NW REporter Serving More Than 29,000 Real Estate Professionals in the Northwest The NW REporter is a joint monthly real estate newsletter from NWMLS and the Seattle King-County REALTORS®. Most content from the NW REporter may be republished or reprinted with attribution. Please inquire by calling (800) 540-3277 ext. 704. LATEST NEWS RELEASE Buyers getting “some relief” as key indicators point to strong summer for housing market KIRKLAND, Washington (July 8, 2019) – Inventory, pending sales and prices all increased during June compared to a year ago, according to the latest report from Northwest Multiple Listing Service. The same report, which covers 23 counties in Washington state, shows year-over-year drops area-wide in both the volume of new listings and closed sales. “Clearly we now see that the market is moderating – that is we’re definitely moving from a ‘hyper-market’ to one where a correction is underway compared to last year,” remarked Mike Grady, president and COO of Coldwell Banker Bain. “While it’s the best time to buy that we’ve seen in some time, and buyers are getting some relief, it is still a seller’s market,” he added, noting some buyers are experiencing multiple offer situations, or considering inspection waivers, or are even forced to consider markets outside King County for affordability. Three Northwest MLS directors from Pierce and Kitsap counties suggest their counties are attracting some of the frustrated buyers from King County. “The darling of the Puget Sound real estate market is Tacoma/Pierce County,” stated Dick Beeson, principal managing broker at RE/MAX Northwest Realtors in Gig Harbor, pointing to low inventory and appreciating values. “The secret is out about Pierce County,” agreed Mike Larson, the president at ALLEN Realtors in Lakewood. “You can buy twice the house for about half the price. You just have to be willing to deal with the traffic if you work north or south of here,” he proclaimed. “The Kitsap market continues to be robust and is maintaining its velocity in sales,” added Frank C. Leach, broker/owner at RE/MAX Platinum Services in Silverdale. He believes Kitsap County will continue to be strong given its economic foundation together with its affordability factor and quick access to Seattle, but noted it is constrained by available inventory (currently at 1.4 months of supply). MLS figures show the median price for single family homes and condos that sold last month in King County was $637,675. In Pierce County it was $372,500, about 58 percent of the King County price, and in Kitsap County it was $387,000, about 60 percent of the sales price in King County. System-wide prices increased more than 3.5 percent from a year ago, from $425,000 to $440,000, although four counties registered declines, including Douglas, Ferry, Jefferson, and King. June’s median price was unchanged from May. At midyear, the overall median price was $424,517, which compares to $405,000 for the first six months of 2018, an increase of 4.82 percent. “As long as interest rates stay low and people seek value outside of King and Snohomish counties, house prices should continue their upward momentum,” stated James Young, director of the Washington Center for Real Estate Research (WCRER) at the University of Washington. House hunters had a broader selection to consider as inventory at month end totaled 16,800 active listings, about 9.5 percent July 2019
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NW REporterServing More Than 29,000 Real Estate Professionals in the Northwest
The NW REporter is a joint monthly real estate newsletter from NWMLS and the Seattle King-County REALTORS®.Most content from the NW REporter may be republished or reprinted with attribution. Please inquire by calling (800) 540-3277 ext. 704.
LATEST NEWS RELEASE
Buyers getting “some relief” as key indicators point to strong summer for housing market
KIRKLAND, Washington (July 8, 2019) – Inventory, pending sales and prices all increased during June compared to a year ago, according to the latest report from Northwest Multiple Listing Service. The same report, which covers 23 counties in Washington state, shows year-over-year drops area-wide in both the volume of new listings and closed sales.
“Clearly we now see that the market is moderating – that is we’re definitely moving from a ‘hyper-market’ to one where a correction is underway compared to last year,” remarked Mike Grady, president and COO of Coldwell Banker Bain. “While it’s the best time to buy that we’ve seen in some time, and buyers are getting some relief, it is still a seller’s market,” he added, noting some buyers are experiencing multiple offer situations, or considering inspection waivers, or are even forced to consider markets outside King County for affordability.
Three Northwest MLS directors from Pierce and Kitsap counties suggest their counties are attracting some of the frustrated buyers from King County.
“The darling of the Puget Sound real estate market is Tacoma/Pierce County,” stated Dick Beeson, principal managing broker at RE/MAX Northwest Realtors in Gig Harbor, pointing to low inventory and appreciating values. “The secret is out about Pierce County,” agreed Mike Larson, the president at ALLEN Realtors in Lakewood. “You can buy twice the house for about half the price. You just have to be willing to deal with the traffic if you work north or south of here,” he proclaimed.
“The Kitsap market continues to be robust and is maintaining its velocity in sales,” added Frank C. Leach, broker/owner at RE/MAX Platinum Services in Silverdale. He believes Kitsap County will continue to be strong given its economic foundation together with its affordability factor and quick access to Seattle, but noted it is constrained by available inventory (currently at 1.4 months of supply).
