‘Crazy prices.’ No relief in sight for Tri-Cities homebuyers. Here’s why

Tri-Cities homebuyers are facing the same problems as last year: higher prices and fewer choices.

“‘Affordable’ is considered anything that is $300,000 or less,” said John Keltch, the president of the Tri-City Association of Realtors.

Keltch and Jeff Losey, executive director of the Homebuilders Association of Tri-Cities, spoke on the state of the housing market at a Tri-City Development Council webcast.

“In the middle of a pandemic and social distancing, the market has adapted. People still need to buy homes and sell homes,” Keltch said.

Demand persists

Housing prices boil down to the simple equation of supply and demand. More home were sold last year than at anytime in 40 years.

By December, homes were on the market for just six days before being snapped up. And the Tri-Cities had only an average of 284 active listings at any point in the year, according to data from the Realtors association.

And now the teleworking environment that has come with the COVID-19 pandemic may continue to increase demand for Tri-Cities area homes, Keltch said.

As employers see that people have maintained productivity, a business model may potentially shift to include permanent work-from-home arrangements, he said.

Plus, teleworking frees people up to work from anywhere — making smaller metro areas like Tri-Cities with a lower cost of living more attractive to buyers.

“As crazy as we think prices are, they still are a lot less than other places,” Keltch said.

Rising costs

Last year, the Tri-Cities area shattered records when the median price of a home reached an all-time high of $336,500.

It was sticker shock to many who have lived in the Mid-Columbia for a while, including a decade ago when the median price of a home was about $170,000.

Tri-Cities ranked No. 2 among all small U.S. metro areas where home prices were outpacing wages, according to Construction Coverage, a company that does research and reviews for the building industry.

Still, Tri-Cities is a bargain compared to many areas of western Washington, as well as other Western states such as Oregon and California..

In King County, the median home price last year was $747,200. In Snohomish County, it was $564,300 and in Pierce County $564,300.

Even slightly closer to Tri-Cities, Douglas and Kittitas counties saw prices close to $400,000, according to the Washington Center for Real Estate Research.

Those prices are going to be climbing even higher in 2021 as energy regulations raise costs, in addition to land becoming more scare and expensive and growing construction costs, Losey said.

Land, lumber, energy

Losey said that even quarter-acre lot in Tri-Cities is now selling for $100,000 — and that’s before the cost of developing the land or building a house.

Lumber costs jumped from $349 for a thousand board feet last April up to $874 in January because of a combination of demand and Canadian lumber tariffs.

Last fall, Losey told the Herald that lumber alone was increasing the price of a new home by about $20,000.

Now, starting this month, Washington’s new energy code is driving up costs from $7,500 to $12,000 for homes measuring 1,500 to 5,000 square feet.

The cost can jump up to $20,000 more for larger houses, Losey said.

Washington State Energy Code for residential construction that went into effect Feb. 1 has a phased-in approach for regulations that will require homes achieving a 70% reduction in annual net energy consumption by 2031.

Some of that is achieved through ventilation systems, an increase in HVAC efficiencies or renewable electric energy and lighting equipment.

Historically low interest rates have off-set some of those increasing costs.

Rates for a 30-year loan have been 3% or less. And Keltch said that the industry does not expect the rate to increase drastically in the next few years — and even if they do, 4% to 6% is still a good rate.

Even so, Losey said that there is only so much that can be done with prices when land costs continue to rise because of the scarcity of vacant parcels and the limit of urban growth boundaries.

“In our current climate, there is a point that the amount of demand is not healthy to have an escalation that is happening so fast,” he said.

This story was originally published February 22, 2021 at 12:49 PM.