During these times of great uncertainty and disruption, Washington’s real estate community has been stepping up to find new ways to make a difference. They’re giving back, pitching in, donating their time and resources and taking other steps to help people through these tough times and move ahead to brighter futures.
While I never had a leadership path planned or a ladder that I felt needed climbing, I have always wanted to make a difference — even if it was just a small one. Many real estate brokers share this sentiment, as contributing something positive to the communities we live and work in helps us to grow personally and professionally.
We invest in the people around us, helping them purchase or sell a home, relocate to a new city or ease a burden as a client navigates the complexities of an estate sale or divorce.
As the incoming president of Washington REALTORS®, I plan to lead our organization on the state and local level to address pain points in Washington communities, particularly the struggle for families to find affordable housing in 2022. As our nation, counties and cities become more diverse, real estate leaders are building cadres of professionals that can understand how to work with, support and foster relationships across all diverse communities.
Washington REALTORS® and our community partners and stakeholders are all doing relevant work in this area, knowing that the perspectives of historically excluded people and communities must be represented within the organization and in the communities at large.
Low Inventory Creates a Market Imbalance
National Association of REALTORS® and Washington REALTORS® consistently monitor housing data nationally and in Washington State. During the past decade, Seattle has frequently landed near or at the top of the list of major U.S. cities for rising housing costs.
Over the past four years, however, smaller cities across the state have seen prices and rents rise far faster than Seattle’s. The costs aren’t only reflected in homes and land purchases, the trend is reflected in the rental market as well and is compounded by historically low apartment vacancy rates.
There are many factors involved in the current housing shortage that predate the pandemic, such as exclusionary zoning in some cities across the state and the fact that for the past decade building has not been keeping up with demand. Enter the pandemic in 2020, with people out of work, supply chain disruptions and rising building costs, we now have to legislate a way back to ensure that all Washingtonians have the ability to find and afford sustainable housing.
Progress is being made — during the third quarter of 2021, building permit activity rose 24.3% from a year earlier, totaling 13,896 new units authorized. Of these, 5,672 were issued for single-family units. However, the median price of homes sold in Washington during this period was $578,500, or 27.7% higher than a year earlier, and though housing affordability rose for all buyers and for first-time buyers from the previous quarter, the Composite Housing Affordability Index stayed above 100 in 21 of Washington’s 39 counties.
Statistically, housing inventory remained tight through much of 2021, with inventories of homes available for sale totaling 8,174 single-family homes at the end of the third quarter. This represented a 19.7% increase over the previous quarter but still a 13.1% decline from a year earlier.
Looking forward, if interest rates remain low, persistent supply issues may continue increased upward price pressure and affordability problems in the face of rising demand, particularly in first-time buyer price brackets. Should interest rates increase, it could impact first-time buyers’ purchasing power and ability.
Addressing Affordability Challenges
According to the study, Housing Underproduction in Washington State conducted by Eco Northwest, “At its most basic level, a functioning housing market needs to produce at least one new housing unit for each new household formed. When factoring in demolition, second homes, changing consumer preferences and the deterioration of the existing housing stock, this ratio actually needs to be higher than one-to-one.”
The reality for Washington State, though, is after a slow recovery from the housing market crash in 2008, we were woefully unprepared for the greater strain of the pandemic. In 2020, the median sale price for houses in Washington was $452,400, while the affordable price point for first-time buyers was $305,429, and the proportion of the market this represented in the largest counties in the state was 13.3%. There’s been no corresponding supply response in the marketplace, with the proportion of affordable homes remaining between 10% and 15% over the past three years.
Covid accelerated these trends and exacerbated problems in housing affordability in Spokane, King and Benton Counties. While housing affordability issues are most acute in King County, median prices in Spokane and Benton counties were affordable to first-time buyers in 2012. Over the past nine years, these counties started to converge toward King County’s levels of affordability.
Should interest rates increase, housing will become less affordable overall, and particularly if prices and incomes remain constant as the proportion of mortgage payments relative to income will deepen. From a policy perspective, this places pressure on rental markets and all parts of the housing ladder, with monthly housing costs in the most vulnerable income categories likely to increase.
Making a Difference Through Advocacy
There’s new legislation being brought forward right now that may impact homeownership, property rights and maybe even the way real estate brokers do business. Some of the most recent legislative successes include ensuring that real estate is exempt from state capital gains tax; keeping the industry essential and in operation during Covid; and decreasing the real estate excise tax by 15% on all sales under $500,000 (putting nearly $1,000 back in the seller’s pocket).
Through these efforts, we’ve also exempted real estate brokers from a 20% increase in B&O Tax (putting $250-$500 back in the pocket of our members each year), protected their independent contractor status and beat back a bill that would have required any in-house transactions to involve attorneys for both the seller and the buyer.
In conclusion, Washington faces an uphill battle in the fight to provide our communities with housing in all tiers of the market. The goals of Washington REALTORS®, and my goals for 2022, are to provide leadership and direction to the thousands of REALTORS® in our state and to advocate for real solutions to the housing crisis.