Spokane has had a very hot housing market for the last few years. Bidding wars were the norms. Reasons for this included the new work-from-anywhere trend caused by Covid, and lower density and prices than nearby tech centers like Redmond and Silicon Valley. Some employers required employees to stay in the same state, so HR didn’t have to learn new Labor and Industries or tax withholding laws, making the Spokane area an obvious choice for west side tech workers looking for a lower cost of living and higher quality of life.
Quantitative easing, pandemic stimulus, low interest rates, and a delay in construction caused by the pandemic caused real estate values to rapidly increase across the country. Another way to look at it would be to say that QE and low interest rates lowered the value of the dollar relative to assets. Now that interest rates are going up, monthly payments are becoming more unaffordable for a house that was affordable just a few months ago. This has caused a slowdown in real estate demand.
Make no mistake, Spokane is still a seller’s market. However, we are seeing many properties stay on the MLS for more than a week, sometimes for over a month if the seller is being too ambitious in pricing, and bidding wars are not as frequent as they used to be.
Home builders across the country are seeing a decline in demand and rising inventories. An increase in inventory is the first step before a housing crash.
Fortune magazine, via Moody Analytics, considered how house prices are likely to change between the fourth quarter of 2022 and the fourth quarter of 2023.
They predict that 183 markets will see a year-over-year home price increase in 2023. The biggest predicted home price increases are for Albany, GA (4.12%); New Bern, NC (4.12%); Augusta, GA (3.84%); Hartford, CT (3.73%); and Casper, WY (3.29%).
They also predict that 231 markets are likely to see home prices drop in 2023. The biggest predicted 2023 home price drops are for The Villages, FL (-6.96%); Punta Gorda, FL (-6%); Reno, NV (-5.57%); Honolulu, HI(-5.56%); and good old Spokane, WA (-5.52%). Spokane is also in the list for biggest predicted price drops from Q4 2023 to Q4 2024.
The Moody’s forecast assumes the U.S. doesn’t enter into a recession. They are assuming we will have the so-called “soft landing.” Note my previous article that concludes that 8 times out of 9, when the Fed raises interest rates, we enter into a recession. If we do enter into a recession, Moody’s predicts that significantly overvalued housing markets like ours, as well as places like Phoenix, Austin, and Las Vegas, are likely to see home price declines of between 15-20% over the next two years.
What actually will happen depends substantially on what actions the Fed takes, as well as what steps government takes to grow the economy, and those things are very difficult to predict. If the Fed chickens out on rate increases and lets inflation rage, our real estate values may see the more modest decreases but we may have a reduction in the value of the U.S. dollar relative to other currencies.
https://fortune.com/2022/08/15/falling-home-prices-to-hit-these-housing-markets-in-2023-and-2024/