Zillow says home values in Spokane have increased by 11.4% over the past year. Apartment rents are up 4.3% from last year.
Some investors mistakenly assume that past performance is an indication of what to expect in the future. While it is true that real estate cycles can last for several years, Spokane has been in an uptrend for a long time. It is more likely that we are near a peak than near a bottom. We may have a 5% increase next year or may see values start to turn downward by the end of 2021 after the prohibition on foreclosures end. But another year of 11% appreciation in Spokane in 2021 seems unlikely to me. Far flung areas in the Spokane region that have not yet seen as much of an increase may have more room for appreciation; e.g., Moses Lake, Wallace, Kellogg, or they may also be affected by a loss of jobs and end of free government money.
The divergence between the increase in values and increase in rents mean that cash flow is likely to be lower for new buyers than for previous buyers. Indeed, properties with positive cash flow is becoming very tricky to find in Spokane and the area. Cap rates are lower than they were last year and last year’s cap rates were lower than the year before that.
Covid-19 has caused many employers to allow employees to work remotely. People who can do that are naturally likely to consider moving to Spokane from cities with endless riots like Seattle and Portland. That has likely had some effect on demand in this area. In addition, despite the recent increases in property values, housing in Spokane remains affordable compared to anywhere in California, as well as Portland, and Seattle. We are in uncharted territory as pandemics do not occur very often. So it is best to take any predictions with a grain of salt.