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Is Tri-Cities headed to a Housing Shortage? |
Feb. 23, 2010
Categorized in: Tri-Cities Market Conditions
Tagged with: richland homes for sale, tricities housing market
While many homeowners across the country have watched the values of their homes plummet, the Tri-Cities real estate market has fared much better. Economic forecasters are now saying a housing shortage may cause Tri-Cities’ home values to increase drastically within the next two years as the recovery across the nation continues. Especially, if lending practices do not provide builders, investors and developers loans to build housing units to keep pace with the demand.
With the relatively healthy local economy encouraging continued migration to Tri-Cities and homebuilders slowing or halting many new projects, Real Estate forecaster Paul Roy, Manager, Coldwell Banker Tomlinson Real Estate said demand will soon exceed supply.
“My fear is that national developers and banks may have overreacted and Tri-Cities may be penalized in the form of lower home starts, which can eventually create an artificial shortage,” Roy said.
Roy estimates newcomers move to Tri-Cities area at a rate of approximately 10,000 a year during the last 10 years. Those newcomers, coupled with the decrease in home starts, new homes under construction, and no new rental units— may lead to a shortage over the next few years, he said.
“Four years ago we were building new homes at a rate of about 2,000 a year, and last year we only built 1,210 housing units. Additionally, there are no new apartment buildings currently under construction. Based on our population growth that’s not enough,” Roy said. “With this type of growth the ideal number of home starts for Tri-Cities is 500 to 700 more a year than last year and most apartments buildings are near capacity, we need new units to keep up with demand..”
The largest decline in home starts in Tri-Cities has been in the $200,000 and under price range since fourth quarter 2007, according to data from housing data from the Tri-Cities Association of Realtors.
“Capital constraints faced by builders and the tightening in credit for buyers played large roles in this decline,” said Roy. “It’s a little different here,” Roy said. “I think a lot of people get confused with the national news. A big challenge that we face is that the buyers come in and think they can buy a house in this area for pennies on the dollar.”
“The guidelines have tightened so much now that even A+ credit buyers are challenged to get loans,” he said. “I don’t think it can get any tighter than it already is.”
The psychology of a recession despite the Hanford reputation, Roy said it works to the areas advantage that not all of the local economy is tied into Hanford.
Pointing to 2010 as a year likely to continue with a growing economy and housing market in the Tri-Cities, Roy said 2009 was a lot better year than 2008. “The psychology of the market is very important. If you expect that the economy is going to get better, it instantly gets better.
Roy said the good news is Tri-Cities home values have never appreciated to the degree national values have.
“As conditions do improve nationally, Tri-Cities will be well-positioned for a rebound because the overall inventory levels are low,” Roy said. “At this point, the most significant variable impacting local demand for housing is depressed consumer confidence. When consumer confidence returns, in 2010, home production will gain momentum.”
In anticipation of the economy’s recovery, Roy said many who have lost their jobs in other smaller markets will move to Tri-Cities and other areas like it for the opportunities of employment. But, they won’t if they can not find suitable housing which will be a negative impact to the areas local economy
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1. RE: Is Tri-Cities headed to a Housing Shortage?
An accurate assessment of the tri-cities housing market. I believe however we need to account for some decreases in employment specifically at Hanford once the stimulus funds which created hundreds of new jobs is eliminated.
That said, it still is a drop in the bucket regarding the entire economic development within the tricities. Nice weather, low cost of living, outdoor activities, wineries, etc all make the tricities an appealing place to live.