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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Spokane-area home sellers made bank in 2021

Spokane-area homebuyers and bankers are finding ways to work around higher mortgage rates.  (Jesse Tinsley/THE SPOKESMAN-REVIEW)

Spokane-area homebuyers had a rough go of it last year, contending with rising demand, multiple offers and record-breaking prices.

Sellers, meanwhile, were raking in the cash.

The median profit for Spokane-area home sellers was $162,350 last year, an 86.5% margin between the amount they originally paid for the home and its resale price, according to a recent report by ATTOM Data Solutions, an Irvine, California-based real estate data tracking firm.

That profit margin marks the second-highest among West Coast metro areas with populations of more than 200,000.

Boise had the greatest return on investment among West Coast cities with sellers generating $236,397, a 121.8% profit last year, according to ATTOM.

The rapid increase in home equity for Spokane-area residents is not surprising as low-interest rates, shortage of available properties and rising demand have pushed home prices up in recent years, said Eric Etzel, president of the Spokane Association of Realtors.

“I think Spokane has been an undervalued home market for a lot of years,” he added.

ATTOM analyzed sales deeds and loan data to determine profit margins. Sellers nationwide realized a profit of $94,092 on the typical home sale, a 45.3% return on investment compared to the original purchase price.

Of all the properties Etzel listed for sale in the Spokane region last year, a majority of buyers were local residents, although there is still demand from out-of-area buyers relocating to the Lilac City, he said.

During the pandemic, Spokane has been attracting out-of-area buyers, some of whom are retirees or remote workers fleeing more expensive metro areas like Seattle and San Francisco in search of more affordable properties with more space.

“That has also affected our prices and number of people coming to Spokane,” Etzel said.

Spokane County’s median closed home price for homes on less than 1 acre was $390,000 in December, a 23.8% increase compared to the $315,000 median price in December 2020, according to data from the Spokane Association of Realtors. January data has not yet been released.

Homes priced $300,000 and below are generating interest from a mixture of local residents, out-of-area buyers and investors, said Ken Sax, designated broker for Professional Realty Services of Washington.

Sax, like Etzel, isn’t surprised that local home sellers saw significant profits last year.

“Those profits are happening,” he said. “We’re still selling homes over list price and we’re still seeing multiple offers.”

Real estate demand in Spokane is remarkably brisk compared to five years ago when the county had about two months of housing inventory.

In December, the county’s housing inventory was 10 days, meaning it would take that long to sell all available homes on the market.

“Two months of inventory is not the insanity that we’re seeing today,” Sax said.

Sax expressed concern that rapidly rising home prices might cause residents to become short sellers in the future.

“When you are overpaying, all it takes is one little financial hiccup,” he said. “When the market turns and now you can’t make your payment and can’t sell your house, you are now a short seller.”

Sax anticipates price increases are likely to continue into the next year because of dwindling inventory.

He advises buyers to exercise caution when considering waiving inspections in an effort to be competitive with other offers.

He also advises potential buyers to work with a competent Realtor familiar with local market dynamics.

Single-family homes in Spokane County have a total assessed value of $45.4 billion this year, a 14.5% increase compared with $39.6 billion in 2021, according to recent data from the Spokane County Assessor’s Office.

The county assessor’s office values properties based on real estate sales information. A home’s assessed value is based on a percentage of its appraised value to determine the amount of property taxes owed.

Double-digit-annual price appreciation is in part fueled by cash buyers as well as supply and demand, said Tom Clark, broker with Kestell Co. Realtors and governmental affairs committee chair for the Spokane Association of Realtors.

“The bottom line with appreciation the way it has been and how often we end up in multiple offer situations … you know you aren’t getting away with just paying the offer price,” Clark said.

Some buyers are offering up cash to pay the difference between a property’s appraisal price and the mortgage approval amount to remain competitive, he said.

All cash purchases accounted for 20.2% of Spokane-area home sales in 2021, up slightly from 19.7% in 2021, according to ATTOM.

Federal Housing Administration-backed mortgages and investors made up 7.8% and 3.8% of sales, respectively, ATTOM reported.

Spokane residents who sold homes in the fourth quarter of 2021 owned their properties an average of six years, down from eight years in the fourth quarter of 2016, according to ATTOM.

Clark said he’s been examining economic forecasts for the year and has “his fingers crossed that price appreciation will be much more moderate in the 6-8% range,” he said.

Clark added he’s optimistic about measures under consideration by the state Legislature that could possibly increase housing inventory in Spokane County.

The state Legislature is considering two bills – SB 5670 and HB 1782 – that would allow denser housing types, such as duplexes, triplexes and fourplexes, in areas zoned for single-family residential use.

The two bills would require cities of more than 20,000 people to allow more housing types within a half mile of a major transit stop.

“If there was light at the end of the tunnel, it would look like more houses coming out of the ground,” Clark said.