MLS figures show the median price for single family homes and condos that sold last month in King County was $637,675. In Pierce County it was $372,500, about 58 percent of the King County price, and in Kitsap County it was $387,000, about 60 percent of the sales price in King County.
System-wide prices increased more than 3.5 percent from a year ago, from $425,000 to $440,000, although four counties registered declines, including Douglas, Ferry, Jefferson, and King. June’s median price was unchanged from May.
At midyear, the overall median price was $424,517, which compares to $405,000 for the first six months of 2018, an increase of 4.82 percent.
“As long as interest rates stay low and people seek value outside of King and Snohomish counties, house prices should continue their upward momentum,” stated James Young, director of the Washington Center for Real Estate Research (WCRER) at the University of Washington.
House hunters had a broader selection to consider as inventory at month end totaled 16,800 active listings, about 9.5 percent
July 2019
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larger than at the same time a year ago. Brokers added 11,977 new listings during the month, a drop from both a year ago when they added, 13,153 new listings, and from May, when they added 14,689 new listings.
About half the counties reported gains in inventory, led by King County where the selection grew nearly 32 percent from a year ago.
“June listing inventory in King County exceeded the levels posted for this month over the past six years,” said John Deely, principal managing broker at Coldwell Banker Bain. “Currently, we are approaching 2012 listing inventory levels,” he noted.
Northwest MLS figures for King County show there were 5,931 active listings at the end June, the highest for that month since 2012 when the selection totaled 6,500 listings.
“Every summer, we see the highest level of new listings and homes going under contract. After the surge of new listings in May, areas close to the job centers saw listings return to the normal seasonal pattern in June,” commented J. Lennox Scott, chairman and CEO of John L. Scott Real Estate.
The Northwest MLS report indicates there is 1.76 months of inventory area-wide (matching May), with eight counties having less than two months of supply.
OB Jacobi, president of Windermere Real Estate, commented on a “considerable rise” in the number of listings priced above $1.5 million in King County. “This could be because of the changes to the Washington State Real Estate Excise Tax (REET) that take effect in 2020, which will significantly impact the tax burden of sellers whose homes sell for more than $1.5 million. I suspect we’ll see even more owners of higher priced homes trying to sell in the coming months in order to avoid the hike in taxes they’ll have to pay starting next January,” he stated.
The new tax measure changes the REET rate from a flat 1.28 percent of the selling price to a graduated rate for real property sales, with exceptions for timberland and agricultural land.
Commenting on the latest report from Northwest MLS, WCRER’s Young said “The perfect storm of low interest rates and falling inventory continues along the I-5 corridor, with double-digit house price increases also continuing.”
Beeson says the “new normal” inventory levels of 2-to-3 months of supply, rather than the traditional 4-to-6 months, makes Puget Sound different than most of the rest of the nation. In Puget Sound, homes sell twice as quickly as a traditional ‘normal’ market,” he stated, but acknowledged, “It feels kinda like things have slowed down. Folks are taking deeper breaths.”
Several brokers commented that buyers are becoming more deliberate in their searches and offers.
“Market savvy buyers are taking advantage of premium location and value pricing due to increased inventory. Price reductions are more commonplace as sellers align their expectations with today’s market,” according to Deely. He said demand remains strong, but “buyers are methodical in their search, and taking more time to jump into an offer.” Also, he noted there have been fewer multiple offers and fewer all-cash buyers in the mix when a listing has several buyers lined up to compete.
Buyers are more “tuned-in” than ever before, Beeson remarked, adding, “Buyers today have educated themselves on the vagaries of the home buying process and are better prepared to meet sellers on firmer ground. They are attentive, vigilant, and discerning toward the marketplace, knowing what they want in a home – and they are willing to wait longer to get it.”
Leach concurred. “Buyers are being very careful about what they buy and at what price,” he stated.
Commenting on King County’s numbers for new listings and new pending sales, Dean Rebhuhn said multiple offers are still occurring in the median price range, noting the 1.9 percent dip in year-over-year prices. “Buyers are seeing higher home
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availability while taking advantage of low interest rates.” Rebhuhn, the owner of Village Homes and Properties in Woodinville, believes those factors, coupled with summer weather and job creation will “continue to create a very active market for buyers and sellers.”
Scott also expects a “quick-action market” for many buyers when new listings come on the market, especially with interest rates in the upper threes. Looking to the months ahead, Scott anticipates strong sales activity close to job centers, while the surrounding area will experience intense, “frenzy-level sales activity” in the more affordable to mid-price ranges.
