GMA worsens housing shortage in Tri-Cities, officials say
A young parent asked Jeff Losey if he should wait for the housing market to cool before buying his first home.
Losey, executive director of the Home Builders Association of Tri-Cities, said he advised against waiting.
“The water level is what it is,” he said, referring to current house prices. “It’s not going to fall in a hurry.”
Losey, along with Ron Almberg, president of the Tri-City Association of Realtors, offered their thoughts on the drivers of Tri-City’s housing market during a recent episode of the Tri-City’s weekly Coffee with Karl Dye program. Development Council.
What drives the market? Low interest rates, job creation and population growth. And the Washington Growth Management Act of 1990.
The Federal Reserve may be raising interest rates in an effort to control inflation, but the other factors driving down inventories and rising demand — and prices — aren’t coming down. , they agreed.
Young and first-time buyers are the hardest hit, but they’re not the only ones, said Almberg, a designated broker at Keller Williams Tri-Cities when he’s not leading the industry association which represents about 850 local real estate professionals.
Older residents looking to downsize to single-level homes also have little choice.
“It’s not just first-time home buyers. It’s old people. They also have a challenge.
Losey explained how builders won fewer permits for new homes in 2021 than the year before, not because demand is falling, but because building land is scarce in some areas.
Tri-City homebuilders secured permits to build 1,647 homes in 2021, down 1,695 from 2020.
He blames Washington’s Growth Management Act for making it difficult to expand city limits — and services.
“The GMA is the thorn in the side of every jurisdiction. It’s more expensive because you’ve limited the supply,” he said.
Housing starts in Kennewick fell to 238 in 2021 from 290. Losey expects a jump in 2022 as work progresses in the Southridge area as the ground is prepared along the base of Thompson Hill. A walk along Bob Olson Parkway easily confirms that the land is being prepared for future subdivisions.
Pasco has also seen a decline and like Kennewick it is not for lack of demand but rather of available land. Once the urban growth boundary is approved, the land will be developed.
“We expect that to pick up again,” he said.
Richland and West Richland performed very well with lots available at Badger Mountain South for the former and Aho Development’s Heights at Red Mountain Ranch for the latter.
Almberg painted a difficult picture of the Tri-City residential market for buyers.
The median home price in the Tri-Cities rose to $400,000 at the end of 2021, up 20% from a year earlier.
The average list price for a top-selling three-bedroom home was around $369,000 in 2021. Tellingly, three-bedroom homes sold for slightly more than their average asking price, around $374,000. on average.
Agents are now advising buyers not to make offers below the full price.
There is, however, a positive aspect.
The Tri-Cities are not Seattle, Portland or even Boise, where homes sometimes make headlines selling for hundreds of thousands of dollars above list price.
Local homes can sell for four figures relative to demand, but not six.
“Buyers aren’t that desperate,” he said. “They won’t overpay.”
The price range of houses is on the rise.
Ten years ago, most homes were selling for between $120,000 and $330,000. Five years ago, the low end rose to $160,000. Today the range is closer to $330,000 to $500,000 and above.
“There’s a huge shift,” Almberg said.
With inflation approaching 8% in early April, homebuilders expect the Fed to take a series of measures to bring it under control.
Robert Dietz, NAHB’s chief economist, laid out his expectations in his email newsletter, Eye on the Economy, in March.
“Economic projections provided by the (Federal Reserve) indicate that markets can expect six additional 25 basis point increases through the end of 2022,” he wrote.
Losey warned buyers – and others – to be aware that the cost of borrowing will rise.
“Absolutely the rates are going up,” Losey said. “If you want to get that pool, you better get it now.”
Almberg said when the Federal Reserve approved a 0.25 percentage point rate hike in March — its first in more than three years — it shaved $40,000 off the purchasing power of a typical buyer.
According to Losey, the Tri-City housing market is increasingly unaffordable.
Only 20% of families in the community have the income to pay the median price of a new home of $569,000. Statewide, only 24% can.
And he notes that for every $1,000 of additional cost in the Tri-Cities, another 80 families are displaced.
That means a lot to the Tri-Cities, which have traditionally marketed themselves as an affordable place to live.
Almberg said an unintended consequence is that the community is growing — with people choosing to commute to Tri-City jobs from homes in Prosser, Connell and in his own case, Benton City.
Rising gas prices could start the trend, but he said he’s noticed builders are drifting further away. He said he moved to Benton City about seven years ago because he wanted new construction. But the nearby alfalfa field now has 42 houses.