Housing supplies will continue to remain low, with the price of homes remaining stable in the coming year. That is the consensus of a local panel of economic experts gathered as part of the annual Greater Spokane Incorporated Economic Forecast for 2024. The economy in this current year continues to show signs of stabilizing, with inflation slowing and our employment growth remaining steady at 2%. Rent increases have slowed to low single digits, while vacancy rates continue to hover near 1%.
In the local housing market, the lack of supply issues will continue, and will likely grow worse as the region continues to see a slowdown in new housing starts.
“Housing supply will remain a key challenge,” said Avista Corporation’s Chief Economist Grant Forsyth, who believes the state’s Growth Management Act and additional regulation on construction is artificially keeping housing supply down, and prices high. “We have lost our inventory especially in the affordable housing sector.” While price increases have slowed, he believes prices will continue to climb until we see an increase in housing supply.”Spokane’s in-migration alone, over the past few years has put additional pressure on housing prices,” Forsyth added.
Market forces such as labor shortages, high interest rates, and supply chain challenges will also continue to have a dampening effect on housing construction. As such, Forsyth predicts housing starts in 2023 to finish the year between 4-to-5,000 units, down from over 7,000 in 2022. Additionally, Forsyth believes there is a 50-50% chance the Spokane Region will be facing a recession in 2024. He points to higher costs in fuel, food and housing taking an increasing share of wages. Locally, Spokane is also facing critical worker shortages in such areas as healthcare, as more aging workers leave the system but are not replaced by the same number of incoming younger workers.
Of particular concern to REALTORS®, Forsyth believes days of low-cost and available home owners insurance may be ending. He believes we will begin to see home buyers facing even greater challenges in home ownership ahead, as many large carriers face bankruptcy or choose to leave the home insurance market.
When asked how businesses and families can be best prepared for the upcoming economy, most believed it’s time to plan for the worse, but hope for the best. “This means holding onto to more cash, and being ready should a recession hit,” said Steve Scranton, Chief Investment Officer & Economist with Washington Trust Bank. “Start having better conversations with suppliers and employees,” he added.
Scranton will be offering his “End of the Year” assessment on the local economy to Spokane REALTORS® at the Governmental Affairs meeting December 20th.