Rising property values dim dreams of home ownership

For the average wage-earner in Kootenai County, the dream of owning a home is slipping away. As property values countywide continue to soar, locals looking to buy a house are finding themselves settling for less — or continuing to rent as home prices move further and further out of reach.

“In every year since 2013, home prices in Kootenai County have grown significantly faster than wages,” said Samuel Wolkenhauer, Region 1 economist for the Idaho Department of Labor. “It’s important to remember that these growth rates compound on each other, which means the gap is growing exponentially.”

Many market watchers say the trend will continue.

“The chances of prices leveling off or going down anytime soon — or ever — are slim to none. They won’t go down because people keep moving into this area,” said longtime Coeur d’Alene Realtor Marshall Mend. “Why would home prices go down when people are lining up to buy? It’s supply and demand.”

And most home buyers, officials said, are coming from out of state, where property values are significantly higher.

Mend estimates a $300,000 home in Kootenai County would fetch $1 million or more in metro areas of Washington or Oregon and most locations in California. That’s why so many people from those areas are flocking to Kootenai County.

Jimmy McAndrew, real estate sales manager for Mountain West Bank in Coeur d’Alene, said the outlook for prospective homebuyers is much less favorable than it was just three or four years ago.

“Definitely for folks hovering around that median wage level it’s a concern,” McAndrew said.

And for those who can afford to buy, they’re having to make concessions.

“They’ll probably have to make sacrifices on needs versus wants compared with what they were looking at three years ago,” he said. “Things like the number of bedrooms, bathrooms, square footage across the board.”

The alternative to home ownership is also costly.

“Fortunately for (lenders) our competition is rents and rents have not slowed down,” McAndrew said. The banker also pointed to low interest rates and relatively affordable taxes and insurance as favorable factors for local homebuyers.

It’s not just the greater Coeur d’Alene area that is experiencing dramatic increases in property valuation.

Kootenai County Assessor Rich Houser said outlying areas like Rathdrum, Spirit Lake, Athol and Bayview that were once a great area for new homebuyers to get in at a lower price have also seen significant increases in value.

“It wasn’t long ago in those outlying areas that you could get a starter home for under $200,000 and now, even out there, it’s closer to $300,000,” he said.

For local wage-earners, the math doesn’t add up.

“For a $300,000 home, you’re looking at a house payment of over $2,000 a month and for somebody making 15 bucks an hour, it may not be realistic,” Houser said.

The valuation increases are affecting every corner of the market, even smaller houses, said Rich Dussell, a Realtor with Windemere/Coeur d’Alene Realty.

“About four years ago, we used to sell a 1,000-square-foot new home for $140,000,” he said. “That same home now is well over $220,000.”

The escalating home values is having an impact on the younger demographic.

“It’s a tough market for them,” Dussell said. While their standards for home ownership are different than for older generations, the need is still there. “A lot of millennials don’t mind renting or staying with mom just a little longer, and a lot of them travel a lot,” Dussell said. “But even that demographic wants to settle down eventually. I believe that we do have to be able to do something to get those people into affordable housing,” he said.

As a labor economist, Wolkenhauer is encouraged by local earning trends. But his optimism is dimmed by soaring housing costs.

“This rate of wage growth has actually been very strong,” Wolkenhauer said, “and under normal circumstances we’d take encouragement from these numbers. But given what has happened to housing, it’s very clear why many people would be priced out of the housing market.”

Still, from a banker’s perspective, McAndrew sees the glass half full.

“People in Kootenai County can still find that dream of owning a home,” he said. “It’s just probably not the home they may have envisioned a few years ago with 2,000 square feet, four bedrooms and two baths. They’ll have to settle for less.”