This article was originally published on WSJ Marketwatch:
The headlines read “Seattle’s real estate market is hot!” Under that glossy surface, Seattle real estate’s inventory dearth is a growing, unruly mess.
Home prices in King County rose 12% in February, but that’s no longer an attention-grabber. They rose 18% in the same period one year before.
Inventory is at just 1.1 months. The number of available homes for sale dropped 21% in one year. These crisis-level numbers should be astonishing, but they’ve begun to seem unremarkable. After all, inventory dropped 26% in 2015, 17% in 2014 and 10% in 2013.
The shock has worn off. We’ve been inundated with double-digit noise for so long in the Seattle real estate market that we’ve almost become numb to it. While that’s understandable, it’s also problematic.
King County is issuing 200 new driver’s licenses every day to people moving in from out-of-state. That doesn’t include in-state migration and in-county natural population growth. Meanwhile, the county is only issuing building permits for 27 new housing units per day.
The diverging trend lines of people and homes get further apart by the day, month and year. Prices rise swiftly.
Residents get squeezed. They “drive to qualify”. They live further out, commute longer distances, create more traffic gridlock, spend more on transportation, have less time to spend with their families and experience a diminished quality of life.
There’s no risky financing housing bubble to blame like there was a decade ago. Employment and in-migration in King County is forecast to rise exponentially in the coming years. These are people with real jobs, verified income and real down payments. There just aren’t enough homes, so prices continue to soar.
Consumers are often surprised to hear that Realtors aren’t always excited about skyrocketing prices. We’ve gone so far as to create a media blitz and conversation starters about how we can add balance to our market at HousingTranslator.com. You’ll see a push for smart housing policy measures on the web, radio, even on the side of buses. Important discussions about creating more housing options in the greater Seattle area aren’t being had often enough and we intend to change that.
We work and live in the same neighborhoods as our clients. Our neighbors and customers feel the same strain on their housing options, commute times and lifestyles. Higher prices due to artificially constrained supply aren’t good for any of us.
As organized real estate groups push for flexibility for greater housing development, we’re often told by those who influence public policy that “We can’t just build our way out of this,” or “Supply and demand don’t apply to this issue.”
The laws of economics are not optional. The population is growing, and demand for housing must be met. Let’s look at the region’s dire housing situation as if it were a different necessary amenity for our residents.
What if the region’s garbage collection services were already maxed out by its current residents? What if, despite population growth, we gave up on building out our waste management services to support our new residents? If some of our residents don’t like the look of more garbage trucks, can we simply deny economics and ignore our population’s growth?
If we try, there’s a day when the garbage service just can’t finish picking up the growing amount of waste that the population is creating. The trucks leave the last 1% of garbage on the sidewalks. They won’t catch up the next week, either. We’ll fall another 1% behind. After just one year, garbage trucks would be leaving more trash on the sidewalks than they’d be picking up. The unmet need for services would continue to become more extreme as the population expands and services, in relative measurement, shrink.
That’s been the story of Seattle’s compounding housing woes, and we’re many years into the process. We can’t clean up today’s problems because we’re still not providing enough housing options to service the population growth from years past.
If the analogy sounds a bit hyperbolic, that’s the intent. Something has to cut through the blasé coverage of Seattle’s real estate outlook.
Bidding wars are the rule. Attorneys and software engineers can’t find homes to buy. That’s not tugging at anyone’s heartstrings.
Higher income residents eventually resign themselves to outbid someone on lower-priced homes, though. These folks force the middle class to find other options — teachers, small business owners, etc. There’s nothing left for middle-class buyers to do but drop down a price category and outbid working-class home buyers. There’s no denying the linkage. We see it every day in the business. Buyers keep bumping each other down, but there’s nothing left at the bottom.
Every new housing unit, high-priced or low, creates more breathing room in the housing ladder. It’s an undeniable domino effect. Thoughtful concern for low-income residents necessarily requires a desire to create more housing units across the entire spectrum of pricing.
The repetitive stories about rising prices in Seattle may lull some to sleep, but the strain on the region due to lack of housing development is snowballing. Affordability of homes at all income levels needs to be addressed if we want to keep our businesses happy, our residents employed and housed, and our transportation systems working efficiently. More people plus more jobs equals more housing units needed. There’s no back-door formula to change this equation.
We can build our way out of this problem. We can also do it intelligently, by preserving legacy neighborhoods and increasing density in urban centers near transit hubs. Change is inevitable. Political myopia and willful ignorance will not improve the path that the Seattle region’s housing stock is headed down.
We’ll be at least 10,000 units further behind next year. There’s no time for nonchalance in light of our repetitively gaudy housing numbers. From a long-term perspective, they’re downright scary.