Homebuyers stymied in the past by Spokane’s ever-climbing real estate prices and bidding war after bidding war may have reason for optimism in the new year.
Although they can expect increasing home prices, high demand and low inventory, area Realtors say, the housing market won’t be as frenzied as 2021.
“Sale prices will continue to increase, but not at the rate it did in 2021. I believe the reason it will increase is lack of supply and demand will remain strong,” said Rob Higgins, executive officer for the Spokane Association of Realtors.
Spokane County’s median home price reached a record-breaking $395,000 in July. The median price for single-family homes sold during 2021 was $370,000, a 23.3% increase compared to the yearly median of $300,000 for homes sold in 2020, according to data from the Spokane Association of Realtors.
“That’s significant. In fact, that might be the highest median sales price increase we’ve seen,” Higgins said, referring to the year-over-year percent change. “I think that’s going to be moderated somewhat as we look at 2022, but the situation will be very similar – demand is strong, supply is low and that’s going to be driving up prices.”
Eric Johnson, former SAR president and director of training for Northwest Real Estate Brokers, agreed that Spokane’s housing market won’t be as frenetic as 2021 because of a possibility of rising interest rates and the end of mortgage forbearance through the federal CARES Act.
The Federal Reserve at a December meeting indicated it may consider raising interest rates sooner than anticipated. If mortgage rates increase, it could curtail home price growth.
The interest rate on a 30-year fixed mortgage increased to 3.22% during the first week of 2022 from 3.11% the prior week, according to Freddie Mac – the highest level since May 2020.
Homebuyers nearing the end of mortgage forbearance terms may decide to list their homes on the market, resulting in a slight uptick in housing inventory this year, Johnson said.
More than 47% of buyers nationwide indicated they would feel more urgency to buy a home if mortgage rates rose above 3.5%, according to a report released Friday by Redfin, a Seattle-based technology powered real estate brokerage.
“Ideally, buyers will have more choices than they did in 2021 … it’s hard to guarantee that, but it’s more likely to happen this year based on market dynamics,” Johnson said.
Johnson added that despite the possibility of increasing interest rates, Spokane’s housing market demand will remain strong this year.
“I expect it to be a fairly healthy market with the same amount of sales, but not likely the same amount of price increases as last year,” he said. “We are still a fairly attractive place to live from a community standpoint with our amenities, schools and recreational opportunities. I think we’re fairly attractive as a metro area for people to move here.”
Spokane County’s median closed home price for homes on less than 1 acre was $390,000 in December, a 23.8% increase compared to the $315,000 median price in December 2020, according to data from the Spokane Association of Realtors.
The national median existing home price for all housing types in November was $353,900, up 13.9% from $310,800 in November 2020, according to the National Association of Realtors. December data is not yet available.
“Supply-chain disruptions for building new homes and labor shortages have hindered bringing more inventory to the market,” Lawrence Yun, NAR’s chief economist, said in a statement. “Therefore, housing prices continue to march higher due to the near record-low supply levels.”
Spokane County had 224 homes available on the market in December, representing a 10-day supply of inventory. That means it would take fewer than two weeks to sell all the available homes. By comparison, the county had inventory of 236 properties on the market in December 2020.
Housing inventory in Spokane County hit a record low of nine days in February , according to SAR data. Higgins anticipates a slight increase of inventory this year.
“We are starting the year with a 10-day supply, so it’s not that big of a change, but we anticipate that we are going to see an increase in inventory,” he said. “People are going to take advantage of equity they’ve built up – perhaps retirees may downsize, making homes available or some may want to take their equity and move into a different type of home.
“So, there will be people taking advantage of that and putting their house on the market.”
Higgins predicts the Spokane area will see home sales increase 2% to 4% this year with demand primarily fueled by millennials at their peak homebuying age and remote workers moving to the area.
National home sales growth is predicted to increase 6.6% this year, bringing the possibility of 16-year highs for sales gains in many metro areas, according to a Realtor.com housing market forecast.
Higgins thinks Spokane may see a slight return to seasonality in the housing market in 2022. Typically, transactions and home prices tend to increase in the summer while activity usually slows in the winter. That trend was absent in 2020, as the pandemic spurred a year-round uptick in activity.
Last fall, however, brought signs of a cooldown as fewer homes sold above listing price and remained on the market longer.
Higgins said there are a number of variables that impact seasonality of the market, including continued in-migration of out-of-area buyers and people choosing to remain in their homes longer.
During the pandemic, Spokane has been attracting out-of-area buyers, some of whom are retirees or remote workers who left more expensive metro areas like Seattle and San Francisco in search of more affordable properties with more space.
Zillow economists expect remote workers to continue seeking affordable midsized markets in 2022 and traditional retirement markets likely to see elevated demand amid the Great Resignation – the large number of Americans who have left their jobs during the pandemic in search of a better career or retirement.
Realtor.com forecasts that Spokane will be the third-hottest housing market in the nation this year behind Salt Lake City and Boise because of its relative affordability compared with larger West Coast metros, robust job market, schools and proximity to outdoor activities.
“Remote workers are here to stay … I think some people are looking for a way out of big cities,” Higgins said. “Even though our median sales price is going up dramatically, it is still significantly lower than other cities.”