This is why it’s so hard to find a Tri-Cities home to buy right now
Supply chain troubles and build-ready lots are redefining the Tri-Cities housing market — shifting the hot spots and possibly stunting its recovery in 2022.
You have to be fast to buy a home in the Tri-Cities, and that isn’t likely to change anytime soon. What is changing though, is where you can find homes to buy.
Because of long-term, sustained demand, builders are struggling to keep up with the rate at which homes are being sold, said Jeff Losey, executive director of the Tri-Cities Homebuilders Association.
They’re also struggling to find the materials needed to finish homes thanks to the global supply chain crisis.
“It’s not even close. There’s still no inventory to speak of in Tri-Cities,” Losey told the Herald. “What’s exacerbating the problem is the supply chain issues. It might have taken four months to build an 1,800- to 2,000-square-foot house, it’s now taking 8 to 12 months.”
Losey said he expects to see supply chain issues continue to plague home builders well into 2022.
He said these issues could make it possible for inventory to drop back to the critically-tight levels seen in early 2021, when the number of home listings across the entire area dropped into the 150s.
“We’re already behind on keeping up with demand,” Losey said.
Lost value
In years past, Pasco had a healthy lead when it came to new homes built. But that changed this year when developers were forced to shift to lots that were ready for construction.
In November, builders filed more than twice as many permits for new homes in Richland as they did in Pasco.
That shift is a trend that has been growing throughout the year, allowing Richland to become the top hot spot for new homes.
A shift that large will result in tens of millions of dollars in home values going elsewhere.
Pasco will see almost 200 fewer homes built from its 2019 peak of 541 homes. And it’s 140 fewer than last year.
That will mean $30 million less value compared to last year, and a difference of $50 million compared to 2019.
To the southwest, Richland saw an increase of $28 million in value for homes slated to be built.
West Richland was set to double the number of homes built in the area compared to 2019, also surpassing the number of homes expected to be built in Kennewick, according to data made available through the end of November.
Sold out
Britt Creer said his company, Ranchland Homes, is selling properties at an unprecedented rate. Ranchland is set to begin work on a new batch of homes in the Western Ridge subdivision of West Richland.
“Five years ago we’d list homes and they would sit on the market for 30 to 45 days,” he told the Herald. “Now within 48 to 72 hours we have a contract. We have a list of people that missed out on the last batch that we’ll be in touch with.”
Creer said builders are facing a variety of challenges, nearly every step of the way. From HVAC components to infrastructure, supply chain issues are slowing down the process.
“It never goes on schedule,” Creer said. “Pipe (for sewage) is tough. We have to order ahead of time, that holds us up sometimes. The cities have a lot of requirements that slow things down as well, because there’s a shortage of civil engineers to design those projects.”
HVAC components for heating and cooling, water heaters and kitchen appliances are the items he has the hardest time getting.
“We have one home we closed on in October, and they still don’t have their fridge we ordered in May,” Creer said. “We have another house we can close any time, but we have none of their appliances, they just keep pushing us back two weeks at a time. We tell customers to buy stuff that’s in stock or this can happen.”
Stricter standards for hot water heaters in Washington means fewer options in an already strained market. Creer said that for homes he builds in Utah, that hasn’t been as much of an issue.
And once you’ve managed to secure everything needed to finish a home? That’s when builders have to hope subcontractors are able to find enough skilled workers.
“Our subcontractors are definitely having issues bringing in skilled entry-level workers,” Creer said. “We really need to see a lot more kids coming out of Tri-Tech with at least serviceable skills.”
The Tri-Tech Skills Center in Kennewick is a high school program that offers technical and professional training for public, private and home-school students.
Costs and competition
Builders are facing more hiring competition than ever, between high-paying government jobs in the area and a boom of food processing and warehouse work moving into the Tri-Cities.
Amazon, Darigold and Reser’s Fine Foods are a few examples of large companies expanding in the Tri-Cities that will soon be competing for workers.
Home prices hit an all-time high in August when the median price for listings in the Tri-City area reached $400,000, but dropped back below that mark this fall, according to data from the Tri-City Association of Realtors.
As the owner of Tri-City Lumber, Betty Hughes has been working with developers for more than three decades. She said she’s seen all the ups and downs, but never constraints like builders have been facing recently.
