Despite a one-third increase in foreclosure actions in the first quarter compared with the year-earlier period, Spokane County's default rate was among the lowest in the U.S.'s metropolitan areas, says RealtyTrac, a national foreclosure data collection firm.

In the first quarter, the county's foreclosure rate was 0.09 percent of its housing units, which was the 26th lowest of 203 metropolitan areas with populations of more than 200,000, says a report RealtyTrac released recently.

Phil Kuharski, a longtime observer of the Spokane economy, says he expects that the foreclosure rate here will improve before year-end.

"I'm seeing signs of recovery from the worst of this recession," he says. "I think things will look substantially better by fall."

During the first quarter of this year, the county auditor recorded 182 foreclosure filings, an increase of 36 percent, compared with 117 filings in the year-earlier quarter.

If that rate of increase were to continue, total foreclosures here for the year would top 760, a number that Kuharski says he doesn't expect to see. The county recorded 560 foreclosures in all of 2008.

Even if total 2009 foreclosure numbers were to approach the record of 1,152 foreclosures that were recorded in 2002, Spokane now has a bigger population base that could absorb such a total more easily, he says.

RealtyTrac calculates that Spokane County had one foreclosure action for every 1,060 homes in the county in the first quarter of 2009. That was second only to the Tri-Cities metropolitan area in terms of lowest foreclosure rates in the Pacific Northwest. RealtyTrac says the Tri-Cities area had a foreclosure rate of 0.04 percent, or one home in foreclosure for every 2,517 homes, the seventh lowest foreclosure rate of all metropolitan areas in the survey.

Boise, Idaho, on the other hand, had the highest foreclosure rate in the Northwest, with 1.18 percent of its housing units in foreclosure, the report says. The Seattle-Bellevue-Tacoma metropolitan area and the Eugene-Springfield, Ore., metropolitan area had the second and third highest foreclosure rates in the Northwest, at 0.47 percent, and 0.42 percent, respectively.

Nationwide, foreclosure rates increased 24 percent in the first quarter, to a total rate of 0.6 percent, compared with the year-earlier quarter, another RealtyTrac market survey says.

Metropolitan areas in California, Florida, Nevada, and Arizona accounted for the 26 highest foreclosure rates in the survey. Las Vegas had the highest foreclosure rate of all at 4.48 percent, or one housing unit in every 22 units.

Those also were areas where real estate speculation drove unsustainable increases in prices and housing inventory, Kuharski says.

"We didn't see excesses and oversupply here," he says.

Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University, says he also believes foreclosures here will peak this year or early next year.

"Housing prices here didn't increase as much as they did in other places, so the market wasn't overheated," Crellin says.

In turn, home values didn't decline as significantly here as in other parts of the country, he says. That means most homes are worth more than is owed on their mortgages, which gives homeowners a greater chance of getting out from under their mortgages should they need to sell.

The median home sales price in the Spokane market during March was $176,200, up slightly from $175,875 during the year-earlier month, although well off of the July 2007 peak median sales price of $196,000, says the Spokane Association of Realtors' Multiple Listing Service.

Rob Higgins, executive vice president of the association, says the foreclosure rate here isn't high enough to influence housing prices.

"When we look at our market, bank-owned homes might get up to 5 percent of the inventory" of homes for sale, he says. "We see markets like in Southern California and Nevada, where more than 50 percent of the sales are bank-owned."

Job creation and retention will be the key to stable real estate sales and foreclosure numbers, he says.

The unemployment rate here in March was 10.6 percent, the highest rate in more than 20 years, says Doug Tweedy, Spokane-based regional labor economist for the Washington state Department of Employment Security. He says he expects to see some seasonal improvement in job creation.

Some construction projects, and the jobs they would have created, were delayed due to extended winter weather. Tweedy says jobs from those projects just now are starting to become available. Any job creation, however, is being tempered by an in-migration of unemployed people looking for work here, he says.

"It's not just job losses that we're seeing, but more people looking for work," Tweedy says.

He says he expects unemployment here to remain near 10 percent in the near term.

Kuharski says in-migration of workers might drive up demand for housing as the economy turns around.

"This is a marketplace of in-migration," he says. "The demand for housing in the $150,000-to-$250,000 range will increase over the next five to 10 years sufficiently to absorb inventory."

Meantime, the Spokane area won't emerge unscathed by the sub-prime mortgage debacle that worsened market swings in many other communities, Kuharski says. Over the next year, some problem mortgages that were written here in 2005 and 2006 will surface as interest rates are reset, he says.

"The good news on resetting is that the rates will be lower than they might have been," he says. "The bad news is a lot of mortgages should not have been made."