by Scott Richter and Dr. Patrick Jones
It is not an understatement to claim the housing market in Spokane County is now a seller’s market. Primarily, these market conditions are due to low inventory and high demand. The low inventory of homes for sale has been a large factor in the very low number of home sales.
Currently our local housing market is one of a few metro housing markets still experiencing strong growth in home values. Realtor.com published an article in early 2019 showing the housing market in the City of Spokane is still achieving double-digit gains in median home resale value.
Rob Higgins, Executive Officer of Spokane Association of Realtors, has been working in the housing industry in the Spokane area for more than thirty-years and notes that recent housing inventory in Spokane County is “by far” the lowest he has seen during his career.
Higgins said that a normal housing market would have four- to six-months of inventory. Inventory of six-months or more is a “buyers’ market” and inventory of less than four-months is a “sellers’ market”.
Regardless of demand, which is high, a low inventory stifles the market.
Higgins referred to a Housing Ladder, a pattern where people sell a house they have been living in for some time and upgrade to a home with a higher price tag. When one or more price ranges have a low inventory, it’s like removing a few rungs in the ladder. If inventory is low and prices high, even though we are in a seller’s market, there is incentive for homeowners to stay put and not upgrade.
Higgins said the Housing Ladder is currently stagnant, reducing a major part of a typical housing market. Without people upgrading, a whole segment is missing from the real estate market. It’s not opening up homes as it would if people were selling old homes intending on buying a more expensive home.
Indicator 6.3.3 Monthly Supply of Homes Listed by Price Level shows the most recent data available, , first quarter of 2019 (19Q1) in Spokane County, the total month’s supply of homes listed for sale based on price was:
- 6 months for $80,000 or less;
- 8 months for $80,000-$159,999;
- 1 months for $160,000-$249,999;
- 1 months for $250,000-$500,000.
Clearly, these numbers place Spokane as a seller’s market. Note that during 19Q1, three out of the four inventory price ranges in Spokane County showed inventories below the state benchmark. The single price range in the county higher, the $250,000-$500,000 price range, was only 0.5 months higher than state.
Higgins said homes less than $80,000 are usually in substandard living condition having quite a few issues. He said, “Flippers most often purchase homes in this price range, making necessary repairs and updates before they relist the home for sale.”
The most expensive price range in the series, $250,000-$500,000, is higher than what the typical homebuyer is looking for, according to Higgins. That said, the median home resale value (see: Indicator 6.3.1) has been increasing at a pace where the typical homebuyer might need to consider their ability to afford a higher priced home. The median resale home value in Spokane County has increased from $168,800 in 14Q1 to $255,600 in 19Q1. This is an increase of 51.4% in just 5-years; an increase from $208,100 (23.3%) in 17Q1; and an increase from $225,100 (33.4%) in 18Q1.
Homes with resale values in the $80,000-$159,999 (at 0.8 months current inventory) and $160,000-$249,999 price ranges (at 1.1 months current inventory) are typically where most transactions are occuring. Currently, these two price ranges have a combined total of 1.9 months of inventory.
Low inventory levels are influenced by a lack of buildable land, increased labor costs to build new homes, and increased material costs (some directly resulting from newly placed tariffs).
Modular Today estimates “On average, you can expect to pay a price of $184,000 just for the building materials and specialized labor needed to construct a new home.” While acknowledging this is an estimated average for the nation, some geographical locations in the U.S. are more expensive to live.
Summer is typically the hottest time of the housing market and the first quarter of 2019 already shows a very low inventory. Home values in Spokane County will probably continue to increase as inventory remains low as we head into the peak of the housing market.