Home buyers face squeeze in Spokane market

In Staci Ward’s year-and-a-half quest to buy a home in Spokane, she looked at dozens of properties, searching for a balance between amenities and location.

In the meantime, houses got more expensive.

Ward, who moved here from Houston, initially wanted a home on a park or boulevard. But after visiting houses in those prime areas, she found that many in her price range needed major plumbing and wiring upgrades.

So, she abandoned her dream of the perfect location, upped her budget by nearly $150,000 and expanded her possibilities.

A few weeks ago, with the help of Marianne Guenther of Windermere Manito, Ward found a 1938 brick Tudor in the Rockwood neighborhood. Although her home cost about $400,000, she said it is a comparatively good value – albeit smaller than she’d originally envisioned, coming from a market where the median home price is about $25,000 less than Spokane’s.

“There are operating costs, so you’re going to have to give somewhere for a bigger, prettier home” and at some point it comes down to tiny decisions like giving up lattes to afford extra rooms, said Ward, a 35-year-old doctor with Advanced Dermatology.

While Ward had a higher budget than the typical homebuyer, she shares a frustration with anyone who has searched for a house during the first half of the year: prices rose while buying power declined.

The Spokane Association of Realtors released data for the first half of 2006 that showed the median home price rose 21 percent, to $168,000, compared with the same period last year. The median means half of the homes sold for more, half for less. The average price increased 19.2 percent to $188,248.

First-time homebuyers have been challenged even in traditionally more affordable areas like Shadle, Guenther said.

“It has squeezed a lot of people out. Unfortunately, you’ve got issues when mortgage interest rates increase and shrink value for the dollar.”

Surges in property values aren’t anything new to Spokane County, said Rob Higgins, of the Spokane Association of Realtors.

During his 25 years in real estate, Higgins has seen the Spokane County market “stair step” at eight- to 10-year intervals. For nearly a decade the market appreciated at about 3 percent to 5 percent annually, he said. Then, in 2004, home prices increased by about 9 percent and in 2005, they climbed by 17 percent.

The first quarter of this year, the median home price in Spokane rose 26.3 percent, according to the National Association of Realtors. Only six of the 156 metropolitan areas surveyed nationwide exceeded that appreciation rate.

However, Higgins noted that prices leveled off during the second quarter, with the exception of June, calming the half-yearly appreciation by several percentage points. With home inventory up and interest rates rising, he anticipates that 2006 will finish with a 10 to 12 percent appreciation.

Guenther, who has 11 years experience as a local Realtor, thinks price increases may slow sometime next year. Still, she notes, some demand is driven by home buyers coming from larger markets. Many of her South Hill clients are health care professionals relocating from other cities.

The South Hill market remains tight and bidding wars occasionally arise, said Guenther, who regularly e-mailed listings of appropriate properties to Ward, her client. The Realtor likens house-hunting to dating, saying, “It’s a numbers game.”

Home buyers should carefully assess their needs, she suggests, because sometimes people have unrealistic visions of how much house they can get for their money.

For Ward, reassessing meant passing over a smaller place on Cannon Hill Park and choosing a more spacious home with a new kitchen in the Rockwood neighborhood.

“I feel like I really got a phenomenal house,” Ward said, “but I had to look long and hard.”