Spokane County’s overheated housing market appears to finally be cooling as inventory spiked and sales in July recorded the greatest year-over-year decrease in more than a decade.
Local real estate experts say, however, that decrease in sales signifies a normalization of the local market from its pandemic frenzy rather than a potential crash.
In the county, 585 single-family homes and condos on less than 1 acre sold in July, a 31.1% decrease compared to 849 homes in July 2021, according to the Spokane Association of Realtors.
“We are comparing the hottest market we’ve ever seen with a market that has cooled a bit,” Tom Hormel, Realtor at RE/MAX of Spokane and 2023 president-elect for the Spokane Association of Realtors, said of July 2022’s statistics.
The local housing market hasn’t seen a year-over-year sales percentage drop that significant since July 2010 when 347 homes sold, a 35.5% decrease compared with 538 homes sold in July 2009, according to Realtors association data.
Rob Higgins, executive officer for the Realtors association, agreed that the local housing market is beginning to normalize from its frenetic pace last year.
Buyers are competing with fewer offers, homes are remaining on the market longer and more properties are undergoing price reductions, he said.
“What we are doing right now is we are kind of leveling off,” Higgins said of the local housing market. “Real estate is a cyclical thing. What goes up, must come down.”
The median closing price for homes and condos on less than 1 acre was $420,000 in July, a 6.3% increase over July 2021’s median of $395,000, according to the Realtors association.
Last month’s median was a $30,000 drop from the all-time high of $450,000 recorded in May.
“We may see that median sales price continue to go down, but still when compared to the previous year, it will be an increase,” Higgins said.
Downtown Spokane had the greatest median closing price at $480,000 in July, followed by a $468,425 median in Spokane Valley and $464,500 in south Spokane.
The median on the West Plains was $400,000, while north Spokane’s median was $380,000, according to the Realtors association.
Housing inventory rose to 1.7 months in July – its highest level in more than three years, according to Realtors association data. That means it would take more than a month and a half to sell all properties listed on the market.
A balanced market – favoring neither buyers nor sellers – typically has about six months of inventory.
Higgins anticipates inventory to increase if interest rates remain elevated.
The U.S. Federal Reserve raised interest rates by three-quarters of a percentage point on July 27 in an effort to tackle inflation.
As of Thursday, the 30-year average mortgage rate was 4.99% and the 15-year average was 4.26%, according to Freddie Mac.
Other factors in addition to rising interest rates are contributing to the local market slowdown this summer, Hormel said.
With more homes to choose from, buyers aren’t as pressured to snap up properties. Instead, some are choosing to travel, Hormel said.
“I think it’s interest rates, but I also think that this summer is the first true relief on the COVID side of things,” he said. “I think a lot of people have decided to spend time with family or take vacations.”
Some buyers, including millennials, might be temporarily halting their home searches, but haven’t exited the market altogether, he said.
“Buyers haven’t gone away. The millennial generation hasn’t gone away. They still want to buy a house,” Hormel said. “I think they’ve just taken a pause on looking.”
Buyers still are facing multiple offers, but it’s now dependent upon the property. At the market peak during the pandemic, a fixer-upper would have sold just as fast as a property in pristine condition, Hormel said.
“Buyers have choices now and they are choosing to not write offers on homes that aren’t in parade-ready condition,” he said. “Having two months of inventory versus a week of inventory is definitely a plus for buyers. Sellers are still getting market value, but what they aren’t seeing is offers 20 to 30% above list price.”
Tim Olsen, a Spokane-area broker with John L. Scott Real Estate, echoed that potential homebuyers seem to be spending money on experiences rather than goods this summer.
“Airplanes are full. People would rather go to Florida and buy a house later,” he said. “I think that’s what we are experiencing and with interest rates rising rapidly since January, that has shocked people and got us closer to a normal market.”
Olsen said price acceleration in the Spokane housing market has been unsustainable, but it’s unlikely there will be a massive downturn as people are continuing to move to the area, further fueling demand.
Olsen, like Hormel, still is seeing multiple offers on homes.
He anticipates rising inventory to persist into the fall.
“I think we are going to see a more pronounced market in the fall, at least that’s what I’m hoping for,” he said. “We are already seeing a lot more activity now that people are back in town.”
Editor’s note: This story was updated on August 9, 2022, to reflect the correct span in which Spokane County had its greatest year-over-year decrease in housing costs.