Larson believes “the big three” – interest rates, the economy, and consumer confidence – all point to a strong summer for the housing market, while contrasting King and Pierce counties. “For years, King County has been a bit like a top fuel dragster – high performing, thrilling, but maybe a bit temperamental. It got the headlines and values skyrocketed, but now it’s experiencing a bit of a hangover. Pierce County’s market is more like a diesel truck – steady, consistent, and less prone to dramatic market changes.”
Larson also offered advice for passive and first-time house hunters. “Every buyer, particularly at the entry level, needs to understand they can’t simply dip their toe in the water when competing for a home. They need to do a belly flop. They need to put their best foot forward right out of the gate.” He also urged buyers to work with a Realtor who understands the market and who can guide them through the process.
Several representatives from Northwest MLS also suggested sellers need to learn the “new normal” as Beeson calls it. “If you overprice your home or fail to get it in good condition for selling, it will cost you time and money in the end, he stated, adding, “Seller’s can’t afford to be tuned out to what the market is saying.”
For sellers in Kitsap County, broker Frank Wilson says pricing is becoming more important. “Our county is starting to feel some of the changes King County has experienced. List price has to more accurately reflect what the home will sell for in today’s market,” explained Wilson, Kitsap regional manager and branch managing broker at John L. Scott Real Estate in Poulsbo. Although Wilson reported multiple offer situations and good traffic at open houses, he emphasized sellers “can no longer chance shooting for the moon, pricewise, or they risk getting stuck on the launch pad.”
Condo activity was mixed during June with year-over-year declines in the number of new listings added to inventory, as well as in the volume of pending and closed sales. Total inventory grew more than 41 percent, although at month-end there was only about 1.9 months of supply. Prices overall were nearly unchanged from a year ago. The median price for June’s sales was $367,000, up about a percentage point from a year ago when the median price was $363,500.
Northwest Multiple Listing Service, owned by its member real estate firms, is the largest full-service MLS in the Northwest. Its membership of around 2,300 member offices includes more than 29,000 real estate professionals. The organization, based in Kirkland, Wash., currently serves 23 counties in the state.
Statistical chart tables begin on next page.
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June 2019 activity
SINGLE FAM.
HOMES + CONDOS
LISTINGS PENDING SALES CLOSED SALES MONTHS OF INVENTORY
New Listings Total Active # Pending Sales
# Closings Avg. Price Median Price This month Same mo., year ago
King 4,381 5,931 3,931 3,357 $780,172 $637,675 1.77 1.29
Northwest MLS member-brokers and subscribers can now access revised forms, which were published for use on Xpress Forms and Transaction Desk on July 1. The changes, made primarily for clarification purposes, were outlined in the 5-page Legal Bulletin 21 issued in early June. The revised forms include:
• Listing Agreements (Form 1A and 1B) • Seller Disclosure Statements (Form 17 and 17C) • Purchase and Sale Agreements (Form 20, 21, 23, 25, and 28) • Financing Addendum (Form 22A) • Appraisal Addendum (Form 22AA) • Increased Down Payment for Low Appraisal Addendum (Form 22AD) • Notice for Increased Down Payment Addendum (Form 22ADN) – new • Low Appraisal Notice (Form 22AN) • Seller Financing Addendum (Form 22C) • Optional Clauses Addendum (Form 22D) • FIRPTA Certificate (Form 22E) • Evidence of Funds Addendum (Form 22EF) • Identification of Utilities Addendum (Form 22K) • Land and Acreage Addendum (Form 22LA)
• Manufactured Home Addendum (Form 22MH) • Well Addendum (Form 22R) • Septic Addendum (Form 22S) • King County Septic Addendum (Form 22S-King) • Thurston County Septic Addendum (Form 22S-Thurston) • Inspection Addendum (Form 35) • Pre-Inspection Agreement (Form 35P) • Withdrawal of Offer or Counteroffer Form (Form 36A) • Back-Up Addendum Notice (Form 38B) • Buyer’s Agency/No Agency Agreement (Form 41A and 41B) • Rental Agreements (Form 65A and 65B) • Lease/Rental Agreement (Form 68) • Assignment of Lease/Rental Agreement (Form 69) • Buyer’s Pending Sale Contingency Notice (Form 90U)
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Voters urged to check, update their status as state implements new elections system
Brokers who have helped clients with a recent move may want to remind them to check or update their voter information before the August 6 primary election.
State and King County elections officials are encouraging voters to check their status due to “glitches” that have been uncovered in connection with a switch to a new VoteWA system.
Voters may register or update their information online or by mail until July 29. The deadline for in-person registration or updates is August 6 in accordance with a new state law.
Tests last month on the new VoteWA system revealed several concerns, including missing apartment numbers from voter addresses, issues with bar codes used to track ballots, and troubles translating materials into various languages.
Forms for new Washington voter registrations and updates to existing voters’ information, including name or address changes, are available on the Secretary of State’s voter registration page. Forms can be printed in 21 languages; completed forms may be submitted by mail or in person at county elections offices.
