new home sales to a median new home price of $164,900, about one-third less than the Ada County median.

Don Hubble, owner of Meridian-based Hubble Homes, blamed rising home prices on exorbitant land prices builders have been forced to pay the last few years.
As prices soared, wages failed to keep pace, resulting in many potential homebuyers being priced out of the market, Hubble said.

"So a booming market has taken a dramatic turn," Hubble said.

For the rest of this year, he said, his company will continue to work off a waiting list of customers wanting to build homes.
"But if that backlog shrinks too much, we'll have to cut back on the number of homes we were planning to build next year," Hubble said.

Trey Langford, operator of Buildingcredibility.com, a Web site that tracks existing and proposed subdivisions in the Valley, said the slowdown has been building for months as requests for permits have begun to lag.
It's gotten so bad, he said, some real estate agents with exclusive contracts to market subdivisions have had to go out and look for customers, when a year ago the phone never stopped ringing.

"Some people are getting a little hungry," he said.

At The Mortgage Co. in Boise, owner Marianne Wake said some new loans are failing to close because buyers cannot sell their existing homes. "We've seen enough of that for me to be worried," she said.
Wake said the market is struggling because outside investment money has disappeared.

Those investment dollars aren't likely to reappear anytime soon, said Lisa Vander, chief executive officer of Pacific Blue Investment, a California real-estate investment firm that has begun warning clients not to sink money into Idaho single-family housing.
Vander said double-digit home-appreciation rates have pushed median prices in Ada and Canyon counties up 30 percent and 35 percent, respectively, in the last year. At those prices, investors cannot get the rents they need to pay their mortgages, she said.

"The investment doesn't pencil out for a $200,000 home, even with 20 percent down. It won't cash flow," she said.