Spokane, WA 2025 Real Estate Forecast | How Bad Will It Get?

2024 is coming to an end, and now it is time to predict what is going to happen in the 2025 housing market nationally and here in Spokane, Washington. We're going to go through all things in regards to home prices, interest rates, how many homes you're going to sell, and everything in between. Make sure you stick around to the very end, because I know you're going to find this video very helpful when it comes to buying your home here in 2025. If you're new here, I'm Hayden Halstead, real estate resource here in Spokane, Washington. Me and my team help buyers and sellers just like you every single day make the move in and out of Spokane, Washington, or across Spokane, Washington to a new neighborhood, anything like that. You can use the link down in the description to schedule a meeting with me or my team, or call, text, email anytime. It's all down below. We'd love to help you out. So let's get right into this. And I guess to give a little bit of context, just to kind of review where we thought we were at the beginning of this year, we were thinking that interest rates were hopefully coming down a lot faster than they were going to, much more aggressively than they were going to. We were going to see a lot more buyers into the market. A lot of realtors were getting very chipper thinking that the market was going to get a lot easier this year. And it really was a tough year in the Spokane real estate market and the real estate market across the entire country. We've had incredibly low sales. It's been very competitive out there for realtors, for buyers and sellers, and it's just caused a lot of turmoil. And I mean, the word that I've used to describe this housing market this year was emotional. It felt very emotional this year. And I've said that to quite a few other realtors and they agree. It just felt like emotions ran high this year. Sellers thinking that their home was worth a lot more than it was because this was the first time in a long time that home values had declined over a 24 month period. I mean, if you had owned your home for two years, you could not sell unless you were going to bring money to the table. I've talked to many sellers this year that did not own their home for very long and did not have any equity. And I know that other agents were working with a lot of sellers in that same situation. And so that is a tough pill to swallow when you think that your home is supposed to be this great investment, but ultimately you lost money in the last couple of years. So let's check out if 2025 is going to get any better and see where we'll go from here. So the first thing I want to talk about is the number of home sales. Realtor.com recently released a report ranking the top 100 largest metros, which Spokane does make it in that list. And they ranked us as the 86th hottest housing market out of that top 100. They say that the number of deals that are going to happen, the number of home sales in Spokane is actually going to decline by 2% next year. So they think it is actually going to go down even further, which would cause even more squeeze in the markets. But because of that squeeze, they believe that home prices are going to go up 8.7%, which I think is very bullish on home price appreciation. We'll talk about pricing here in just a second. Nationally, we'll end 2024 around 4 million home sales, which is the lowest since 2008. And so far we're predicting in 2025 for home sales to increase by about 5% or about 4.2 million for the year. An average over the last two decades is 5.15 million. So we're still quite a bit lower than what we've been this century, but we're expecting to see a little bit of growth as people continue to get used to the interest rate environment that we're currently in. We'll touch base on interest rates here in just a moment. Now I'm filming this in the second week of December, so not all the numbers have finished for 2024 in Spokane. My best guess is that Spokane will finish the year at 6,700 home sales, about 6,775 is my best guess. I believe 140 homes have closed in December so far. It's December 10th, 11th while I'm recording this. Time's up by three. It adds up to be about 6,700 to 6,800, which will put us lower than we were last year. We were at 6831 for last year. So we'll see once we actually land in 2025 if December ends up being a booming month, which I don't think it will be, or if those home sales are actually going to decline year over year. So for Spokane, this is the lowest number since 2013. Our housing market really fell off after the Great Depression in 2008. And so we had our lowest home sales in 2010, actually. We had a big drop in 2008 when the housing market crashed. It went lower and lower for three more years and started to rebound in 2012. In 2013, we had 6,670 homes sell. And so if we are above that 6,700 mark, then it'll be the lowest number of home sales since 2013. So my personal prediction for next year, knowing where the market's at right now, I don't believe that we will break the 7,000 home sale mark next year. I think we might see a nominal 3% increase next year for home sales, but I just think there's going to be so much pain in the market still from the high interest rates and the affordability being such a massive issue here in Spokane. I also looked at the numbers going back through to 2005 and watched the market go up and then come back down. In 2005, we had about 8,900 homes sell. And then just kind of looking at the numbers, how long did that number fall before it started to go back up? It was about six years. And so our most recent peak in the housing market was in 2021 when we had over 10,000 home sales, 10,140. And so now we've been steadily declining for the last three years since 2021. I don't think it'll take us six years to fully recover. I think we'll hit the bottom. I think we've kind of hit the bottom. We