Ballots are expected to be mailed around July 19th. King County voters who haven’t received their ballot by July 22 are encouraged to call the county’s election office at 206-296-VOTE (8683). King County voters can also obtain election information online.
Later this month, King County will open regional drop-in voting centers where people can ask questions or express concerns. This is the first time such centers will be opened. Locations will be in Bellevue, Federal Way, Kenmore, Renton and downtown Seattle.
About VoteWA
VoteWA, a modernized statewide elections system, is a collaboration between the state’s Office of the Secretary of State (OSOS) and 39 County Elections Administrators. It establishes standards for election data and reporting, and is intended to be a centralized system for both voter registration and elections management. The new $9.5 million system replaces a ten-year-old system in 39 separate counties supported by three different vendors. It now encompasses integrated petitions management, candidate management, and an integrated self-service public portal for more than 4.3 million active registered voters statewide.
Bankrate offers guide for financing age-in-place renovations
Knowing an overwhelming number of people age 65 and older (95 percent) prefer to stay in their own homes as they age, Bankrate created a guide that compares financing options for various age-in-place renovations.
The fully accessible guide considers various living situations, including pre-retirees who own a home and are contemplating the future, retirees on a fixed income, and seniors planning to move in with a family member.
Home modifications for an aging population are usually undertaken to help seniors age comfortably at home, and to make the property safer and more accessible, the publishers note.
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“Renovating for old age doesn’t have to result in a cold and clinical design,” Bankrate suggests. Its guide includes a link to a room-by-room HomeFitGuide published by AARP.
Bankrate’s financing guide explains and compares options for budget-minded homeowners, including home renovation loans, home equity loans/home equity lines of credit (HELOC), reverse mortgages, and government grants and loans. There are benefits and drawbacks to various methods, according to Bankrate.com, an independent, advertising-supported publisher and comparison service.
REALTORS® host housing briefing for candidates to promote working together for stronger communities
Changing the narrative was a common theme at the 2019 annual Housing Issues Briefing presented by Seattle King County REALTORS® for candidates seeking public office. The event at Bellevue’s Meydenbauer Center drew more than 100 participants.
With a focus on “working together to build stronger communities,” SKCR president Rich Bergdahl welcomed guest speakers, incumbents and residents hoping to be elected to various city and county positions, plus Realtors to the 25th annual installment of the Briefing. He said the goal of the event is to arm candidates with some tools to address housing issues, calling it “probably the most pressing public policy issue of our time.”
Keynote speaker Ada M. Healey, chief real estate officer at Vulcan Real Estate opened her remarks by outlining three key concepts that provide the framework for that company’s development and redevelopment efforts as it addresses the twin challenges of supply and affordability:
1. Taking a regional approach2. Utilizing the power of public-private partnerships (noting Vulcan has had 10 such partnerships in the past decade)3. Deploying a robust toolkit
“We can build walls for the elite, or we can work together,” she suggested while noting Vulcan chooses to embrace policies and incentives. “When we plan for managed growth, we can create great neighborhoods,” she stated.
Healey’s presentation included informative graphics on rising construction costs, permit approval times (now at an all-time high of 18-24 months), and forecasts for continued growth around Puget Sound (with the addition of an estimated 1.8 million people by 2050). Such factors increase development costs, which are passed on to consumers, forcing people of more modest incomes to live farther from city centers, thereby resulting in more traffic gridlock and greenhouse gasses.
Using South Lake Union as an example, Healey attributed the success of this “innovation district” to four key elements:
1. Influential stakeholders with shared values2. Trust between public and private sectors3. Risk-taking and persistence (even in the face of adversity)4. Every stakeholder has a fulfilled commitment
Ada M. Healey, chief real estate officer, Vulcan Real Estate
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Additionally, there is a common four-pronged vision centered on the area being an economic engine, being a mixed use neighborhood, being pedestrian and transit-friendly, and being focused on sustainability.
Transforming the Yesler neighborhood has been a long-term project for Vulcan, which partnered with the Seattle Housing Authority and the city of Seattle to redevelop the 30 acres that once encompassed the city’s first publicly subsidized and racially integrated housing community. When built out, the neighborhood will house around 10,000 residents in approximately 5,000 housing units for mixed incomes.
Healey also discussed the MFTE (multi-family tax exemption) program, one of the primary tools Seattle has to provide affordable housing options, including a graphic showing the rising number of units expiring out of MFTE. “Notably, more than 7,000 MFTE units will roll off by 2029. A legislative bill that would have extended it failed to pass,” she remarked.
Vulcan believes the MFTE program should be renewable, applicable to existing products, and available in all neighborhoods.
