SPOKANE - The inventory level of residential homes for sale in Kootenai County is steadily dropping, creating a need for more homes to be built this year, according to a presentation Thursday at the Real Estate Market Forum for Kootenai and Spokane counties.

At the end of 2012 there were 2,525 homes for sale in the market, down from a peak of 4,500 in 2007. The inventory has further declined this year.

The inventory level right now is the lowest it has been in eight years, said Jennifer Smock, managing broker at Windermere/Coeur d'Alene Realty, speaking at the Spokane Convention Center in downtown Spokane.

"If inventory continues to decline like this, we could have a potential issue," Smock said. "(We're) primed for a shortage in inventory and listings for those people who will be moving into our area."

New-home construction has been increasing, she said.

In 2010, there were 475 new home construction permits pulled, she said. Last year, the number jumped to 546.

So far this year, there have been 56 new construction permits pulled. "This far exceeds where we were in 2012, this time year-to-date, at about 30," Smock said. At this pace there could be 550 or more new homes by the end of this year.

However, she said, "It's hard to say whether that's going to be enough."

The county is projected to see population growth of less than 1 percent to 2 percent. The county has a population of approximately 142,000, with 65,000 housing units, and a home-ownership rate of 70 percent.

"At the current demand we have we're looking at a need for possibly 875 additional housing units in Kootenai County by the end of this year," Smock said.

Kootenai County draws population primarily from Washington and California, she said. That's determined by looking at driver's-license-surrender data, compiled as people turn over their driver's licenses from their previous home states to gain Idaho driver's licenses.

In 2012, Kootenai County had more than 4,500 driver's licenses surrendered in this way, and 78 percent of those came from the Northwest region, she said. She said one reason they come to North Idaho is the affordability of homes. She said it's less expensive to own a home in Kootenai County than to rent one.

The median sales price is just more than $168,000, and the average sales price is just more than $203,000.

Grant Forsyth, chief economist for Avista Corp., who also presented at the forum Thursday, said population growth in both Kootenai and Spokane counties is tied to economic activity.

"Population growth cycles with the business cycle," he said. "Employment growth is an important driver of population growth."

A year of robust employment growth in the region will be followed a year later by a corresponding uptick in population growth. The second half of last year was the first notable employment growth since 2007, he said.

Forsyth said home ownership increases in areas as incomes increase and unemployment decreases. As annual household incomes reach $30,000 there is an even split of home ownership and renters. Once that $30,000 income level is surpassed, the percentage of homeownership just continues to rise.

When the population growth comes, it's likely going to be found in the urban areas of Kootenai County.

"I would be looking for Kootenai to become more urban over time," Forsyth said, citing gas prices and the fact that employment is increasingly found in cities. "That makes some people uncomfortable, but that's sort of the trend we're seeing around the U.S."