Published February 2006

Land crunch will force
creativity when it comes to
developing affordable homes

The National Association of Realtors reports that the Seattle residential real estate market is now the 15th most expensive place to buy a home in the United States. The median price of a single-family home in the Seattle-Bellevue-Tacoma area was $325,000 in the third quarter of 2005. Tacoma arguably dropped the average down just a bit. It’s closer to $350,000 for Seattle/Bellevue.

What this means for Snohomish County is very interesting. As prices rise in King County, more and more migration moves this direction. This added competition and demand for single-family product is a major factor in driving up values locally. Indeed, the common misperception that developers are inviting outsiders into the area to clog our roads and schools couldn’t be further from the truth. There’s roughly a one-in-three chance that your new neighbor is someone just like you, who is fleeing more expensive digs in King County and just looking for a solution that fits their budget.

What makes things a bit testy today is that the Puget Sound geography is running out of land to develop in the areas where public policy allows it. Urban growth boundary lines are reviewed and adjusted periodically under The Growth Management Act, but not fast enough to keep pace with demand. Couple this with geographic restrictions such as mountains, wetlands, farmland and bodies of water and you have the definition of a tight single-family market.

A consequence of the supply pipeline limitations is a sort of friction that is created as developers now look to deliver what was contemplated by GMA. Stories about developers buying mobile-home parks to convert to dense single-family homes are just examples of how hard it is to find sizable tracts of land to build on inside the cities. Despite the angst that seems to be directed toward developers, they are doing exactly what GMA and the resulting limitations on supply requires of them in order to create densities in the urban areas. Like it or not, you can’t get the density without converting properties inside the urban areas in reaction to market demand.

A consequence of this dynamic is that Snohomish County residents are in the midst of changing their expectations of when they can buy a home and how much of a home they can buy.

The future for life in Snohomish County is one with even more expensive single-family homes and probably, for young people starting out, a condo or similar alternative rather than a more traditional starter home as their first jump into homeownership. If they want what their parents’ generation had in terms of a first home, they’d better look elsewhere or be prepared to pay more.

It’s not all bad, though. Examples of creative and appealing dense living such as the upcoming Port Gardner Wharf project on the waterfront in Everett foretell of mixed-use concepts that combine economic activity, places to live and accessible open spaces. Urban areas such as Edmonds have had a brisk condominium market for years, to cite another positive example. Everett is probably the next to see significant activity — probably centered in its downtown core and most certainly coming along its waterfront.

Change is hard sometimes. But Snohomish County residents had better hold on tight. Because change is coming as homebuyers get squeezed out of King County and developers become necessarily creative where current public policy allows them to build to hit the pricing sweet spot buyers can afford.

Tom Hoban is CEO of Coast Real Estate Services, a commercial sales, leasing, investment and property management company with offices in Everett, Tacoma, Spokane and Boise. He can be reached at tomhoban@coastmgt.com or 425-339-3638.

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