Spokane housing market cooling off, not bursting anytime soon

SPOKANE, Wash. — Spokane’s once red-hot housing market has begun to cool off. Rising interest rates have kept prospective home buyers at bay, slowing the sale of homes in one of the most overvalued housing markets in the nation.

Interest rates have doubled in the past year, now at 6.99 percent in the state of Washington. It’s caused many to be hesitant when it comes to locking down a home.

Not only that, but the bidding wars that saw offers of tens of thousands of dollars over the asking price have dramatically dropped in frequency.

“In May of this year, 69 percent of homes were selling above asking price,” said Gabe Modderman, a real estate agent with Haven Real Estate Group. “Right now we’re seeing about 36 percent of homes selling above asking price.”

In September of this year, the sale of homes dropped nearly 30 percent compared to September of 2021.

These factors have some thinking the Spokane market is going to see prices drop off dramatically. Regional economist Steve Peterson isn’t convinced.

“You know, I don’t see it. If people are waiting for dramatic decline in housing prices, I think they’re in for the long haul,” Peterson chuckled.

One of the big reasons is supply and demand. While the number of houses available in Spokane is growing, it’s not nearly high enough to offset the steep prices buyers have grown too familiar with.

“An average or a balanced market, which is balanced between sellers and buyers, is around five to six months [of inventory],” said Modderman. “Right now we’re seeing a two-and-a-half month inventory.”

Peterson says this inventory problem started back in 2007, as the Great Recession began. During that time period, many contractors found themselves out of work, causing the development of homes to be on hiatus for several years.

“There was a lack of inventory a lack of homes being built for ten years,” said Peterson. “Then all of the sudden, demand caught up somewhere around 2016.

READ: U.S. Dept. of Housing & Urban Development releases Fair Market Rents