People who have been watching the Spokane housing market and waiting for a chance to pounce may be in luck in 1996.
The balance of power in Spokane’s housing market shifted in 1995 as sales and price increases slowed after a five-year boom.
Home buyers regained the edge in sales negotiations as the number of homes on the market grew relative to the number of potential buyers.
Some market observers even think prices could decline over the next 18 months.
“The market is getting back to more of a normal pattern,” said Phil Kuharski, vice president of investments for Prudential Securities and a longtime observer of the Spokane economy. “We’re in the process of settling down.”
Final statistics for 1995 indicate 4,860 homes were sold, compared with 5,893 homes in 1994. The average home spent 74 days on the market in 1995, up from 65 days in 1994. The drop in home sales was the primary reason countywide construction spending dropped from $363 million in 1994 to $339 million in 1995.
Those numbers are in sharp contrast to the early ‘90s when robust sales and double-digit increases in prices helped bring national attention to the Spokane housing market.
Despite the low numbers for 1995, economic observers emphasize that the industry is healthy compared with pre-boom years.
“This is more like the average before the boom,” said Don Walker, director of communications for the Spokane Association of Realtors.
Economists also emphasize that despite the high visibility of local construction industry in recent years, a slowdown will not create a significant drag on the local economy. Construction is an indicator of how the economy is doing, rather than a driving force, they say.
“Construction is sort of a barometer of the other strengths in the region,” John Mitchell, senior vice president and chief economist for Portland-based U.S. Bancorp, said at a recent economic forum.
Nevertheless, few sectors of the economy intersect as directly with consumers and wage earners as does the housing industry.
Among the ways a slower housing market could affect local residents:
Taxes. As the appraised value of homes rises, so does the tax bill for that property since taxes are computed as a percentage of appraised value. The rapid appreciation of recent years has squeezed some homeowners at tax time. A slowdown in price increases, or a decline, could provide relief.
Home buying. If prices stabilize and interest rates decline, as many economists expect, more people will be able to qualify for a loan to purchase a home.
A consumer confidence survey taken in the fourth quarter of 1995 shows that Spokane-area residents expect to pay $95,000 for a home, said Shaun Higgins, developer of the survey and director of marketing and sales for The Spokesman-Review. That price is about $10,000 less than the average for the county.
If home prices are leveling off, many potential buyers haven’t noticed.
“There’s no question that people perceive that housing will cost them more now than a year ago,” Higgins said.
Ron O’Halloran, a health care worker, has watched the housing market during the two years he’s lived in Spokane. He plans to buy a house this summer or fall but feels that prices are substantially higher than he’d like to pay.
“I believe houses are overpriced, but that’s the market,” O’Halloran said. “The market is telling me I’m going to spend $110,000 minimum. I would prefer to spend between $78,000 and $85,000.”
Housing availability. The run-up in home prices made the availability of affordable housing an issue in the Spokane area for the first time in years. As fewer people are able to afford homes, that increases the demand for apartments and other rental housing, driving up prices.
“Affordability has been decreasing because of the increase in cost of construction and cost of a new home. Ours was a very affordable place to live,” said Al Haslebacher, executive officer of the Spokane Homebuilders Association.
A slowdown in the housing market should relieve some of that pressure, although observers don’t expect a significant increase in the availability of low-cost housing in the near future.
Employment. Fewer construction projects mean fewer jobs for construction workers.
In addition, many small businesses exist to support the construction industry. Some of them have begun to struggle.
For example, Spokane Escrow Company, a small company that handles residential home closings, suffered when the market began to decline at the end of 1994.
The company, which had two offices with six employees, had to close one office and lay off four employees in November of 1994.
And 1995 didn’t help, said Pam Wise, escrow manager.
“Business has been drastically down,” she said. “It’s dead. I think everybody’s been affected.”
, DataTimes ILLUSTRATION: Graphic: Spokane area construction declines