The Spokane Housing Inventory Crisis of 2023

With national headlines often portraying a bleak picture of the housing market, it's crucial to examine the local perspective. In this blog post, we will delve into the real estate market in Spokane, Washington, focusing on the inventory across different sectors. By analyzing the current state of apartment buildings, new construction, resale homes, Airbnb rentals, and additional dwelling units (ADUs), we aim to provide insights into the local market dynamics and their potential effects on homebuyers in the coming years.

Apartment Buildings

Spokane has seen a rapid increase in the number of apartment buildings. According to a Journal of Business article, over a thousand units are projected to be added. However, it's important to note that unlike larger cities such as Los Angeles or New York, real estate agents in Spokane typically don't assist with apartment hunting. Prospective renters often rely on platforms like Zillow and Facebook. While the inventory of rental properties is expected to expand due to permits issued for multi-family residential units, rental growth in Spokane has slowed. Over the past year, rent prices have decreased by 1.2%, which, although not significant, marks a departure from the substantial increases observed in the previous years.

New Construction

The availability of housing options is a significant challenge in Spokane, prompting the need for more construction. However, the data shows a concerning trend. Over the past decade, the number of new listings for residential properties, particularly new construction homes, has remained relatively stagnant. With an average of around 700-800 new homes hitting the market each year, it would take at least 32 years to bridge the current housing shortage gap of 32,000 units. This insufficiency of new homes entering the market impedes the restoration of a balanced housing market with a six-month inventory.

Resale Homes

The inventory of resale homes, or normal residential properties put up for sale by motivated sellers, has been declining steadily in Spokane. Apart from a slight bump in 2022, the number of new resale listings has remained at its lowest point in the last decade. This scarcity of inventory is unprecedented, with levels even lower than during the housing crash of previous years. Consequently, the limited supply of homes, coupled with a decreased number of interested sellers, creates intense competition among buyers, which contributes to the ongoing price growth in Spokane.

Airbnb Rentals

Contrary to the national trend, the Airbnb market in Spokane remains healthy. Occupancy rates have experienced only a slight decrease, while rental rates have reached peak highs in June 2023. Spokane's status as a non-destination city, where tourism is not the primary driver, contributes to the stability of the local Airbnb market. Consequently, the predicted wave of Airbnb listings flooding the market is unlikely to materialize in Spokane, as the city's rental revenue from Airbnb properties continues to increase.

Additional Dwelling Units (ADUs)

ADUs, which allow homeowners to build small units in their backyard for rental purposes, have become a hot topic in Spokane. While the number of permits issued for ADU construction has shown some growth, it remains relatively modest. However, there is potential for future development. Washington state law is set to change by 2027, enabling homeowners to convert ADUs into condominiums, thereby increasing their value and marketability. Investing in properties with larger lots in Spokane's opportunity zones could offer substantial long-term benefits for those looking to build ADUs and capitalize on the upcoming changes in legislation.

The real estate market in Spokane faces significant challenges, primarily driven by a lack of inventory across various sectors. Despite some growth in apartment buildings and ADUs, the pace of new construction and resale homes remains insufficient to meet the demand. This scarcity of housing options contributes to rising prices and a competitive market. While Spokane's Airbnb market remains resilient, the anticipated wave of listings is unlikely to affect the local market significantly. To address the housing shortage, increased efforts are required to add inventory and provide more affordable options for homebuyers in Spokane.