Spokane home sellers expect tough sledding early into next year

Forces that slowed the the local housing market may be thawing, but homebuyers in the Spokane area likely won’t see much relief in the first three months of 2024, a local real estate official said.

Tom Hormel, president of Spokane Realtors, said the high interest rates that have constrained local and national housing markets continue to hold sway even though the national average for a 30-year mortgage has finally dropped to at or below 7%.

“I think the first quarter of next year will be just as tough as what we saw last year,” Hormel said. “We still have that low inventory problem. We are still 10,000-to-20,000 units short of what we need in Spokane County.”

In Spokane, overall home sales dropped 11.7% in November, according to Spokane Realtors, with only 377 homes changing hands.

However, new listings in the Spokane area jumped 17.3% compared to November 2022, and inventory climbed by 10.6 percent for the same time period.

The median price for a Spokane-area home was $407,500, up some 3.2% over November 2022 when the median price was $395,000, according to Spokane Realtors.

But it’s the inventory, that has Hormel worried. Only 980 homes were available, which would take about 2.6 months to sell every home listed for sale. Realtors typically hope to have about a six-month supply for a healthy market.

“In the market we have been going through, typically you see prices go down,” Hormel said. “But that hasn’t happened just because there is no inventory. We just don’t have enough housing units for the number of people we have.”

The national situation wasn’t any better.

New U.S. home sales unexpectedly slumped in November, led by a sharp drop in the South and suggesting a bumpy road to recovery for the housing market.

Purchases of new single-family homes decreased 12.2% to a 590,000 annual pace last month, a one-year low, government figures showed Friday.

The median forecast in a Bloomberg survey of economists called for a 690,000 rate.

The decline in sales may represent a temporary setback for a housing market that is otherwise on the mend.

Reports earlier in the week showed a six-month high in national housing starts and a pickup in homebuilder sentiment.

“Especially when weighed against the high new home starts number released earlier this week, low new home sales in November aren’t particularly significant,” Robert Frick, corporate economist at Navy Federal Credit Union, said in a note.

“The new home market is shaping up to have a good 2024, with already high inventories and more in the pipeline. When rates come down next year, there will be a surge in sales.”

The outlook for the new-homes market has brightened as 30-year mortgage rates are back below 7% amid expectations the Federal Reserve is poised to cut borrowing costs next year.

In addition, builders are taking advantage of lean inventories in the resale market and luring buyers with incentives such as subsidized mortgage rates and price cuts.

The government’s report on Friday showed the median sales price of a new home fell 6% from a year ago to $434,700.

New-housing inventory increased in November for the fourth consecutive month, to the highest level in nearly a year.

Sales decreased nearly 21% in the South, the largest U.S. region, to the lowest level since April 2020. Purchases also dropped in the West.

New-home sales are considered a more timely gauge than purchases of previously-owned homes, which are calculated when contracts close.

Existing-home sales increased by 0.8% in November from a month earlier, when they dropped to the lowest level since 2010.

The new-homes data are volatile, however. The report showed 90% confidence that the change in sales ranged from a 27.8% decline to a 3.4% gain.

Hormel, from Spokane, said the conditions likely won’t change until the Federal Reserve begins to lower interest rates, which could happen as early as the second quarter of 2024.

“That’s when sales will pick back up,” he said of lower rates. “Plus, it’s an election year. Everybody will want the economy to seem as good as it can.”

Bloomberg contributed to this report.