Housing shortage in Pierce and King counties driven by a surging jobs market

Job growth in Pierce and King counties has pushed the cost of housing higher resulting in a shortage of homes for sale and to rent.
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Job growth in Pierce and King counties has pushed the cost of housing higher resulting in a shortage of homes for sale and to rent.
By

Business

Housing prices are crazy. Why can’t we build enough?

July 28, 2017 08:00 AM

During the recent recession, home building dropped dramatically in the South Sound, forcing construction workers out of their trade and many developers out of business.

Today, companies in the region are creating jobs at an unprecedented pace — adding more in the past five years than any period since the early 1990s.

With those new jobs come new residents. From mid-2015 to 2016, more than 86,000 people moved to Pierce, King, Kitsap and Snohomish counties — and we welcomed our 4 millionth resident a year ago.

Where will all these new residents live?

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Thousands of apartment units will open in Pierce County in the coming years as the structures are built at a record pace. But some some developers question whether that building boom will last.

“The big question that all developers are asking themselves is how deep is the market?” said John Wise, who co-owns The Grand on Broadway.

COMING IN DROVES

State and U.S. Census data show far more people are moving here than there are new homes to accommodate them.

“You can hire people for any industry a lot faster than you can get housing suddenly online,” said Josh Brown, executive director of the Puget Sound Regional Council. “The regional economy has created an enormous amount of jobs over the last five years.”

From mid-2013 to mid-2017, state and Census data show, 285,900 people moved to Pierce, King, Kitsap and Snohomish counties — nearly 200 people a day.

During that time, 82,521 housing units were built.

285,900 Number of people who moved to King, Pierce, Kitsap and Snohomish counties from mid-2013to mid-2017

82,521 Number of housing units built in those four counties in the same time frame.

Much of the soaring growth in new residents locally is fueled by explosive job creation.

State labor economists predict another 30,000 jobs will be created in King County by the middle of next year — more than half in the software industry alone.

Case in point: software job openings in Seattle are outpacing the number offered in Silicon Valley, according to The Seattle Times.

Pierce County’s more than 6,500 predicted new jobs will be for mostly blue collar workers: construction trades, sales, transportation, health care and grounds maintenance positions, for instance.

Building the homes to house all of these new workers is lagging far behind the influx of new residents.

From mid-2013 to mid-2017, Pierce, King, Snohomish and Kitsap counties should have added 39,500 more housing units than were built to keep up with demand from population growth, according to an analysis by The News Tribune.

King County should have added 25,600 more new housing units to accommodate for new residents.

By comparison, in Pierce County, where nearly 45,000 people moved here in four years, 13,700 units were built. By that math, builders should have added more than 4,400 new housing units to keep up with population growth.

Housing is being built here, in some areas faster than in years — just not fast enough.

Thousands of apartments will open in Pierce County in the coming years as structures are built.

More than 3,500 apartments could open countywide through 2019, according to Dupre+Scott Apartment Investors in a report issued last year. In 2018 alone, the firm predicted, 2,145 new units will open.

Through June, the Pierce County planning department is reviewing or has approved 847 home starts, a 5 percent climb from a year ago.

Even as outlying areas fill with new residents, regional home construction still cannot keep up with demand, largely in part with the rapid pace of hiring in Seattle, said James Young, research director for the University of Washington’s Runstad Center for Real Estate Studies.

“That’s the nature of the housing market,” he said. “… You will never build fast enough. Even if you took away all of the regulations it’s almost impossible to build fast enough.”

HOUSING PRICES, RENTS SKYROCKET

Pierce County has seen housing prices recover from their pre-recession peak and continue to climb.

While a few years ago about half of homes had negative equity — where the homeowner owes more than the house is worth — 7 percent of homes in Tacoma have negative equity today.

That’s on par with Seattle’s 6 percent, said Aaron Terrazas, an economist with real estate data company Zillow.

“That’s really a testament to how far Pierce County has come over the past four to five years,” he said recently.

During the recession, family members moved in with each other, Terrazas said. That’s starting to change: “In 2016 and 2017,” he said, “we saw those people looking to buy.”

Meanwhile those looking to buy a home have less to choose from than ever before in a region plagued with record-low housing inventory.

1.22 months of inventory in Tacoma’s housing market in the second quarter of 2017. Tacoma’s home inventory was third-lowest in the nation.

Tacoma’s market had 1.22 months of inventory on hand in the second quarter of this year. A four- to six-month supply of homes for sale is considered a balanced market between buyers and sellers.

Tacoma’s for-sale inventory was third lowest in the nation, behind the Seattle and Denver areas, which has less than a month of inventory, according to information compiled by Nationwide Insurance.

“Affordability is a significant concern in these metros,” the report states.

The mismatch of low supply and high demand has sent housing prices soaring.

Since 2013, King County home prices have jumped more than 60 percent to a median cost of $580,100 in June. Median apartment rents have climbed by about 32 percent to $1,984 a month, according to data from Zillow.

In Pierce County, prices have surged by more than 39 percent since 2013, to nearly $300,000 in June for a median-priced home. Apartment renters are paying more than 22 percent more in 2017 than four years ago, at $1,376 per month.

With rents continuing to climb and wages not keeping up with rent increases, concerns about affordable housing for low-wage earners will grow.

An hourly, full-time worker would have to earn $21.02 an hour to afford a two-bedroom apartment in Pierce County, Michael Mirra, director of the Tacoma Housing Authority said earlier this year.

The authority recently completed its Bay Terrace development on Tacoma’s Hilltop, which has 144 apartments for a range of incomes. Units will be occupied by August, Mirra said.

The authority has hundreds more apartments planned for the next five years but that won’t be enough to meet the need the agency forecasts through 2030. Another 29,159 subsidized units will be needed to meet that need in Tacoma alone. Nearly 19,000 are needed now, Mirra said.

Affordable housing “is a nationwide problem you’ll see in most communities,” he said. “Somehow the Puget Sound area is seeing it in stark relief.”

SHORTAGE OF CONSTRUCTION WORKERS

The shortfall in housing compared to the number of incoming residents is exacerbated by a labor shortage in the construction trades.

Nationwide, 154,000 construction-related jobs were open in May, according to federal mortgage lender Freddie Mac. Fewer young people seem interested in the labor-intensive work, according to Freddie Mac.

Puyallup builder Kurt Wilson said he can’t keep up with the demand, partly because many construction workers left the profession during the recession — and builders still struggle to find qualified workers.

“We could deliver more houses than we are,” said Wilson, chief operating officer of Soundbuilt Homes, which builds about 200 homes a year.

1,600 Number of new construction jobs predicted to be created in Pierce County by state labor economists within the next year

The state does predict about 1,600 construction jobs will be created in Pierce County by this time next year.

“Demand for houses always changes faster than supply,” said Young of the Runstad Center for Real Estate Studies. “It takes a long time to bring housing supply online.”

Kate Martin: 253-597-8542, @KateReports