Although many of us are making this frenzied seller’s market work for our buyers and sellers, I think we can all agree that it is not a healthy, sustainable housing market for Washington state.
Historically, a healthy real estate market is like a ladder with the first step being affordable entry-level housing for renters and first-time homebuyers and the last step being seniors selling their last home. On average, Washington homeowners will buy and sell three homes in their lifetime. Each transaction opens the door to another homebuyer moving up or down that ladder. Our current housing market shuts out many first-time homebuyers who historically represent 36% to 50% of all Washington real estate transactions. This is not a new problem, as the percentage of first-time homebuyers has been on the decline since 2010. If the trend continues, only the affluent will be able to afford to buy a home and an entire generation of first-time homebuyers will not have an opportunity to build wealth through real estate.
The Center for Real Estate Research at the University of Washington pioneered the “Housing Affordability Index” — a matrix which measures the income of residents in each Washington county against home purchase costs. They have published this index for years, and it has become the standard nationally for measuring affordability of housing.
The index is based on the number 100. It is when the median household income meets the median home sale price affordability. At a 100 you have a healthy market and first-time homebuyers have a shot at purchasing a home. There are only seven counties in Washington that have that inventory — Lincoln, Ferry, Asotin, Grant, Adams, Garfield and Stevens. The picture gets worse when mortgage interest rates increase, and we are currently enjoying historically low interest rates.
The Puget Sound area counties have been the hardest hit — but 32 counties are not affordable for entry-level buyers. Take Spokane County for example. This county has a First-Time Homebuyer Index well below the 100 mark (a score of 73.2) and to get to affordability, the median house must sell for $218,290 dollars. If you do a search for homes in that county for that price, you will see the problem.
Even if we ignore the first-time homebuyer problem — we still have a problem. Prices will continue to escalate, and rental units are calibrated to mortgage payments. As home prices and land value increase, so do rents. This greatly impacts the availability of workforce housing which directly impacts businesses.
The first-time homebuyer is essential to the housing cycle and the only reasonable remedy is an increase in housing supply — especially in the lower prices. Washington will benefit from affordable ownership opportunities and, among other things, we need to encourage condo, townhome and small-lot building and zoning — especially near our transit lines.
But accessible and affordable housing can’t be solved by the private sector alone. This is a statewide problem that requires action by the state legislature, as well as local officials and even the federal government.
The Washington REALTORS® are working with lawmakers, communities and other Associations to increase buildable lands, work out water issues and stimulate the first-time homebuyer market. For more information about the Housing Affordability index, visit the University of Washington Center for Real Estate www.re.be.uw.edu/research/.
To see what Washington REALTORS® is doing to increase housing supply: https://myneighborwa.com/.