Housing permits decline in Tri-Cities, but builders say business still steady

Permits for new houses in Pasco and Kennewick dropped sharply in the first half of this year but housing officials see room for hope.

Just last week, for example, the website The Fiscal Times named the Tri-Cities as the top U.S. city that people are moving to.

And local builders say business has been steady even if it's not as busy as in recent years.

Through June, 633 new home permits were issued in the Tri-Cities, compared to 766 during the same time last year, according to the Home Builders Association of Tri-Cities. That's a 17 percent drop.

Pasco saw the biggest decline, with 188 new homes the first half of this year compared to 291 last year. And Kennewick was down 25 homes with 131 permits issued.

But Richland and West Richland each had slight increases in permits for the year. Richland has issued 155 permits so far and West Richland 75. The rest were permits for homes in the rest of Benton and Franklin counties.

Kennewick's home permit drop of about 16 percent likely is a normal fluctuation, said Rene Dahlgren, director of governmental affairs for the Home Builders Association of Tri-Cities. But the 35 percent drop in Pasco's new home permits is significant, she said.

"I have no doubt that the Pasco numbers are due in part to the impact fees," Dahlgren said.

Pasco's big draw was being the most affordable place to live, she said.

For some builders, the new $4,700 school impact fee is enough to make building in Kennewick or Richland more attractive.

But Rick White, Pasco's community and economic development director, doesn't agree.

New homes got off to a strong start in Pasco during the first three months of 2011, White said. But they didn't see the same pattern this year.

However, the average value of a home has risen to $232,000 from $220,000, he said.

And multifamily complexes and industrial construction projects are up from last year, White said.

The city got a rush of about 200 applications for single-family homes during the five weeks before the school impact fee took effect on April 16.

Since then, developers of 21 homes have needed to pay the impact fee, White said.

Ron Olin, founder and owner of Olin Homes, said they will continue to build in Pasco. They are about a third of the way finished with a 130-lot project called West Pasco Terrace, near Sandifur Parkway and Road 60.

What his company will do once that project is finished depends on where they can get the best deal, he said.

Olin Homes has created a smaller floor plan so it can continue to offer a $146,000 house, he said. While impact fees are part of it, it's not the only reason.

So far, sales are similar to last year, and Olin said they may build about 50 homes this year. The homes they build are all presold.

That's down from the 100 the company built in 2010, when the first-time home buyer credit was in place, Olin said.

"We are in one of the best areas in the country for building homes," Olin said.

The market for new homes is fairly steady, Olin said. With builders figuring out how good the Tri-Cities is for building homes, there is competition, making it a buyer's market and keeping prices down.

So far this year, Kennewick already has received initial subdivision applications that if approved would mean the addition of 544 single-family homes, said Evelyn Lusignan, Kennewick's customer service manager. Those applications show developers are still looking at Kennewick for future housing developments, she said.

As of last year, the city almost had 500 lots approved and ready for new homes, according to city documents. That represents a two-year supply, and does not include about 1,500 lots that were in the pipeline at that time.

Dahlgren said she is expecting new home permits to meet last year's numbers, though she's not sure where Pasco's will end up.

Brett Lott of Lott's Better Built Homes said custom homes have picked up in the last few months. People just can't pass up the low interest rates, he said.

Lott said he has three homes started and three more ready to go in Kennewick and Richland.

"I'm doing a lot of custom homes right now," said Lott, who also is vice president of the Home Builders Association of Tri-Cities.

He is seeing families who are selling their current houses and want to upgrade or have their dream home built.

His company may build about eight homes this year. Normally they build about six to 10, he said.

-- Kristi Pihl: 582-1512; kpihl@tricityherald.com