Homebuilders race to match Tri-City growth
Tri-City building agencies issued a record 1,655 permits for single-family homes in 2019, an 18 percent gain in just a year.
Predictably, fast-growing Pasco led the market with 585 permits, followed by Richland at 371, Kennewick at 342 and West Richland at 122, according to year-end figures compiled by the Home Builders Association of Tri-Cities.
Between 2014-19, homebuilders secured permits for more than 8,000 homes and the pace of development grew by nearly 60 percent.
But is it enough to keep up with demand sparked by low unemployment, low interest rates and an economy that has added a staggering 47,500 jobs since the year 2000?
Pasco permitted 100 more homes in 2019 than the year prior, a 21 percent gain. Since 2014, the city has permitted nearly 2,400 new single-family homes.
It’s a healthy figure, but Rick White, director of planning and community development, said new construction isn’t occurring in the “affordable” range, generally $300,000 and below.
It’s not an idle question. Pasco expects to grow to 124,000 people by 2040, a gain of roughly 50,000 people in just 20 years.
“Are we building enough? I can’t answer that. But inventory is low and apartment vacancies are basically nonexistent,” he said.
The population of Benton and Franklin counties stood at nearly 300,000 in a 2018 population estimate by the Census, 36,000 more than 2010.
During that time, the Tri-Cities added about 1,750 households per year, growing to 103,500, according to a 2018 housing market analysis conducted by the federal Department of Housing and Urban Development.
For buyers, that means there are about 500 to 600 homes for sale at any given time, about three months’ worth. Historically, the market was considered healthy when the inventory hovered around 1,200.
Still, buyers purchased 4,153 homes in 2019 on an average of 12.5 homes per day. That’s almost one more house per day than five years earlier, according to figures compiled by the Tri-City Association of Realtors.
Jeff Losey, president of the home builders association, expects the homebuilding industry to boom again in 2020.
The year is already off to a better start than 2019, when February snow slowed the start of the construction season and the uncertainty caused by trade wars and tariffs on Washington-produced agricultural goods injected uncertainty into the economy.
The trade wars have eased, and the winter has been mild as of early February. If it continues, Losey said 2020 should be a repeat of 2019 or better.
“We’re benefiting from the economic opportunities that everyone else is having,” he said. “Interest rates are low and stable. That keeps buyers making purchases.”
Rising prices for land, homes
John Kelch, managing broker for Windermere One Tri-Cities, is the 2020 chair of the Tri-City Association of Realtors. New construction accounted for 25 percent of home sales in 2019. In the pre-recession years, it topped out at about 30 percent.
Kelch anticipates it will remain at the 25 percent level. Developable land is in short supply, which has driven lot prices to more than $100,000. That doesn’t help build the $250,000 to $300,000 homes considered affordable.
Indeed, the median price of a home in the Tri-Cities rose to $300,000 in 2019, from $275,000 the year before.
“As land becomes available, it’s getting built on,” Kelch said.
In a tight market, Kelch advises sellers to price their homes appropriately and buyers to be patient and ready to act when they find the right property, whether it is new or not.
Tax base bump
2019 wasn’t just a marquee year for homebuilding.
All construction was up. In all, builders pulled permits for projects with a combined value of more than $1.1 billion — $486 million for single-family homes and $700 million for all others, including commercial, renovations and so forth.
It’s the first time the Tri-Cities topped $1 billion in construction value since at least 2004, according to Losey, who checked the home builders association’s records. Ten figures is a big deal, he said.
“It means that it was a very good year for the Tri-Cities from an economic perspective,” he said.
Benton County’s total assessed value for tax purposes is $22.8 billion, and Franklin County’s is $9.3 billion.