Soaring sales prices for homes here might be a welcome trend for some in the real estate market, but for first-time buyers and those with lower incomes, they mean dwindling housing options.
Spokanes reputation as an affordable place to buy a home remains somewhat intact.
Real estate market experts here warn, however, that if current double-digit annual increases in home prices continue, achieving the American dream of home ownership could become a struggle for some Spokane families.
The median sales price of homes in Spokane County was $168,700 in the fourth quarter of 2005, jumping more than 21 percent from the same period in 2004, says the Washington Center for Real Estate Research (WCRER) at Washington State University, in Pullman. The median price is the midpoint, with an equal number of homes selling for more than and less than that price. Meanwhile, median household income here has been rising at a more moderate pace of about 3.5 percent annually, says Glenn Crellin, director of the WCRER.
The median price has been accelerating at a rapid pace, says Rob Higgins, executive vice president of the Spokane Association of Realtors. Were just in a wait-and-see period to tell whether the trend will continue.
The problem in Kootenai County appears even more alarming. Last year, the median home price in Coeur dAlene skyrocketed by nearly 30 percent to $210,000, says Jack Beebe, vice chairman of the Idaho Housing and Finance Association and a real estate broker in Coeur dAlene. The median sales price of a home in Post Falls currently is $198,000, he says.
Were talking about affordability for the local work force, and its getting more difficult for them to buy a home, Beebe says.
The housing affordability climate here is cloudy, but the outlook isnt as dire as it appears to be elsewhere, Higgins says. The median price of a home in Washington state was $275,700 during the fourth quarter of 2005, climbing 19 percent from the year-earlier period, but that figure was skewed heavily by West Side home sales, results from the WCRER show. For example, the median sales price for a home in King County was $390,000, while the median sales price in Clark County was $252,800.
You look at those numbers and say, Wow, Higgins says. Spokane is still one of the most affordable housing areas youre going to find, especially compared with other population centers.
Beyond just Washington state, the median sales price for homes in metropolitan areas in the Western U.S. during the fourth quarter of 2005 was $328,000, up by 18 percent from the year earlier period, preliminary figures from the Chicago-based National Association of Realtors show. The nationwide median home sales price was $213,000 during the last few months of 2005, an increase of 13.6 percent from the same period in 2004.
Although the housing affordability predicament here might not appear as pronounced as it is in other markets, its worsening rapidly, real estate professionals say. To illustrate the problem, they cite a measurement called the affordability index. The index, measured from data supplied to WSU, tracks the ability of a typical family in Washington state with an annual income level of $53,000 to make payments on a median-priced resale home, assuming a 20 percent down payment.
Spokane County routinely scores well on the index, but in recent years its index number has been slipping.
Its affordability index stood at 135.5 in the fourth quarter of 2005, which meant that the typical family had about 35 percent more income than the bare minimum needed to buy a home. During the fourth quarter of 2004, though, Spokane Countys affordability index was 169.2, and in 2003 it had a rating of 199.5. Meanwhile, the affordability index statewide fell to 96 in the last few months of 2005, dipping below 100 for the first time since WSU began preparing the index in 1994.
Even more concerning is Spokane Countys declining number in another affordability indicator, called the first-time affordability index, says Crellin. That indicator measures the ability of the typical first-time home buyer to afford a less-expensive home, and accounts for the lower down payment that likely would be made on the house and the buyers presumably lower income. Spokane County had a first-time home buyer index of 75.4 during the fourth quarter of 2005, which beat the statewide average of 55.8 handily, but also was down sharply from a figure of 93.3 during the first quarter of 2005.
It represents a housing market where its difficult for a young household to purchase a home, even though homes here are priced well below the states median sales price, Crellin says.
Inventory shortages and low interest rates have been driving up sales prices, but it appears the tight inventory might be loosening as rising interest rates soften demand a bit in Spokane County, Higgins says.
In Kootenai County, further action needs to be taken to stem the tide of rising home prices, or else important members of the work force, such as police officers and schoolteachers, will start moving out of the area in droves to find an affordable place to live, Beebe contends. For example, younger Kootenai County schoolteachers, who earn starting salaries of about $28,000, simply cant afford the $1,200 monthly mortgage payment required to buy an average-priced home, he says. Furthermore, even though workers have started commuting to Coeur dAlene from places such as the Silver Valley to work, home prices in those other locals also have risen markedly due to heightened demand, he says.
Even if the interest rate was at zero, people would have a hard time buying homes here, he says.
Developers can help combat rising home prices by including more affordable homes in their projects, by using more economical architectural styles, or by building smaller houses, Beebe says. Realtors can encourage prospective home buyers to consider buying manufactured homes, which are a more affordable housing alternative, he says.
This isnt a fatal flaw, but if we dont provide for good work-force housing, were going to have a real problem, he says.
Despite escalating home prices, its still a good time to buy or sell your homes here, Crellin says. Residents who are considering buying or selling their home should take advantage of the vibrant real-estate market, before prices increase further, he advises.
For the buyers, conditions have deteriorated, but arent horrible, he says. For sellers, its a good time to move into the market because theres still relatively strong demand for homes.
Contact Emily Brandler at (509) 344-1265 or via e-mail at emilyb@spokanejournal.com.