Vulcan also supports upzoning, given Seattle’s desperate need for affordable housing. Relief from sales tax, expedited approvals, and other regulatory relief are other ways to help expand supply and make Puget Sound more inclusive Healey suggested. “I’m personally very optimistic,” she told the audience, adding, “But we need to think creatively and work together.”
To open the panel discussion, a video produced for Sightline Institute was shown to explain the concept of invisible walls and upzoning, or revamping zoning laws to allow a healthy mix of homes of all shapes and sizes, and for all incomes.
Panel members Rob Johnson, Margaret Morales, and Amy Walen made introductory remarks before panel moderator Healey and audience members posed questions.
Former Seattle City Councilmember Rob Johnson, who is now VP of transportation for NHL Seattle, summarized Seattle’s growth since 2015, showing a progression of slides with overlays of new buildings. He also provided a snapshot of the Housing Affordability and Livability Agenda (HALA), a multi-pronged strategy for addressing housing affordability in Seattle.
As part of the 28-member stakeholder group, officially known as the Regional Affordable Housing Task Force, Johnson shared insights about their 65 recommendations, its bold vision, and actionable steps for creating 244,000 units of income restricted housing by 2040.
Recalling the first public hearing to present HALA’s recommendations before a crowd of 300 people, Johnson praised SKCR Housing Specialist Randy Bannecker for standing up and expressing support despite being met with boos.
Implementing zoning changes and other recommendations to build affordable housing doesn’t have to be scary, Johnson told the audience. It can be accomplished with smart planning and good intentionality.
We have a punch list, Johnson told the audience noting “HALA gave elected officials a roadmap.” Turning to the aspiring public officials in the audience, he said, “We’ve got the playbook, now it’s up to you guys to execute.”
Margaret Morales, senior research associate at Sightline Institute, gave a synopsis of that think tank’s focus on policy measures to boost housing diversity. She also shared “constructive housing messages,” some of which were top-level findings from focus groups. As examples, she recommended saying “choices” instead of zoning. For narratives around “greedy developers,” the message should be about the expenses of building, and developers should be referred to as homebuilders.
Panelists Walen, Johnson and Morales
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Morales stressed the importance of effective communications in part, she explained, because growth is a divisive issue and when one city makes a decision, the impacts of it may not stop at its own boundaries.
The third panelist, Amy Walen, is a former Kirkland City Council member who served as mayor in 2014. Sue currently serves as a State Representative in the 48th Legislative District and as CFO at Ford-Hyundai of Kirkland, a business she and her husband own. Among her accomplishments while serving in office in Kirkland were strategic economic development, including revitalizing the Totem Lake Business District and championing mandatory inclusion of affordable housing in residential developments.
Commenting on strategies for boosting the supply of housing, Walen said “every strip mall on the Eastside is an opportunity, and with transit, there are perfect places to build zero lot line housing. Housing is infrastructure, she emphasized, and it needs to be mandated for cities to take their share of growth. She also suggested churches with a lot of real estate could develop housing on surface lots.
“Without planning, we won’t have service workers living in the community,” and some of the aging population won’t be able to stay, Walen suggested.
Panelists also discussed Engrossed 2nd Substitute House Bill 1923, new incentives the legislature approved to encourage larger cities (with 20,000+ population) to accommodate more housing. A synopsis was included in the Housing Briefing packet.
In response to a question about how Realtors can better work with council members, Johnson said they need to be better at telling stories. “Realtors are on the ground collecting information. They need to appear during non-controversial moments and share their stories.”
Walen emphasized council members can’t know everything, saying they need to know Realtors, librarians, and others. “It is essential when we face angry people opposed to growth that Realtors and other “regular community members” who are stakeholders appear, and write an email or letters for the public record.”
“Regular people” can invest in new fund for affordable housing
Seattle’s largest nonprofit provider of affordable housing became the first such group in the country to raise money through federal crowdfunding regulations for affordable housing when it unveiled its Building Opportunity Fund last month. Bellwether Housing’s effort, launched in collaboration with Tech 4 Housing, aims to raise $4.5 million in investments to build 750 affordable homes in the Seattle area.
“Regular people with a little bit of money to invest will be able to see their money at work, helping to build affordable homes in their own community, while earning a modest return on their investment,” Tech 4 Housing Director Ethan Goodman told GeekWire. “We hope that tech workers will be a large part of this campaign, and that investing can serve as one path towards deeper engagement on housing issues.”
Backers of the Building Opportunity Fund say it will provide the nonprofit with a stable, low-cost source of capital that Bellwether can use to accelerate its work at a time when demand for affordable housing far outstrips supply. Investors can expect a modest annual return on loans, which will have 15-year terms with opt-outs every five years. Amazon is matching employee investments in the Fund dollar-for-dollar until September.
