Rob Higgins has been selling homes in Spokane for 36 years. He’s worked through booms, stagnations, slips, dips and backslides.
But, Higgins said he’s never seen a seller’s market like the current state of affairs in the Spokane region.
Higgins, the executive vice president of the Spokane Association of Realtors, noted the median price of a Spokane home had climbed to $341,000 in March.
“I didn’t think they would ever go to this price,” Higgins said. “It wasn’t that long ago that the median price was $150,000. It’s like, I’m in a fog.”
The low supply of homes has pushed prices higher for whatever homes come onto the market. It’s the opposite of a buyer’s market, where prospective buyers can choose and potentially offer less money than the asking price because so many homes are for sale, he said.
“I’ve been doing this since 1985. We used to say that the normal market is four months worth of inventory,” Higgins said.
He explained that the inventory time frame is how long it would take to sell all the homes currently available on the market.
“Today it’s 11 days,” Higgins said. “That’s the lowest number I have ever seen. That’s hard to even wrap your head around.”
The low inventory has created a feast-or-famine situation for real estate agents, he said.
“If you have a listing, it’s going to sell,” Higgins said. “But if you are a buyer’s agent, you’ve got a tough job. You’ll be working seven days a week to present offers to buyers. They are being rejected because there are so many buyers.”
Higgins said he did a random sample of homes that sold in the $350,000-$400,000 range in March.
“The average increase over list price was over $20,000,” he said. “That means the price is being bid up.”
Grant Forsyth, the chief economist for Avista Corp., said the seller’s market is good for those trying to sell their homes, but it could push out younger buyers who are trying to purchase their first new home.
“These are largely native-born people who want to stay here,” he said of the first-time buyers. “They are in competition against a lot of people who can bring a lot of cash to the table. So, there is an affordability issue with these long cash runs.”
Higgins agreed, saying the seller’s market can push some first-time buyers either to wait or force them to rent.
“For the first-time homebuyer, their big issue is to save enough money to make a down payment,” he said. “Almost all of the sales are conventional, which requires a lot. Affordability is going to become a significant issue. “
Joel White, the executive director of the Spokane Home Builders Association, said much of the current seller’s market is coming from folks moving to Spokane from the higher-priced real estate markets in the Seattle area.
“It’s not because our economy is doing so much better,” White said. “We have a great quality of life here. They can buy a nice home in Spokane where they may have been living in a small house or condominium in Seattle that was worth $1.5 million.”
As the inventory remains low, the pressure for contractors to build more homes has increased, White said.
“When these homebuyers call us and ask us, ‘Can you give us a builder?’ We say, ‘Yes. But heads up, you will probably have to wait a year before they can build your home,’ ” he said. “Builders are unable to meet the demand. They are basically turning away business.”
In addition to the normal price increases caused by demand, contractors are currently facing record lumber prices that are adding about $45,000 to the cost of a median-priced home.
“We still have builders building speculative homes, but that activity has died down,” White said. “As soon as they get final plat approval and put a yard stake down, it’s purchased. Buyers are so desperate.”
All that activity has been a boon to local banks as well.
David Flood, the chief title lending officer for STCU, said his company has been doing a robust business with mortgages and refinancing of existing mortgages as buyers and owners take advantage of historically low interest rates.
He said in 2018, STCU did about $183 million worth of mortgage lending. That jumped to $442 million in 2019 and it nearly doubled to $731 million in 2020 despite the pandemic. For the first quarter of this year, STCU has already done $221 million worth of mortgages.
“We have more demand for homes than supply,” Flood said. “That gives the seller a pretty big advantage at the moment. We have a lot of buyers for the same home and it’s driving up prices.
Forsyth, the Avista economist, said he expects it may take a combination of market influences for the current seller’s market to cool off.
“My guess is that the home-price gains are going to be pretty sensitive to interest-rate changes,” he said. “And, if suddenly there is a downshift to the number people moving here to the region.”
Higgins, a former Spokane City Council member, doesn’t expect the flow of new residents to stop soon. He noted the median price of a home in Seattle is still more than double Spokane’s record level.
And, homes in Spokane remain competitive to other regions in the nation, he said.
“Lots of people are coming over from the West Side or California,” Higgins said. “They are looking at the prices and saying, ‘Heck, we had those prices 10 year ago. What are you guys complaining about?’ ”