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Spokane, Coeur d’Alene among most overpriced real estate markets in the nation

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Three years ago, the Spokane region attracted attention as the top real estate market for its quality of life, employment opportunities, and relatively affordable prices compared to the large and expensive metropolitan areas.

Currently, the city of Lilac and the adjacent Coder Lane are named in different lists. This is the most expensive market in the country.

Researchers at Florida Atlantic University and Florida International University ranked 7th in the list of the 100 most overrated home markets in the country in April, more than 54% above home prices that should be based on historical price trends. I ranked it.

Spokane has consistently ranked in the top 10 overrated housing markets across the country since the two universities began their survey in August, and is a real estate economist and vice president of FAU’s Business College. Ken Johnson said.

“Like many other regions, premiums continue to rise slowly in Spokane,” Johnson said.

Johnson and Eli Beracha, directors of the Hollo School of Real Estate at FIU, used a 25-year history of monthly home prices from Zillow and other public data sources to compile a list of overrated cities for a particular market. Predicted current home prices in. ..

They compared these projected home prices to the median closing price to determine if the buyer was paying a higher premium. This is more than you have to pay based on historical price trends.

In this survey, Boise was ranked as the most expensive city in the country.

Although this study does not track coder lanes, Moody’s Analytics researchers were the seventh overrated market in the United States in the fourth quarter of 2021, with buyers paying a premium of 55.9%. increase.

For comparison, according to Moody’s Analytics, the coder lane housing market was overvalued by 19.6% in the fourth quarter of 2019.

According to the Coeur d’Alene Association of Realtors, the median home price in Kootenai County in April was $ 549,950.

Moody’s Analytics economist Todd Metcalf said in an email, “Idaho has had a strong housing market for the past few years because it is generally a relatively affordable place for people to travel. I’ve been here. ” “The pandemic really overestimated its dynamics.”

Strong housing demand and declining supply have pushed prices to record highs in both cities, putting homebuyers at a disadvantage.

Rising interest rates may stabilize prices, but experts predict that affordable housing shortages will continue.

Median closing prices for less than one acre homes and condos exceeded $ 425,000 for the second straight month in April, according to data from the Spokane Real Estate Agents Association.

According to Johnson, prices are unlikely to bottom out as Spokane is backed by a constant flow of people moving to the region, but prices are in the past without major market problems. It is the same as the price trend, so it needs to be calculated.

“I don’t think the price of Spokane will plummet, but I think the region will suffer from affordable housing over the long term,” Johnson said.

According to the National Association of Real Estate Agents, the median national value for all home types in April was $ 391,200, up 14.8% from $ 340,000 in April 2021.

Competition remains fierce and buyers continue to pay asking prices for homes in the Spokane market, but multiple offers that were 15 to 20 or more at the start of the pandemic have diminished, said Tom Clark of the Government Affairs Commission. Said the president of the Spokane Real Estate Agents Association.

“I think prices are definitely rising,” Clark said. “Are they out of control? I don’t think so, but I think buyers and business people want things to settle down, and they can return to the normal housing market. “

Historically low interest rates during pandemic-fueled housing demand further exacerbate inventory shortages.

However, economic uncertainty is causing fluctuations in mortgage rates nationwide. As a result, buying demand has declined and homebuilder sentiment has fallen to its lowest level in almost two years, Freddie Mac reported last week.

According to Freddie Mac, last week’s average 30-year mortgage rate was 5.25%.

“Interest rates will have a more devastating effect on entry-level buyers because they are tied to what they can afford,” Clark said. “There are still quite a few cash buyers in the market and they are completely unaffected by interest rates.”

Housing collapse is unlikely

Beracha at FIU’s Hollo School of Real Estate does not anticipate a nationwide downturn like during the Great Recession, when some homes lost more than half their value.

“At the peak of the last housing cycle, there was an oversupply of housing units nationwide,” Bellacha said in a statement. “So when prices started to fall, there was nothing to catch them, and we witnessed a monumental crash. The current shortage of homes is how much this price will go down. It helps to determine if it is possible. “

Rob Higgins, executive officer of the Spokane Real Estate Association, said banks are making lending practices more conservative by ensuring that buyers are eligible to buy homes.

Higgins expects demand in the Spokane market to remain strong, but rising interest rates could delay the rapid double-digit price increases seen during the pandemic.

But Higgins said it’s not uncommon to think that home prices are rising faster than the local economy can tolerate.

“I’ve never seen a rise in selling prices like today,” he said.

A 3-year waiting list for affordable homes

On average, households in Spokane County spend more than 25% of their income on mortgages and interest payments, according to the Washington Real Estate Research Center, which calculates and maintains affordable housing indicators.

This index measures the ability of middle-income households to pay mortgages in median homes.

Spokane’s affordable price index for the third quarter of 2021 was 88.8. If the city index is exactly 100, the household spends 25% of its income on mortgages and interest payments.

If the number is less than 100, it means that the household spends more than 25% of their income on housing.

For loan approval, lenders often prefer potential homebuyers to spend less than 28% of their total monthly income on housing with debt that does not exceed 36% of their income.

Ben Staccato, executive director of the Spokane Low-income Housing Consortium, said there are more than 3,000 people on the waiting list for rental assistance in the region.

“The current average wait time is three years and hasn’t improved,” he said.

Last year, about 6,000 apartments were built in the Spokane area, but it’s not enough to reduce the availability of homes, Stuckart added.

Rising real estate prices in Spokane have a direct impact on the rent market as people who cannot afford a home stay in their apartments longer and put further pressure on housing supplies.

“It’s all part of one system,” Stuckart said. “A supply problem in an area can clog the entire housing system.”

Rents in the region are rising rapidly as housing supply declines and demand spills over into the rental market. According to the apartment list on the rental property listing site, the median rent for Spokane is $ 931 for a one-bedroom apartment and $ 1,258 for a two-bedroom apartment.

“Surveys show that high rents lead to homelessness in the community,” Stuckart said. “It’s not a lack of service or poverty.”

Stuckart said city officials need to advocate different types of housing and zoning changes to enable further development. He encourages residents to open their doors to different types of homes in the neighborhood.

“The market is not going to fix itself until the restrictions on what we can build are relaxed,” he said. “The amount of land we build is limited, so we need to use it.”

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