Hughes said a small snag in a project can snowball into big delays.
“When a builder can’t finish a project and get a (certificate of occupancy) they can’t complete the house and then the bank can’t close the house, then it trickles down and affects everybody,” she said.
Supply chain shortages mean her business is also taking a hit.
“Being a small store, where the bigger box stores and retail sales take precedent over us, it exacerbates the situation because we don’t have the same buying power that someone like Home Depot has,” she said.
“It’s affecting the mom and pop stores because they don’t have as much pull, which is too bad because those (national chains) aren’t out here supporting the community … The real world runs on mom and pop businesses in communities.”
Climbing prices
The sum of all these interconnected issues ends up raising costs for home buyers.
The median price for homes sold in October was $392,100 — an increase of more than $53,000 from the same period last year.
Emmanuel Ochoa, the association’s communications and marketing director, said it’s a great time to put a home on the market.
Buyers have been snapping up homes with the average days on market dropping from 30 in Oct. 2020 to just 13 days this year.
“It’s definitely a seller’s market right now, there’s not enough inventory and houses are going like crazy here,” Ochoa said. “I think that goes back to the housing shortage, if there’s a house on the market it ... goes pretty quickly.”
Ochoa said that while home prices are expected to continue to rise, it will likely be a gradual increase. Another major driver of rising costs is a land crunch, with areas such as Richland and West Richland seeing more homes going up.
Available lots
Losey said the reason for these shifts actually comes down to where infrastructure and lots are ready to build.
“The only reason that a shift is ever going to happen is because there’s land and lots available. Once those lots become available, if they’re anywhere close to remotely affordable, there’s no keeping them on the shelf,” he said.
“How quickly can lots become buildable, and then how quickly can homes get put on there? In Kennewick, out in Southridge there are more lots that are going to be available, but they’re just not there yet,” he said.
Creer said his company is focusing on multi-family developments such as town homes to help alleviate some of the obstacles that comes with limited space. His company is focusing on areas of land they already have locked up in Western Ridge and Red Mountain Center.
“There is a constraint on the amount of lots being opened up,” Creer said. “We also have national developers competing to buy large (portions of land).”
By purchasing the land ahead of time he’s able to plan further out. Even so, both Creer and Losey agree that this combination of sustained demand and supply chain problems could make for a tight market for years to come.
Recruiting more workers for incoming warehouse jobs is only going to add fuel to the fire.
In September, Tri-City leaders said they expected Amazon to follow a game plan similar to the way they recruited for a delivery center in Spokane last year. In that case, the company partnered with local governments on a $500,000 marketing campaign directed toward workers in Western Washington.
Losey said finding housing for those workers is going to put even more strain on the market. The Tri-Cities is already considered one of the toughest markets to find a rental, with an apartment vacancy rate of less than 2% in May.
Losey said that there could be some relief on the horizon with the possibility of interest rates going up in 2022 and slowing down home sales a bit.
Especially if that potential slowdown gives builders the opportunity to bring home inventory back up to a more healthy level.
“For Tri-Cities, if we have anywhere around 1,200 homes on the market at any given time, (we consider that healthy),” he said, “Three to six months of inventory available, that’s a much healthier market for us to be in.”
State of the market
The number of homes on the market has leveled out since a dramatic decrease last spring when it plummeted to just 159 active listings in March, compared to 463 in March 2020.
In October, there were 400 active residential listings, up by 50 from the same time last year.
Permits compiled by the Home Builders Association of Tri-Cities show that single-family homes remain a priority for builders.
For the week ending Dec. 4, builders filed dozens of permits for new single-family homes, with Richland and West Richland being the most sought after areas.
Permits to build new single-family homes remain high with 1,526 filed year-to-date through the end of November, down just 10 homes from the same time period in 2020.
More than one-third of those will be built in Richland and West Richland.
This year also will see Richland knock Pasco off the top of the list for the highest number of new homes built, with 346 permits filed in Pasco compared to 387 in Richland, year-to-date.
Those numbers represent a significant drop off for Pasco, which hit a peak of 541 permits for new homes in 2019 and 488 in 2020.
Kennewick also saw fewer permits for new homes, but Benton County numbers were up.
This story was originally published December 19, 2021 at 5:00 AM.
