Hold onto your hardhats, a residential building boom is on.
The number of residential building permits issued in Spokane and Kootenai counties in the first 18 weeks of the year shot up 49 percentto 1,334 dwelling unitscompared with the same period last year, says Randy Barcus, chief economist at Avista Utilities here, who tracks the data. That sharp rise follows a 26 percent jump in residential construction in 2002, he says.
Thats good news for the Inland Northwest economy, because builders spend money locally on lumber and other supplies and employ construction workers, Barcus and others say. The valuation of the permits issued through the first 18 weeks this year, for example, is $177 million, compared with $110 million for permits issued in the year-earlier period. In addition, buyers of new homes purchase furnishings, appliances, and landscaping supplies and services.
Theres a big spillover effect that comes after you see the surge in construction, Barcus says, and for that reason building permits are considered a leading economic indicator.
The question is, whos buying these new homes?
Thats whats so weird about this whole thing, says Dale Strom, a planner with the city of Spokanes community development department. The current activity clearly isnt fueled by the job market or the overall economy, both of which are sluggish, he says.
Instead, Strom and others suspect that people are moving here without jobs and are remaining unemployed, either by choice or because they cant find a job.
Although there isnt much data to back up such a hunch, longtime economy-watcher Phil Kuharski and Scot Auble, president of Auble Jolicoeur & Gentry, a real estate appraisal company here, both believe its true.
I think everybody Ive talked to would agree that we have substantial in-migration taking place, Auble says.
Some evidence can be found in the number of relocation inquiries received by the Spokane Regional Convention and Visitors Bureau, he says. The bureau has received almost as many inquires in the first four months of 2003 as it did for all of last year387 versus 454, respectivelyand the number of inquiries in April alone is four times that in April 2002.
Most of the in-migration is assumed to be coming from Western Washington or other areas where the economy is slow and housing prices are high.
People are drawn here by the Inland Northwests cheap housing and high quality of life, Auble says.
This is as good a place to live as anywhere if youre unemployed, he says.
Says Strom, They can almost come over here without a job or minimal types of jobs and still live fairly well because they brought so much equity from a home (elsewhere).
In addition to the possibility of more demand, home construction is responding to a slide in supply, says Rob Higgins, executive officer of the Spokane Association of Realtors.
The inventory of houses on the market here dipped into tight territory early this year, with about 2,000 homes available in March and 2,200 in April, Higgins says.
When inventory gets down around between 2,200 and 2,000, were getting pretty low, he says.
He also credits continued low interest rates and a bump from what he describes as an eight-year housing cycle here for an increase in real estate activity. During the first four months of 2003, 1,738 homes were sold through the Multiple Listing Service in Spokane County, compared with 1,511 during the same period last year. The average sales price rose to $128,962 during that period, compared with $118,185 a year ago.
Historically, if you look at Spokane, every eight years there seems to be a little up tick in whats going on, Higgins says. If interest rates stay down, certainly 2003 is going to be a very good year in home sales, and thats important for the economy.
Its also usually true that the Inland Northwests real estate market is up when other markets are down, real estate industry sources say.
Tom Torgerson, of Coeur dAlene-based Century 21 Beutler & Associates and past president of the Coeur dAlene Association of Realtors, says, Every time theres been any sort of fiscal tightening in the country, our real estate industry prospers. Weve bucked every trend when theres been a nationwide fiscal slowdown.
Why? It could be that the market has been flat for so long that its just catching up, says Al Haslebacher, of River City Mortgage Corp.
Orback to the in-migration issuepeople dont have much impetus to relocate when times are good, Auble says. When youre out of a job in the big city, you start looking for somewhere else to go.
Despite improvement in the real estate market here, Barcus says hes not expecting a big increase in home prices. The market still is balanced, he believes, with an adequate amount of demand and builders who are able to supply that demand easily.
While current homeowners might disagree, Barcus and others say its important that the region try to avoid Seattle-esque, double-digit price appreciation.
One of the great advantages we have is low-cost housing. As that low-cost housing advantage erodes, we lose the ability to attract both companies and workers to come here, he says.
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