might be slowly seeing an increase, but I think it's unlikely that we get back into the 8,000 homes selling a year, which is kind of around average until 2027, at least. All right, let's talk about home price appreciation now. So is your home going to go up in value in 2025? The national expectation is 2.6% on average, looking at about 13 different companies and economists that are all running those numbers, like Realtor.com, Zillow, the National Association of Realtors, taking the average, they're landing at about 2.6% increase for next year. The National Association of Realtors is pretty conservative at 2% for the next two years in a row. So they believe that interest rates are going to stay high. It's going to cause prices to increase slowly. But something to remember is that there's a belief that every seven to 10 years, home prices double, which is not necessarily true, but especially not in all markets, that is for sure. But Spokane has seen a doubling here recently. From 2017 to today, the housing prices have doubled. And we were one of the fastest doubling periods in the entire country. We were placed number two at a 5.9-year doubling. Most people had to go back a little bit further, with the average being around seven years. Spokane did it in 5.9. Now, I don't see that happening again. But the other thing to think about is that we are compounding. And so when home prices got more expensive back in 2007, when the average price was $1.65, a 5% increase was like $7,000 or whatever it was. Now, today, a 5% increase is $20,000. The numbers we argue over are much bigger. Back then, you would be negotiating over $1,000 being a big issue. Today, that $1,000 is $5,000. So the numbers getting thrown around are much bigger, and it causes the prices to go up much faster. So even if they don't double over the next 10 years, the likelihood of them increasing much faster than they did in previous years is more likely. Because even if we just follow the average 3%, 3% a year of today's numbers is much greater than it was 10, 20 years ago. My personal belief is that we have seen the majority of the appreciation for this decade already. I think we front-loaded it from 2020 to 2023, and we will likely ride a pretty flat line into 2030. But who knows? That's a long ways away. There's going to be a lot that happens in that amount of time. And by flat line, I mean 2% to 3% per year for the next five to six years, which is still not a bad place to be. By the end of that, you're getting anywhere from 12% to 18%. And so you're doing pretty well. The other thing in regards to pricing, I just want to say is that I believe 2024 was the last year that homes will ever, on a monthly basis, go below $300,000. So on an average, on a yearly basis, we have been above $400,000 for the last three years since 2022. But on a monthly, if you looked at the monthly chart, generally in January, December, things like that, prices would fall off back into the $300,000, $375,000, $390,000 is what we were seeing. I don't think that's going to happen this year. I think we're going to finish December into January above the $400,000 mark. And so I believe that the average home being under $400,000 at any point in the year is nonexistent anymore here in Spokane. Now on to interest rates, the hot button topic all year long. So something I want to clarify, I've probably said it before on this channel, but the thing to remember is that the Federal Reserve, when they are determining their interest rate, it does not affect the mortgage rates. So when they came out this year, said they were going to start dropping rates, everybody in the real estate industry got so excited that the mortgage rates were going to get more affordable. And what happened? When the Federal Reserve dropped their interest rate by half a percent, mortgage rates went up significantly because the 10-year treasury, the bond market, thought that that was a bad thing. They thought it was a sign that the economy was not doing well. And so because they were nervous, the bond market went up, which made mortgage rates go up. So they are not directly correlated. The reason the interest rates were potentially coming down is because the economy was not showing good signs and we needed to make money cheaper to get the economy recovering again. But things have changed since then. Inflation has come out again today that it went up more than we were expecting. And so we're kind of holding steady right now. But just know that if we start dropping interest rates, it's because the economy is not in a good place. It's because people are losing their jobs. And really, that's what the Federal Reserve wants in order to lower those interest rates right now. They need people to be in a bad place, which then affects the housing market because there's less people to buy a home because they don't have a job. But those that can get into the housing market will have a lower interest rate likely because it will start to settle over time as money starts to get cheaper. When it first came out that the Fed was going to start dropping interest rates, people got super bullish. They were saying by the end of 2025, we were going to be in the mid to low five percent range for interest rates. And that has gotten more and more conservative the further we've gone through 2024. And now most people agree that we are lucky to see six and a half percent as an average in 2025, like Redfin believes that we're going to be at 6.8 for the entire year of 2025. So the key point here is that it's likely that home prices are going to be more expensive by the end of 2025, but interest rates are not going to be much better by the end of 2025. So if you're waiting for any of those things to come down, I don't know if you're waiting for the right thing. And I'm not a person to say marry the house, date the rate. I think that's horrible advice. You need to marry the payment and