REALTORS® Discuss Housing Supply Crisis, Trends and Concerns
"The Law of Supply and Demand cannot be repealed," said Realtor Patti Hill in welcoming attendees to the 22nd annual Housing Issues Briefing by Seattle King County REALTORS®. This year's event, intended for state senators, state representatives, legislative assistants, and candidates for House and Senate positions, drew more than 100 policymakers, Realtors, affiliate members, and others.
Along with a market overview, this year's event featured a nationally known market research consultant and panel of industry experts who discussed policies for restoring affordability while building strong communities.
In her opening remarks, Hill, the 2016 president of SKCR and a broker at the Ballard office of Windermere Real Estate, called this year's Briefing "the most important ever," due to the "enormous housing supply crisis," which she described as "an undeniable emergency."
To underscore her points, the leader of the 6,000-member association said multiple offer situations are common in King County, prompting unrealistic bidding wars between would-be owners and skyrocketing prices. Citing statistics from Northwest Multiple Listing Service, Hill said the growing gap between the countywide median price ($475,000 at the end of April) and the median wage is harming growing numbers of working families and "crushing lower income families."
Hill said families are responding to the supply crisis by looking for homes they can afford in outlying areas, which can result in long commutes and other problems. Lengthy commutes "clog our roads, pollute our air, create sprawl, and maybe worst of all, they erode our quality of life and precious time with family and community," she noted. An unhealthy market also harms the economic competitiveness of the region, and will eventually hurt tax revenues for state and local governments, she added.
Relief can best be achieved by increasing the supply of inventory, currently at about of 1.1 months, to inventory that approximates four-to-six months - a level that has not occurred since 2011, Hill emphasized, citing data from Northwest Multiple Listing Service.
While increased supply is essential, Realtors believe another important component of a healthy market is housing that meets changing demographics and consumer preferences.
Where REALTORS® Stand
• Will work to achieve a healthy real estate market (3-4 months of inventory, improved affordability levels, access to fair, affordable mortgage financing, access to information);
• Help make communities vibrant (healthy single-family neighborhoods, good schools, reasonable commutes, sense of community);
• Help uphold the goals of the Growth Management Act (relevant, forward-thinking comprehensive planning, timely response to actual demand, public discussions around smart growth planning);
• Pursue policy initiatives to increase housing supply and affordability (zoned densities, better quality population forecast data, legislative reforms to reduce barriers to condominium development, tax reforms to preserve affordability).
Featured speaker Mollie Carmichael, principal at John Burns Real Estate Consulting, shared insights from comprehensive research around consumer preferences, comparing both King County and the Seattle-Tacoma metropolitan areas with national averages. The research covered preferences on home sizes, architectural styles, interior features and various amenities.
The Burns firm also analyzes what it calls a "Housing Cycle Risk Index" based on 24 variables. Seattle is currently graded B+, but Carmichael warned the audience to "prepare for higher risk for real estate investments in the future due to greater challenges with affordability." She said three major factors - job growth, available supply, and interest rates/affordability - will have an impact on growth. Multi-family developments will continue to be an affordable solution, she added, and multi-generational homes be sought by more buyers.
Constrained supply is contributing to flat sales and rising prices but "ridiculously low" interest rates continue to attract buyers and keep the market stable. Asked if now is a good time to buy, 72 percent of survey respondents in King County believe it is, according to Carmichael.
To better understand consumers, the Burns firm no longer segments them into categories commonly known as the Silent Generation (born before 1945), Boomers (1945-1964), Generation X (1965-1979) and Generation Y (1980-1994). Instead, they're classified into more finite groups using lifestages and unique societal influences. Government, technology, the economy and social acceptability also differentiate the categories.
In King County, the group Carmichael defined as Innovators (born in the 1950s) are the biggest shopper segment, followed by Balancers (those born in the '70s). In general, shoppers want to live close to work, but they want single-family detached. They also have an aversion to alley-loaded neighborhoods, preferring instead a conventional lot with a garage or street parking.
