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The dwindling supply of vacant buildable lots is a key reason why prices are escalating and homeownership rates are declining, according to Todd Britsch, Pacific Northwest regional director of Metrostudy. He also believes a global recession is inevitable.
Speaking at the annual Builder & Developer Breakfast presented by John L. Scott Real Estate, Britsch said the imbalance between lots created and new homes sold is worrisome. “”We continue to pull product off the shelf and not replace it,” said Britsch.
During the past decade, 41,184 new lots have been delivered across the six-county region that encompasses King, Kitsap, Pierce, Skagit, Snohomish and Thurston counties. During the same period (2010-2019) 62,620 total new homes have been sold, which leaves a lot supply deficit of 18,639. Notably, this year’s shortfall (at 2,480 so far) is far outpacing 2018 when the net impact was minus 1,032. Since 2010, only two other years, 2012 and 2010 have had bigger net losses.
Based on his data, plus price trends and income qualifiers, Britsch estimates only 32% of the region’s households can afford new construction.
Britsch also discussed job growth and employment trends, noting 78,679 jobs have been added in the Puget Sound region during the past 12 months.
Statewide in-migration has slowed since 2015. A comparison of figures for July shows the average monthly gross in-migration peaked at 16,859 in 2016. This year, the average dropped to 13,691.
Metrostudy’s research indicates a recession is likely. “We’re going to get sucked into a global recession,” Britsch told the audience. But thanks to robust growth in the tech sector, he expects the Seattle region to be “relatively insulated” from it.
Nevertheless there are other looming challenges Britsch outlined, including:
- Trade war with China
- Bond market crash
- Corporate stock buyback
- Boeing 737 challenges
- Likelihood of layoffs
- Boeing’s limited operating capital
- Slowing in-migration (down 8% from 2018)
On a brighter note, Britsch listed several regional upsides:
- Amazon has 10,000 jobs posted in the Seattle
- Another 57,000 jobs posted within 25 miles of Seattle/Bellevue
- Anticipated growth of 30% in software developers by 2026 (255,000 jobs)
- Entering a normalized market based on demand scenarios.
Along with a guest speaker, the Builder Breakfast also features comments and price predictions by J. Lennox Scott, chairman and CEO of John L. Scott Real Estate.
Scott anticipates appreciation across the price spectrum in 2020, topping out at 8% or more for houses priced up to $500,000 in Southeast and Southwest King County, along with Kitsap, Pierce, Snohomish and Thurston counties.
Scott believes homes in the $500,000-to-$750,000 range in Southeast King and Snohomish counties will appreciate 6-plus percent, while for those price points in Pierce County a bump of 5 percent is anticipated.
Homes in Seattle and on the Eastside that are worth up to $1 million will likely increase 6 percent, Scott stated. Above that threshold, prices will rise about 5%. For Eastside luxury homes at the highest end of the price spectrum Scott predicts gains of around 3 percent.
Metrostudy covers 10 counties in the Seattle/Portland region: King, Kitsap, Pierce, Skagit, Snohomish and Thurston in Washington, and Clackamas, Clark, Multnomah, and Washington counties in Oregon.
Researchers track activity on more than 40,000 active lots and 2,000 proposed projects every 90 days. The company also provides builder floor plan pricing and weekly deed data for active projects within the region.