make sure no matter what payment you have accepted at whatever interest rate is something that you're comfortable with and you can afford. I don't care what the house is or what the interest rate is. And then if you are so lucky that interest rates decrease in a couple of years and you are able to refinance and lower your payment or do something to help you absolutely great. But if not, and you are stuck with 6.8% for 30 years, you can handle that and that is just fine. All right, let's touch base quickly on the rental market for those investors or renters watching the video right now. I think that rental rental prices are flattening and or decreasing here in Spokane. We've hit 5% vacancy for a little while now, and I think it is continuing to increase as more and more apartments are hitting the market that has started building two years ago in the boom. And there are no signs of slowing down. I just saw another 32 unit get listed for sale. That's a pre-construction, um, on North foothills drive today. And so if you are looking to park some 1031 exchange money into an apartment building, I've got a lead for you. We'd love to help you out with that. So let me know. And so don't be afraid to submit an offer to your landlord. They are asking the price that they would want, but they would like to have a great tenant. If you are a great tenant that has a great background, great credit, all that kind of stuff, you are more than welcome to negotiate. Everything is a negotiation. I do believe that Spokane is becoming more of a renter market. It is one becoming more of a renter market because home prices are more expensive. It's much harder to get into a home. We are building so many more rentals than we are single family homes. All of the zoning law changes I've talked about on this channel previously are all adding more rental units to the market and not adding more housing units to the market, especially not any more affordable housing market, uh, units to the market. Anything that I see that as a town home being built in the Spokane area is above $500,000 much above the average currently. And I don't think that is helping the affordable housing issue here in the area. And so as Redfin puts it, I think the American dream is kind of being rewritten right now as Gen Z and millennials are choosing to stay with their parents for much longer into their thirties and try to build wealth in other ways or delay buying a home altogether. The National Association of Realtors recently released their 2024 report of home buyers and sellers. And the average age of a first-time home buyer increased from 31 to 38 this year, which is a massive jump. And quite frankly, a little alarming that it's taking people almost half their life realistically to get into their first home. Now I don't get political on this channel much, but I want to just touch base on a topic that I've come across a few times and we'll kind of mix it in with a few things. But in terms of new construction, some people have fears of possible tariffs from our new administration being added and causing more fees into our real estate market. That's something that's speculative at this point. And we don't know what is going to be tariffed, how's it going to be tariffed and anything like that. So it is hard to say if that will do anything to our market at all. The thing that I do know is that fees are increasing for the city of Spokane. I was touring a new construction community, a luxury new construction community, I should add, where homes are $900,000 to $1.5 million. And they're starting the second phase of that community. This is Whitetail Ridge. And they said that every home is going to be at least $70,000 more expensive due to Washington State's new energy codes that were passed this year. So that's just on the state side. Plus, that's not factoring in if you're building in the city of Spokane, the increasing water and hookup fees that are being tacked on to new construction builds as well. Plus, if builders are building in the Latah Valley, they are required to pay for infrastructure like roundabouts, sidewalk and improvements to 195 and it's on ramps. So of course, that it will get added into the cost of the new construction builds as well. So there will be a lot to navigate in 2025. I feel like it will be a relatively similar market to 2024. Overall, if we don't see any drastic changes, affordability will still be a major issue. We're going to be getting very creative. And I just recommend to every single person out there, put as much cash away as possible, pay off your debt and get your credit score up. My personal opinion is that this is not a great time to buy a home on a first-time home buyer basis with no equity in the property at all. You should really have a goal to put money down on a property because we are not going to see a lot of equity gains over a long period of time. And it is possible that you would be upside down in your home for a long period of time if you don't put money down as a buffer. That's just my personal opinion, just one realtor here in the Spokane area. If you don't like it, there's 2,500 other of them that would probably be happy to help you otherwise, I would love to advise you through your real estate transaction here in the Spokane area. I love what I do, and I love helping the people that reach out through this YouTube channel every single day. So if you'd like to have a conversation, you can use the link down below in the description to schedule a meeting with me on my calendar at a time that's convenient for you. You can also call, text, email anytime my team will get ahold of you. And if you found this video insightful, please like and subscribe. It not only means a lot, but it helps me get this video out to more people and get this information in the hands of many more people moving to Spokane. All right, thanks so much for watching. I'll see you in the next one.