Among other consumer findings Carmichael highlighted:
• There are more "non-traditional" families than traditional families in today's market, but the latter group will buy 2-to-4 times faster than the non-family segment.
• They have more pets than children.
• There is a huge opportunity for multi-generational housing, reflected by the fact that 44 percent said they want to accommodate their parents in their next home.
Asked about location preferences, the majority of King County respondents (52 percent) prefer inner suburban (with 15-30 minute commutes), with another 36 percent choosing outer suburban (30-60 minute commutes). Only 7 percent said they prefer the city core. A suburban master plan is favored by 44 percent - twice the number for any other alternative. Only 11 percent prefer urban.
When researchers invited shoppers to identify obstacles to their search, two-thirds of King County residents said lack of available homes is the biggest challenge, followed by an inability to find what they're looking for.
With that information framework, the discussion turned to a panel discussion moderated by SKCR Housing Specialist Randy Bannecker on restoring affordability and balancing interests to facilitate growth. Panel members included representatives from Forterra, the Runstad Center for Real Estate Studies, and Seattle King County REALTORS.
Michelle Connor, executive VP, Strategic Enterprises at Forterra talked about achieving balance through "smart, sustainable conservation" and policy innovation.
Last month, Forterra (formerly known as Cascade Land Conservancy) announced a partnership with El Centro de la Raza (a social service organization) to address housing issues. In explaining that endeavor, Connor said affordable housing is "more than just a logical part of a long-range land-use strategy."
Going forward, as Forterra continues its quest to protect critical landscapes, improve quality of life, and engage the community in creative attractive urban developments, Connor said she expects Realtors will be a key partner. She invited audience members to review two publications from Forterra's website: a 26-page communications guide with messaging research on growth, and a presentation consisting of 46 slides summarizing the values research findings. The research was commissioned by Forterra, the Puget Sound Regional Council, King County Council, and Amazon.
Panel member Sam Pace, a broker with Executive Real Estate, Inc. and a housing specialist with SKCR, was asked about specific fixes for both growth management and buildable lands. After providing an overview (with diagrams) of the Growth Management Act, the buildable lands process, and the roles of the State Office of Financial Management and Puget Sound Regional Council's transportation plans, Pace stressed the need for better data. The methodology is flawed, he suggested. "The problem is not with the agencies, it's with the law," Pace emphasized.
The third panelist, Peter Orser, acting director at the Runstad Center for Real Estate Studies at the University of Washington, is a past president of both Weyerhaeuser Real Estate Company and Quadrant Homes. He also has an extensive record of civic commitments, ranging from service as chairman of the King County Housing Authority and president of the Master Builders Association of King and Snohomish Counties to being a councilmember for the City of Mercer Island.
Orser noted he's been involved in the business of getting permits for 30 years but said it is becoming increasingly difficult. "Electeds need to step up to the responsibilities inherent in growth management," he stated. He also believes "we're overstating available land," in part because of flawed data. "We need the courage to execute against a plan that is good, but we need the data," he remarked. He also bemoaned how conversations are changing. "It's gotten angrier and more personal - more Trumpian," he suggested, drawing chuckles.
Orser cautioned against "pouring cold water on the corporations and employers" that are creating jobs and sustaining the economic engine. He urged policymakers to think of both education and affordable housing as parts of our infrastructure, adding "Rent control is not the solution." Finding solutions is possible, he said, but "It will take political courage and political capital."
Connor noted the Forterra research revealed we are a region of optimists. "Our community wants leadership, they want a vision put forward," she commented. "We are a region that is realistic that growth is inevitable, and overall, we're optimistic that it will make our lives better if we have a vision and plan for it."
Orser suggested Realtors collaborate with the Master Builders and Runstad Center to foster better understanding and appreciation of what is involved in planning and creating housing, and the risks associated with developing it, including what time delays and added codes/regulations can do to cost and success.
As part of the 2016 Briefing, participants received a packet of information that included a market snapshot with various charts and diagrams, an overview bills considered during 2015 to create a state capital gains income tax and the impact on real estate and small businesses, copies of the speakers' slides, and a summary of the Realtors' candidate endorsement process.