Idaho economy to click right along – Expert: New jobs to stimulate housing market

Idaho’s economy will continue to out-perform the nation this year and next, thanks to employment growth and a strong housing sector.

David Berson, chief economist with Fannie Mae, the nation’s top provider of home mortgage financing, said Thursday that with Idaho creating jobs faster than the national rate, the number of people migrating here will keep demand for housing strong enough to offset the end of the refinancing craze, which he said came to an end when interest rates began to rise.

Joe Estrella
The Idaho Statesman

http://www.idahostatesman.com/apps/pbcs.dll/article?AID=/20040827/NEWS0203/408270307/1029/NEWS02

Fueling the Idaho economy will be a resurgent high-tech manufacturing sector that has begun to replace some of the jobs lost during the last economic downturn during 2002-2003.

"Orders for high-tech goods are sharply up," Berson said following a presentation to the Fannie Mae Idaho Partnership Office’s Housing Advisory Council. "Manufacturing (nationwide) is coming back very strongly. And at least part of that is in high-tech."

Statistics compiled by the Idaho Department of Commerce and Labor show that between July 2003 and July 2004, nonfarm employment in the state grew 2.9 percent, compared with a national rate of 1.1 percent. That was good enough to rank second in the nation, trailing only Nevada’s 4.4 percent increase in employment.

The Treasure Valley real estate market, meanwhile, has posted a corresponding increase in housing sales, according to statistics compiled by the Ada County Association of Realtors.

During the first six months of the year, sales of single-family housing totaled 3,992 units in Ada County, compared with 3,441 for the comparable period a year ago.

Sales of existing homes were up 18 percent, or 2,665 compared with 2,256 during the first six months of 2003.

At mid-year, a total of 1,842 new single-family housing units had been sold in Canyon County, a 17 percent increase over the 1,579 sold during the same period a year ago. Sales of existing homes totaled 1,160 at the midway point of the year, up 35 percent from 862 units sold during the like period in 2003.

However, U.S. housing sales — which in 2004 are expected to set a national record for the fourth straight year — may begin to slip next year if the Federal Reserve Bank continues to boost long-term interest rates, Berson said.

In Idaho, an "affordability" problem is already brewing as well-paying manufacturing jobs are replaced with lower wage service work, said J. Craig Naylor, senior deputy director of the Fannie Mae Idaho Partnership Office.

"We’re seeing that particularly in Boise, where jobs are a little lower level than ones that went away," said Naylor, predicting that the problem can be offset if developers adjust their products and prices to accommodate market conditions.

Nationally, meanwhile, Berson said the $3.8 trillion in mortgages issued last year likely will fall to $2.4 trillion for 2004, as a spike in interest rates brings an end to the refinancing boom. However, the strength in the Idaho housing market should be enough to offset the drop in the value of home mortgages issued, he added.

"For years, people came to Idaho because it was a good place to live," Berson said. "Now you’ve got employment picking up and in-migration picking up. So, the housing market should stay pretty strong."