“This fund is not just about raising money. It’s about engaging an entire community directly and powerfully in the creation of a more affordable and inclusive region,” said Susan Boyd, CEO, Bellwether Housing. She noted they reached half their goal
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within a day of opening the fund, adding “We know this is resonating. If we can raise more than $4.5 million and create even more housing, we will.”
Boyd said Bellwether has raised investment funds for affordable housing in two previous offerings, but these investments were available only to “accredited” or high income/high net-worth individuals.
Tech 4 Housing, an advocacy group, approached Bellwether with the idea for this crowd-funded initiative about 18 months ago after the SEC relaxed rules governing non-accredited investors. Both organizations say they saw it as an opportunity to engage young professions in the effort to build affordable housing.
“You can put your money in stocks, you can put your money in startups, or even in real estate––and now, for the first time ever, you can put your money in building affordable housing in our own backyard,” said Cameron Keegan, an employee of a tech start up and an investor in the Building Opportunity Fund. “This investment will build homes for seniors and veterans; for families who need stable affordable housing for their children to thrive; and for people who serve this community everyday but cannot afford to live here. These are people that keep our city’s ecosystem thriving and they deserve to have a place here.”
These 750 apartments will house an anticipated 2400 people, including children, seniors, young people starting out, teachers, service workers, and community members we cherish and rely on. Thirty-five percent (35%) of these homes will have 2-4 bedrooms to support families of all shapes and sizes. Every apartment will be located near public transit, providing easy access to opportunities like great schools, good jobs, and strong community resources.
The offering is presented by Wefunder, which describes itself as “Kickstarter for investing.” Instead of buying a product or donating to an artist, Wefunder helps “everyday people” invest as little as $100 in the startups they love. Like other investments, there is a hope (but no guarantee) of earning a return.
The Building Opportunity Fund is the latest in a series of announcements that show the tech industry taking a more active role in housing issues.
Momentum building for B2R
Big-name homebuilders along with lesser knowns are jumping on the build-to-rent (B2R) niche, hoping to capitalize on growing demand.
Analysts cite the waning stigma around renting, a “safer and more official rental product,” a lock-and-leave mentality among millennials, and affordability as factors driving the surge.
Investors are climbing aboard, too.
Unlike the foreclosure crisis of a decade or so ago, investors bought distressed homes and converted some of them into rentals. Now, with foreclosures comprising only around 2 percent of home sales, investors’ strategy is shifting to buying new construction, sometimes investing in contiguous tracts and stand-alone developments built as a rental community.
Putting dozens of homes in one location makes property management much easier and far less expensive, according to one report. Partnering with a property management company that can provide high-quality maintenance and repair services can be beneficial, according to analysts.
“There is a consumer rental demand that is driving these institutions to want much greater levels of inventory of this product,”
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said Gerald Ellenburg, CEO of ERC Homebuilders, in an interview with CNBC. “They are learning or have learned that new inventory is a much safer and more official rental product.”
“The single-family rental (SFR) space has quickly quieted skeptics and scaled into an institutional asset class,” wrote Don Walker and Rick Palacios Jr., principals at John Burns Real Estate Consulting.
Figures from the National Association of Home Builders illustrate the growth. In 2017, 37,000 homes were built as rentals. In 2017, it grew 16 percent, to 43,000, account for just under 5 percent of total single-family housing starts. “That’s just homes built and held by builders for rent and doesn’t include those sold directly to investors, so the number are likely larger and growing more quickly,” observed one analyst.
A VP at a Phoenix-based commercial brokerage firm reported having clients looking to acquire 5,000-to-6,000 homes in the next two years. He suggests demand is growing in part because the “huge millennial generation” is aging into marriage and parenthood, but not all of them want nor can they afford to buy a home.
AHV Communities, which calls itself as the premier developer and builder of single family rental communities, and whose experience includes 15 developments encompassing more than 2,500 homes, describes its vision as “Creating the new American Dream. The smart new paradigm in rental living.”
“It’s a great alternative to apartment living and homeownership,” says Mark Wolf, CEO and founder of California-based AHV Communities, “A lot of people want to be mobile. They don’t want to be saddled with mortgage debt, and they want to live maintenance-free.”
A single-family home offers more space and privacy, with a backyard, attached garage, and other features not available in multifamily housing, added Gene Kim, a VP at AHV Communities.
Research by John Burns Real Estate Consulting indicates strong ROI in the B2R space, noting product niches and service levels with each subcategory of single-family rentals have proven successful by multiple measures:
• Quick lease-up periods, ranging from 10 to 30+ units per month (average of 14); • 91% to 100% stabilized occupancy rates (average of 96%); • Significant rent premiums, ranging from 15% to 30% above equivalent-sized apartments or “one-off” SFR homes located
in traditional for-sale neighborhoods.
Burns’ research shows rents for single family (growing at 4.5% annually) are outpacing rent growth for multifamily (3%). The firm also reported finding much less turnover in single-family rentals, and much less volatility in the rental market than the home sales market.
