Washington is experiencing a statewide housing shortage problem that is unlikely to change anytime soon, according to Washington Center for Real Estate Research (WCRER) Director James Young. Unless changes are made to accommodate future population growth and the “perfect storm” of retirees outbidding first-time home buyers, 70 percent of city residents will be renters, and almost a third of home sellers will leave the state to buy a more affordable property elsewhere in the country.
That’s the possible future housing landscape in Washington, Young told state lawmakers, U.S. representatives, housing industry members and local government stakeholders at a July 8 housing forum in Bellevue, using data from the state Office of Financial Management.
“What you need to say is: ‘do you want that for Washington’?” Young told attendees. “Do you want that future for Washington, because that’s currently the trajectory. It’s called California. It’s up to you and the people in this room to decide if that’s what you want.”
Although Seattle metro’s real estate prices have drawn national attention, Young argued that “it’s not just a Puget Sound problem,” as housing shortages exist elsewhere, and there are numerous factors involved. One is low interest rates that allow people to bid up a house price and keep the same mortgage payment they would have had with higher interest rates, Young said.
What’s also driving the home price increase is “economic synergy” from professionals who are capable of job-hopping without having to leave the Seattle area, he added. “Cost of living doesn’t matter to them. (It’s why) New York (city) …is what it is, and Buffalo, New York is what it is. If I’m working for Chase, I don’t like the way Chase is treating me, I’m going to go work for Bank of America. Seattle has that in a lot of different industries.”
Although residential construction permits are at record levels, affordability has stagnated due to the type of permits sought. Single family and/or townhouse building permits are still below that of 2005. Builders in the Seattle area are “not building anything for people to own, which is a problem,” he said.
In the city of Spokane, almost all permits are for multifamily units. Less than one percent of those Spokane-based permits are for condos, according to Young. “Everything else is pretty much apartments.”
That means even if middle-income earners manages to either advance in their careers or save up enough to put a down payment on a house somewhere else in Washington, “the stock of available housing… represents less than 10 percent of existing houses out there. The reality is the houses are simply not there.”
Another factor pushing up house sale prices are retirees from western Washington buying up cheaper properties on the eastside, either to live in or rent, that are also sought by first-time homebuyers. “You got cashed-up retirees who don’t need a mortgage chasing the same type of houses.”
However, there is also an influx of out-of-state retirees coming from states such as New York and California responding to recent changes to federal tax policy who are anxious to take advantage of Washington’s lack of an income tax, he added.
U.S. Rep. Denny Heck (D-10) told attendees: “when you defer getting into that home you have….the size of the pot at the end of their working years is that much smaller.”
The eventual result will be a market in which few Washingtonians can afford a home. When they do sell, many of them will move to other states “simply because even in the small towns they’re going to be priced out.” The situation could also cause a “brain drain,” Young warned, because it will generate a demographic of people who are “staying just long enough to make the money to go buy a house somewhere cheap and get the lifestyle they want.”
The housing forum was hosted by the Association of Washington Business, Association of Washington Cities, the Building Industry Association of Washington, the Seattle Metro Chamber of Commerce, Washington Roundtable, Washington Realtors, the Washington Association of Counties, Greater Spokane Inc., the Washington Ports Association and the Rental Housing Association of Washington.