Tri-Cities’ hot market attracts outside buyers
By Andrew Kirk
A woman from Hawaii recently bought a home in Tri-Cities with cash and outbid other buyers by $10,000.
Real estate shoppers from Seattle, Portland, California and beyond are a growing trend in Tri-Cities, said Dave Shinabarger, president of the Tri-City Association of Realtors.
Lance Kenmore of the Kenmore Team in Kennewick said his office is getting about 15 percent to 20 percent more calls from outside of the state than usual—for commercial, residential and property management services.
Shinabarger said the buyers are selling property in their markets and buying here in cash. Not only can they “sell high, buy low” comparatively, but in the Tri-Cities they can expect healthy appreciation over 30 years. And in the meantime, they can collect reliable rents in the market, thanks to its 1 percent vacancy rate, he said.
Commercial real estate agent Charles Laird of Tippett Company in Pasco said outside investors buying buildings here is not new. For years they’ve looked for opportunities in this area when they didn’t like what they saw in their own cities, he said. The amount of activity in the last two years is what’s different, he said.
“I’m quite surprised by the amount and pace of activity that’s occurring,” Laird said.
Making those national lists of “best places to live” and “cities with lowest costs of living” grabs the attention of investors who are looking for multi-family dwellings or commercial property, said Ben Murphy, a property manager with SVN Retter and Company in Kennewick. Partly it’s the region’s strong economy but also it’s just a sign of growth, he said. In the 1990s, the majority of building owners were local. Now it seems most are regional, he said.
More office buildings and shopping centers from regional and national developers comes with population growth, said property manager Jerry Abrams of Jerry D. Abrams Company Inc. of Richland.
“We’re on the map. We’re getting noticed,” said Mark Trout of Retter & Company Sotheby’s International Realty. “They cite our economy, the potential for appreciation, the favorable vacancy rates for rentals. It makes good business sense.”
Vista Pointe Developments has taken notice of the area. The company is building Windsong at Southridge—a 56-bed, $6.1 million memory-care facility on Quillan Place and 24th Avenue off Highway 395 in Kennewick. Vista Pointe owns memory-care homes in Colorado and Oregon. This is their first project in Washington state.
“We do a thorough look-around to see where we want to grow,” said Don Harris, a developer with Vista Pointe. “Tri-Cities is growing and it’s not oversaturated. … I like the area.”
Wes Romine, development services manager for city of Kennewick, said there’s definitely an uptick in outside firms seeking applications to build commercial buildings. It’s always happening—like the national chain At Home taking the place of Shopko on Columbia Center Boulevard. He said there’s been a definite increase, and many are seeking permits to build and service the health care industry serving the area’s growing senior population.
Holly Logan, communications and marketing manager for city of Richland, said she has no data on where applicants are from, but agreed there’s been a noticeable increase in applications in 2019 alone.
It’s interesting that people turned homes into rentals during the great recession out of necessity, and now it’s a trend for investment purposes, said Michael Erickson of Crown Property Management of Kennewick. But the only significant increase in out-of-area clients he’s seen is for smaller-scale commercial properties and multi-family dwellings. He believes there are fewer options for those investments in Seattle, Portland and California right now.
What does all this mean for Tri-City residents?
Kenmore said it’s definitely having a “creeping” effect on the median sale price. In May, the median home price was $302,900.
When out-of-state developers compete with west side firms for commercial property, or out-of-market investors compete with locals and transplants for homes, the supply-and-demand result is median prices creep up, he explained.
The local real estate market is so hot right now because the population is growing, but the supply of housing isn’t keeping up with demand. That means there are only 500 to 600 homes for sale most months and turnaround is fast.
The Tri-City Association of Realtors reported the median sale price in August 2016 was $229,000. A year later it was $250,000. Last year it was $292,000.
“The market began heating up three years ago,” Shinabarger said. “It’s still double-digit appreciation and that’s expected to continue through June 2020.”
This time next year the market is predicted to cool a little, and some evidence of that is already showing this summer, he said. But year-to-year appreciation could still exceed 7 percent in the near future.
“A lot of equity was created in the last three years,” Kenmore said.
Erickson said the present market puts his mind back to the previous decade and the recession. But even though current levels of appreciation aren’t sustainable, he was quick to clarify he is not pessimistic about the future.
The people who could be adversely affected are those making $20 an hour or less and hoping to save up for a home with 1,500 square feet, Shinabarger said. Those properties are up to $250,000 right now.
The solution is city and county incentives for creating the right kind of affordable housing, he said.
Too many people seeking public office think affordable housing means tall apartment buildings and smaller lot sizes, Shinabarger said. This isn’t what the Tri-City market is calling for, he said. Incentivizing owners to renovate less-desirable properties in older neighborhoods is a good option, as is tearing down old homes and building anew on the lots. Considering the need for inter-generational housing in Tri-Cities, allowing more auxiliary dwellings to be adjacent to or behind existing homes is another solution, he said, adding that making smart decisions while respecting market trends is how more people can get in on the current appreciation.