In the same report, Walker and Palacios stressed the importance of being mindful of demographics and design elements. “To be clear, B2R does not work in every market and in every situation. Understanding local demographics, proximity to retail and good schools, walk scores, and market feasibility all remain essential. Our B2R community visits also found product and design elements critical, both from an operator cost savings and consumer preference perspective.
After visiting 50 open and planned B2R communities consisting of more than 6,000 homes and analyzing amenities at various communities, researchers from Burns believe the segment will continue to grow. “It’s a trend that is projected to continue as consumers struggle with higher interest rates, higher home prices, and a limited supply of homes for sale. Or simply prefer to rent.”
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New drinking water rules of which Kitsap County home sellers should be aware
New drinking water regulations are taking effect in Kitsap County this year of which real estate professionals and prospective home sellers need to be aware.
An updated drinking water ordinance approved by the Kitsap Public Health District Health Board in 2018 created several rules for new and existing Group B water systems and private wells. Group B water systems are typically small, community systems serving between three and 14 residential connections. More than 4,000 properties in Kitsap are supplied by Group B systems.
Several rules created by the drinking water ordinance are taking effect in 2019. Home sellers should make sure the water systems serving their properties comply with the new rules prior to sales closing. Real estate professionals should advise their clients to get a head start on meeting these requirements to avoid any delays in closing.
User agreements
Beginning Sept. 4, 2019, all Group B water systems will be required to submit a recorded User Agreement to the Health District. The agreement should address ownership and management of the system, including items like how repairs are funded, who has access to the wellhouse, how the user’s group will make decisions, etc.
The Health District will post resources to help water system managers develop user agreements at kitsappublichealth.org/GroupB.
Operating permits
By Jan. 1, 2020, all Group B water systems must have an annual operating permit from the Health District. The cost of the permit is $75.
The state tasks Kitsap Public Health District with administering Group B water systems. These new requirements will help the district ensure compliance, protect human health and cover its administrative costs.
If a homeowner is unsure if their property is served by a Group B system, they can use the Health District’s parcel search to find out. Go to kitsappublichealth.org/irecordsearch.
More information is available at kitsappublichealth.org/GroupB or by calling 360-728-2235.
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Nominations for Friend of Housing awards are due July 12
Know any affordable housing champions?
If you know deserving candidates who are making communities and families in Washington state stronger through affordable housing, nominate them for a Friend of Housing Award. They could be among the honorees at this year’s Housing Washington conference on October 1 in Tacoma.
Friday, July 12 is the deadline to nominate a Friend of Housing using this form.
The Friend of Housing and Margaret Sevy Lifetime Achievement awards are presented annually to individuals, projects, or organizations that have made exceptional contributions to creating or supporting affordable housing.
Nominees are evaluated based on their active commitment over the previous twelve months in:
• Housing-related programs • Innovative financing mechanisms • Educational efforts • Problem solving • Legislation/public policy efforts • Innovation, leadership, creativity, or partnership that goes above and beyond job duties • Specific examples, quantified results, and other details that show impact
Sustainability thought-leaders will keynote 2019 Built Green Conference
A planetary futurist and two architects known for their expertise in passive, sustainable, zero energy, and carbon neutral building are keynoters for the 2019 Built Green Conference.
This year’s annual gathering of the “brightest and best in green building” is scheduled for September 12 at the Lynnwood Convention Center. Organizers say attendees will receive “valuable, cutting-edge information on green building and sustainability through an array of immersive topics related to green building.”
Alex Steffen, an award-winning writer, speaker, and foresight consultant, will share his vision for the future of green cities. The prolific writer who has been described as a leading voice on sustainability, has been a featured speaker at the United Nations, YIMBYtown, and at TED talks. From 2003-2010 he edited two best-selling books while running a pioneering sustainability and social innovation project for Worldchanging, an organization that “ aims to show ways in which seemingly unconnected resources link together to form a toolkit for changing the world.”
Also featured are Julie Willem and Sebastian Moreno-Vacca of A2M Architecture, a firm that champions quality contemporary architecture with high environmental value. A2M is known for its expertise in passive, sustainable, zero energy, and carbon neutral building. The pair, who are co-founders of the “be.passive” magazine, will discuss their concept of “permacity,” which applies the notion of permaculture to the design of cities.
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Registration for the full-day conference may be made online. The event fee includes the keynote addresses, three breakout sessions, lunch, awards ceremony, and a “buzzy reception primed for networking.”
