Home Builders Association: Housing remains strong
In what can only be described as the year we all would like to forget, the construction sector was one of the bright spots for 2020 in spite of COVID-19’s best efforts to dominate.
Working from home was no longer the one-off but the norm. Time spent with family was tested in 2020, with most everyone working, attending school, making meals and having staycations all at home. This has driven many to re-evaluate their own spaces, including the backyard, to find ways to make them better for long days of living and a better place to call home.
At the beginning of the shutdown a year ago, all private construction projects were deemed as “not essential” and halted for five weeks by Gov. Jay Inslee. Even with that delay and new construction safety guidelines for keeping workers safe, we saw 1,722 new single family residential (SFR) permits pulled in 2020, an increase of 5% in over 2019.
Pasco continues to lead the Tri-Cities again with 30% of all those permits pulled (524). Richland comes in at 22% (386) and Kennewick garnered 17% or 295 permits. The biggest jump in single family permits was in West Richland, which nearly doubled its 2019 numbers with 230 permits pulled.
One thing that has been clear over the last year is that nothing is normal. Housing is usually impacted by jobs. We have seen unemployment at unprecedented levels, and yet we still can’t build up an inventory of homes. As of the time this article was written, the current number of active home listings is less than 200. A normal average would be 1,000 – 1,200, which we haven’t seen for years.
Looking ahead, this year there is some good news and some bad. The good news for the near term is interest rates are not expected to change much, staying below 4%.
The bad news is housing affordability in Tri-Cities is getting harder and harder to control. Because of supply-side issues and environmental regulations in the new energy code, new homes built today will face an added cost of as much as $44,000 for each new home.
Lumber prices have been especially volatile in the wake of the COVID-19 pandemic due to increased demand and supply-side constraints. The unprecedented spikes in lumber prices have added more than $24,000 to the price of the average, new single-family home since April 17, 2020. The escalating lumber prices are largely due to insufficient domestic production.
Washington state’s energy code, which was adopted on Feb. 1, has added anywhere from $3,500 to $20,000, depending on the size of the home. In Tri-Cities with most homes ranging from 1,500 to 5,000 square feet, the energy regulations will add $10,000 to $15,000 per home.
Although the housing sector continues to lead Washington State’s economic recovery, these sharp price increases threaten housing affordability for everyone in the state.
We believe that 2021 will continue to keep pace and outperform 2020 with demand remaining strong in the wake of a year to forget.
This story was originally published April 30, 2021 at 12:04 AM with the headline "Home Builders Association: Housing remains strong."