Do you feel recession-proof, Spokane? All steel-plated and financially indestructible?
No? Maybe you should feel a little harder. Because Forbes magazine – “the No. 1 source for business news on the planet” – has declared Spokane one of the nation’s “recession-proof cities.”
Feel better now?
It’s a sign of how lousy the national economy is that Spokane’s mere stagnancy in home values is declared a triumph. But, just in case you’ve seen anyone whistling and snapping their fingers over this declaration, here’s the buzzkill: Our supposed recession immunity is based on a nice but very small and very nebulous bump in estimated real estate values for one quarter over the previous miserable quarter.
Which brings the mean estimated home value – as estimated by Zillow, anyway – to just 2 percent lower than a year ago. Actual sale prices here have gone down by almost three times that rate.
See? Recession-proof! Just a small decline in home values, on top of the steady declines that preceded it. This is what earns us a spot on a list of cities that have figured out a way to “wrangle up the modest beginnings of a real estate rebound this year,” according to the Forbes piece, published online last week.
Modest is putting it mildly. Modest, in this case, is whatever there is below an understatement. Because maybe we are indeed wrangling up a recovery here at the Spokane corral. I want that as much as anyone else who owns a house here. But there are reasons to still be concerned.
“There are lots of reasons to still be concerned,” said Glenn Crellin, an economist and the director of the Washington Center for Real Estate Research at Washington State University.
Among them: Through the second quarter, the sale of existing homes in Spokane County is down by 23 percent this year, compared with 2010. That’s according to the WCRER’s latest Housing Market Snapshot. New construction is way down, too – with building permits off 16.6 percent. Median price of those sales is down 5.8 percent.
Down 5.8 percent from 2010, that is – a year that was worse than the year before that, which was worse than the year before that …
So, yeah, it’s modest, this real-estate rebound. Definitely.
The Forbes piece was one of those shallow, catchy, Internet page-view traps. I saw it first on my email account home page, which likes to run lots of lists (5 Easy Steps to Get Rich!), scare headlines (Does Mother’s Milk Cause Cancer in Infants?), and sexy come-ons (Did Beyonce’s Dress Go Too Far?).
In this environment, “10 Recession-Proof Cities” qualifies as hard news.
At least it would if there were anything hard in it, like a fact. But by the time you make your way from the sexy headline into the story, “recession-proof” has softened into “recession-resistant” – either of which would be news to our long-term unemployed – and then into “recession-resistant real estate market,” and then into the statistical basis for all this optimism: a report from Zillow.
Zillow is the website that has, in some ways, revolutionized real estate information. It attempts to derive a value for each home in a market based on many different factors – not simply recent home sales. Its “Zestimates” sometimes come under attack as unreliable, particularly from people in the real estate game, who have held the lock and key on real estate information for so long that they can’t stand even the suggestion that there’s another way.
But Zillow makes it clear how it arrives at its estimates, and that there are potential pitfalls, and I think they are doing an interesting service, if one that needs to be taken with a grain of salt. Like just about every statistic in the entire universe.
But Zillow’s estimates of the overall Spokane market, based on its estimates of each home here, are simply not enough to declare the beginning of a recovery. Zillow says its estimate of home values here increased about 6 percent from the first quarter of this year to the second. But overall, we’re still behind last year.
Furthermore, from June 2007 to June 2011, these estimates have fallen hard. The mean home value for the Spokane metro area has fallen from $187,000 to $149,000 in that time. And so far this year, Zillow says, more homes sold at a loss and fewer sold for a profit than last year.
But are we coming out of these woods? Is that a little glimmer up there in the tunnel? Are we wrangling anything up?
Crellin says the best predictor of a market’s future is the inventory – the number of homes for sale versus how fast they’re selling. A good, stable figure is an inventory of five to seven months. Any shorter and prices rise sharply. Any longer and prices usually go down.
As of the end of the second quarter in Spokane, Crellin said, we have an inventory of 10.1 months.
“That tells me we should expect to see prices decline,” he said.