News In Brief
Washington was recently named the Best State Economy in the nation by WalletHub, and it had a healthy lead over second-place Utah. The agency compared all 50 states plus D.C. in 28 metrics across three general categories: Economic Activity, Economic Health, and Innovation Potential. As you might imagine, Washington scored well in all three categories, including first place in Economic Activity Rank, 2nd in Innovation Potential and 4th in Economic Health. Among individual categories, the Evergreen State scored tops in GDP Growth and Exports per Capita, 4th in percent of jobs in high-tech industries and 10th in startup activity. Scores were added up into a 100-point scale with Washington finishing at 77.60, ahead of Utah (73.51), and Massachusetts (70.23). California and Colorado rounded out the Top 5. Oregon landed in 8th. The state with the worst economy? It’s a near 5-way tie at the bottom with Alaska faring the worst, just ahead of Louisiana, Mississippi, Hawaii and West Virginia.
Home prices in 2018 climbed 4.5%, while incomes grew 3.2%, according to CoreLogic real estate figures and government wage data released in early June. The gap suggests that affordability is worsening. Still, this gap appears to be narrowing relative in much of the country as gains in average hourly earnings have risen as the unemployment rate has fallen. Meanwhile, a slowdown in homebuying since 2018 has limited price gains in real estate and improved affordability. Across the country, there are significant variations in this trend as some markets are seeing affordability worsen and others have seen it stabilize after rapid growth. Home prices in the Boise, Idaho area jumped 16.3%, significantly higher than the 3.7% gain in incomes. The Florida retirement community known as The Villages saw a similar trend as incomes rose 3.1% while home values increased 7.7%. Places such as New York, Seattle and San Francisco are already pricing out residents, forcing many to stay as renters or move to cheaper cities. But in the past year, rising incomes in these areas and slowing growth in home prices has improved affordability slightly. This doesn’t mean that middle-class workers can suddenly afford to buy in these communities, so much as the squeeze isn’t as great as it was at the start of 2018. A few major metro areas have seen homes prices and incomes grow roughly in sync such that there have been minimal changes in affordability, including Atlanta, Louisville and Birmingham, Alabama.
boom has been long-lasting. We have now ranked among the top 5 fastest-growing big cities for six consecutive years. Since 2010, Seattle has grown by 22 percent, making us the fastest-growing big city of the decade. Our suburbs have not had such phenomenal growth in population. In fact, 2018 marks the third consecutive year that Seattle has added more people than all the King County suburbs combined. Excluding Seattle, the county grew by about 13,500 people last year, for a growth rate of a little less than 1 percent – less than half Seattle’s rate. However, Redmond – with a 4.2 percent increase, is the fastest growing city in Washington, among those with at least 50,000 people. Redmond’s population now stands at 65,000. Among the county’s other cities with at least 50,000 people, Bellevue grew by 1.5 percent, followed by Sammamish at 1.1 percent.
More rich millennials are moving to Washington than any other state in the nation except California, according to a newly released analysis. The study, by the financial planning website SmartAsset and based on the latest IRS data available, found a net inflow of 1,920 affluent millennials into Washington state in one year. That breaks down to a total inflow of 5,729 rich millennials and a total outflow of 3,809. Washington state’s increase was second only to California,
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which had a net inflow of 3,597 wealthy millennials. The analysis defined rich millennials as people under the age of 35 with adjusted gross incomes of at least $100,000. Other findings of the study:
• The third most popular state for wealthy millennials is Texas, with a net inflow of 1,878. • Oregon is the sixth most popular state for under-35s with a six-figure yearly income, with a net in-migration of
886. • Seven of the top 10 states where rich millennials are moving are on the West Coast or East Coast. • Affluent millennials are exiting New York in droves. The state lost more than any other, with a net outflow of
4,867 wealthy people under the age of 35 during the one-year period. • Illinois had the second-greatest loss of rich millennials, with 2,248 ditching the state for more hospitable areas. • You can view the full results of the study here.
The home to Washington State University has been chosen as the best city to live in Washington, according to a new study. ChamberOfCommerce.org says Pullman came out tops among cities they studied with populations over 25,000 in such categories as: employment (number of establishments, median earnings); housing (owner-occupied housing with a mortgage, monthly housing costs); quality of life (work commute, poverty levels); education (percentage with a bachelor’s degree or higher); and health (obesity ratios). Pullman was lauded for its “lush natural surroundings” and a “strong agricultural tradition” as well as an affluent and well-educated populace. Neighborhoods on Seattle’s Eastside also scored well with Redmond (2), Issaquah (3), Sammamish (4) and Kirkland (5) rounding out the Top 5. Seattle ranked 12th, Sequim and Port Angeles ranked back-to-back at 14th and 15th and Bellevue came in at No. 16. At the bottom of their list at No. 57 is Tacoma.
Calendar of Events Through August 6, 2019
DATES EVENT TIME LOCATION CONTACT
Seattle—King County REALTORS®
For updates visit http://www.nwrealtor.com/events
7 /10 / 2019 Board of Directors 9:30 am - 12:30 pm SKCR 425-974-1011
