The state of local real estate

By BRIAN WALKER

Staff Writer

COEUR d'ALENE — Booming, and no bubble.

That was the upbeat theme during the 10th annual Kootenai County Commercial Real Estate Forum that covered all types of properties and was organized by Coldwell Banker Schneidmiller Realty at the Salvation Army Kroc Center.

"The new construction market is booming," Rob Brickett, a Coldwell Banker agent, said Thursday. "There's an incredible demand for new homes in our area. The secret is out and people want to live here."

There were 878 new construction permits issued in the cities of Coeur d'Alene, Post Falls, Hayden and Rathdrum in 2016, which was 139 more than 2015 and 165 more than robust 2006.

"I get emotional every time I show (the permit chart)," said Brickett, drawing laughs from the crowd of nearly 400.

As a result of high demand, median home prices for new construction have also climbed in three of the county's four largest cities. It's risen to nearly $300,000 in Coeur d'Alene, about $225,000 in Post Falls and $230,000 in Rathdrum. Hayden's price is down, but is still the highest among the cities near $330,000.

Brickett said one trend to follow this year is if prices will push some buyers out of the market.

"It will be interesting to see what types of homes fill that void in the ownership market," he said.

Due to the building boom, there's a shortage of skilled craftsmen, Brickett said.

"There's far more opportunities to work than can be filled by the local workforce," he said. "That labor shortage will be our glass ceiling."

While some 2016 real estate numbers are comparable to 2006, agent Joel Elgee said the industry is not entering a bubble.

"There's so much pent-up demand from the downturn that, even after five years of solid gains, we expect at least three more years of market gains," he said. "Market conditions in residential real estate are healthy and sustainable."

Low inventory was another theme at the forum. There were 2,574 homes on the market at the end of 2006 and 3,100 at the end of 2009. In 2016, there were fewer than 2,000.

The local labor force increased by more than 1,600 people in 2016, while the unemployment rate remained below 5 percent. The increase in personal income is estimated to exceed 4 percent.

"We continue to see business and investors gravitating to our area and this will continue to have a positive impact on the workforce and unemployment rate," a Coldwell Banker report states.

"Commercial construction costs have remained high and current rental rates are sub-par to the construction costs. As our market conditions continue to improve, rental rates will increase until the gap between new construction and rental rates is narrowed. Then we will see speculative construction become viable again."

Coldwell Banker's Glenn Sather, who spoke about the multi-family sector, said the vacancy rate for such housing in the county is an astounding one half of 1 percent.

"Rates are unbelievably low," he said. "Huge demand, limited supply. Fewer people own homes today than they did 10 years ago."

Sather said the trend will lead to "adaptability and creativity" in the market with cluster housing.

The report states vacancy rates should rise this year as more units are completed, but likely still won't reach the historical norm of 5 percent.

Mike Gregg, who spoke on the retail sector, said consumer confidence is as high as it's been in the past 10 years. However, there's still some uncertainty, especially with brick and mortar stores. Hastings and Sports Authority are among the Coeur d'Alene stores that have recently closed.

Such stores, Gregg said, continue to lose market share to Amazon and other online retailers.

Millennials, those born between 1980 and 2000 and referred to as "Generation No Ownership," are the biggest part of the workforce at 80 million — and they’re an X factor when it comes to spending.

"They're redefining ownership to suit their lifestyles," Gregg said.

That population prefers to rent vs. buy and it waits more than any generation to buy a home, he said.

Post Falls Mayor Ron Jacobson, who attended the forum, said his city's commercial vacancy rate was high compared to other area cities in previous years because the factory outlet site and former Kimball Office building had space available.

However, gun holster manufacturer Tedder Industries is now occupying half of the outlet site and leasing out much of the rest. The Orgill distribution center is planning to open in the Kimball site in March.

"I like that trend," Jacobson said. "It's indicative that the market in Kootenai County has stabilized and shown improvement, but I'd still like to see more commercial."

Jacobson said the future remains bright for Post Falls because of available residential and industrial property.

"We've got the land to grow," he said.

Jim Hammond, Coeur d'Alene's city administrator, said how the real estate market performs has a ripple effect with other industries. That's why, he said, such a diverse group attended the Forum: bankers, title company representatives, attorneys, developers, architects and other business professionals were there.

"The real estate industry is a large segment of our economy," Hammond said. "Hearing their positive forecasts bodes well for all of the affected industries."

Brad Marshall, planner for JUB Engineers, said he believes this year's forum was the most positive since the start of the recession.

"It is great to see a strong real estate market again and the associated positive impacts to our construction and real estate industry," Marshall said.

David Bobbitt, CEO and chairman of Community 1st Bank, added: "All tides are rising (in real estate). The (limited) labor force appears to be the only thing holding us back."