Interest rates and affordability have been major factors in stagnant commercial and residential real estate markets in Spokane and Kootenai counties this year, according to some industry experts.

Dave Black, CEO of Spokane-based NAI Black and Black Realty Management Inc., says he’s closely watching long-term interest rates — an indicator that will shape the region’s real estate landscape in 2026.

“We’re hoping that interest rates start trending down a little bit,” Black says, noting that the U.S. 10-year Treasury yield is around 4%, with typical spreads of roughly 200 basis points, which is 2%.

“That gives you about a 6% interest rate,” he says. “Today, if we can get down in that 5 1/2 range, I think it would break a lot of things loose.”

Interest rates, however, are not the only factor influencing investment decisions, he says. Washington’s regulatory climate regarding taxation, energy-code requirements, and new rent-control rules, is pushing many investors across the border to Idaho.

"I’ve had people say, 'We’re only looking for this in Idaho,'" Black says. "I call it the Idaho factor, meaning people will pay more to be in Idaho."

Despite those challenges, his outlook is optimistic in the new year. Black explains that recent efforts by Spokane’s city leadership to address public safety and street conditions are improving perceptions of downtown. Still, with 32% office vacancy rates, Black says progress must continue to restore confidence.

“I feel a lot better this year about Spokane and Eastern Washington than I did last year because the city council has done some things to clean up the homeless and criminality and safety issue,” he says.

The Industrial real estate sector is also showing signs of recovery.

“We have a number of large industrial listings … on the west side, and several big properties on the east side of town, and several across the state line that are finally filling up,” Black says.

Jennifer Smock, board president of Coeur d’Alene Regional Realtors, says North Idaho’s market has remained largely unchanged over the past two years.

“As a general rule, it’s fairly flat as far as any sort of price appreciation or depreciation,” Smock explains.

Many segments, she says, have seen almost no change in residential valuations at all. 

"If two years ago somebody bought a house for $600,000 in Hayden, it’s probably worth about $600,000 still, which is uncommon," she says. "Typically, we do have some sort of valuation shift.”

Submarket conditions are varied depending on the location. For instance, the city of Post Falls, Smock notes, has historically seen strong new construction activity. 

“What we’ve noticed in Post Falls is that most of those big developments have been built out, and now it’s a resale market,” Smock says. “The values are actually down, not huge, but maybe 2% or 3% from this time last year.” 

By contrast, the Rathdrum area continues to see price increases tied to ongoing new construction.

"They’re closing them out at list price or a little above, pushing prices up,” Smock says.

Inventory levels are steady albeit seasonally low, she says.

“That’s totally normal in this market because of the weather,” Smock says, adding that countywide averages are skewed by multimillion-dollar waterfront and high-rise condo closings in downtown Coeur d’Alene. “They’re closing at between $2 (million) and $4 million and it’s really shifting the price points.” 

The median single-family home price in Kootenai County in November was $549,000, up 4.3% from the median price in November 2024, according to Coeur d’Alene Regional Realtor’s latest Market Snapshot report. Home sales in November were up 2.4% over the year-earlier month at 2,307, with 886 active residential listings as of Dec. 3. 

Market stabilization, Smock says, is emerging as the shock of interest rates wears off.

“We’re starting to see a little bit of a shift," she says. "It is opening up some inventory and allowing buyers who were waiting out in the wings to finally feel like, 'Okay, I can do this now.'"

In the Spokane area, the median sales price for a single-family home in November was about $420,000, up 0.6% from the year-earlier period, according to the latest Spokane Realtors' Home Sales Report. Home sales are down 3.5% in November compared with November 2024, and new listings are up 0.8% from 523 to 527. Inventory in Spokane County at the end of November 2025 totaled 1,344 units, up 16.9% from the year prior.

Karene Loman, president of Spokane Realtors, says the real estate economic outlook for 2026 will continue to be shaped by high interest rates, strained affordability, and cost pressures driven by tariffs — what she calls a “trifecta” influencing today’s market conditions.

“I don’t believe we’re going to see interest rates drop this year. What we’ve seen is what we’re going to see,” Loman explains.

Citing Lawrence Yun, chief economist for the National Association of Realtors, she notes that even top forecasters expect only modest improvements.

“He’s predicting that we will hit 6% next year, but that’s probably the best we’re going to hit.” 

Affordability, she adds, remains a critical issue.

“When you talk about the difference interest rates make, it’s huge,” she says. “We never should have dropped all the way down to 3%.”

The pandemic-era lows, Loman argues, helped fuel today’s affordability crisis.

“All the people that didn’t qualify for homes before now qualified and move-up buyers bought bigger houses at lower rates. That’s what jacked up our prices,” she says. “It’s the simple law of supply and demand. Demand was high, but not enough supply.”

Spokane County’s median home price at $420,000, which Loman says requires buyers to earn about $120,000 in household income to qualify.

“Our average consumer in Spokane County can’t afford to buy our average-priced house,” she says. 

Tariffs are also increasing the cost of new construction and refinancing, notes Loman.

“Now, all of our appliances, all of our home furnishings, and all of our materials that are coming from out of the country cost more, which means builders have to raise their prices,” Loman says. “And if you have a house that is in (poor) condition and needs to be fixed up to qualify for financing, that cost has also doubled.” 

Looking ahead at market conditions in the new year, Loman cautions buyers against waiting for better rates.

“I tell people not to sit on the fence and wait for prices to go down … because when interest rates go down, buyers are going to come out, and that means supply and demand prices are going to go up,” she says. “You’re better off buying now at a higher rate.”