Spokane market affordability draws both single- and mutlifamily homebuyers, analyst says

Retirees, particularly from California, are double dipping in Spokane’s housing market by paying cash for homes while at the same time buying investment properties, according to a regional housing market analyst.

“What you got is people selling their homes in the Bay Area for millions of dollars, mostly cash, and they are moving to Washington, where they can buy a nice house in Spokane,” James Young, director of the Washington Center for Real Estate Research at the University of Washington. said Thursday in Spokane. “They can buy a four-unit or eight-unit multifamily complex, redo it and have the income coming off of it.”

Young, speaking at a housing market forecast sponsored by the Women’s Council of Realtors Spokane-Eastern Washington, said data from the California Association of Realtors indicates more than 40% of people 65 and older in California are looking to move to Nevada, Arizona and Washington.

Spokane County’s multifamily building permits exceeded that of single-family homes in 2016 and 2017 and it’s creating an interesting scenario for first-time homebuyers and developers, he said.

Developers view the rental market as a “one-way bet” because they can get a larger return on multifamily investments – in addition to tax breaks, Young said.

“If the market goes down in a couple of years, multifamily property owners can lower rents and get some cash flow. But selling houses – they have to the get timing just right,” he said. “Either they are making money or they are broke.”

Spokane’s housing affordability index – which tracks whether housing is becoming more or less affordable for the typical household – indicated a median home price of $169,000 is considered affordable, especially for the first-time homebuyer in the area, Young said.

The median closing price in Spokane County was $269,900 in February, according to the Spokane Association of Realtors.

More than 1,100 homes closed for less than $169,000 last year in Spokane, he said, adding about half were one- and two-bedroom homes. First-time buyers represented 13% of the Spokane housing market last year, he added.

First-time buyers who are priced out of the market will gravitate toward rental property because of an increase in multifamily supply and competition from retirees who can pay cash for a property, Young said.

The increase in housing demand in Spokane County is primarily driven by employment growth, Young said.

“There’s lots of people working; there’s lots of people moving here. There’s lots of jobs being created with almost near-record employment levels in Spokane,” he said.

The region encompassing Spokane, Stevens and Pend Oreille counties created more than 4,600 jobs in 2019, the fifth consecutive year it surpassed that mark, according to the Washington state Employment Security Department.

Although home prices have continued to increase in Spokane, properties are more affordable than in most other counties in the state, Young said.

And Spokane has something that other areas lack – available land on which to build, Young said.

“What Spokane has is land and infrastructure. You can build here,” he said. “In the Puget Sound region, you can’t build anything, it’s mostly infill.”