R
eal estate affordability remains a pressing concern in Spokane and Kootenai counties, with high costs expected to persist into the new year. Commercial real estate specialists warn that elevated interest rates, high development costs, and increased investor interest in North Idaho will put pressure on the market.

    Dave Black, CEO of NAI Black, notes that commercial real estate development has slowed for multifamily and retail properties, while leasing activity is mixed for industrial and office markets. The inverted yield curve created by recent Federal Reserve rate adjustments has added uncertainty to the market, making it challenging for developers to earn a decent return on investment.

    In the multifamily market, Black expects rental rates to level off as more apartment projects are completed, but construction costs remain elevated due to high interest rates. Industrial rents were strong in 2024, but vacancy rates have been rising due to a surplus of large industrial buildings. The office leasing market has been doing well, driven by business activity, but belies rising vacancy rates, particularly in downtown Spokane.

    Safety issues in the city are also driving investors to North Idaho, where there is more security and fewer expenses associated with owning real estate. In the residential market, Patrick Jones of Eastern Washington University notes that housing affordability has improved slightly this year, but remains a challenge due to rapid increases in median home values and stagnant household income.

    Home prices and household income will play a major role in market activity next year, with wages still lagging behind rising home prices. Mike Wendland, board president of the Coeur d'Alene Regional Realtors, says real estate activity in the Coeur d'Alene market has stabilized after explosive growth during the pandemic, creating more opportunities for buyers and sellers.

    However, elevated home prices and low inventory in Kootenai County have driven some homebuyers to other North Idaho counties, where there are more affordable options. Wendland notes that lengthy permitting processes and development impact fees also contribute to housing affordability issues in Kootenai County, increasing development costs that are ultimately passed on to consumers.

    Despite some development delays expected in 2025, Wendland expects to see more real estate activity focused in the Post Falls market, where there is potential for density and growth due to available water, sewer, and land.