The State of the Building Industry in Thurston County
The forecast, the challenges and the need for immediate solutions.
By Jill Williams, Communications Director at Olympia Master Builders
Nationally, builder confidence in the market for newly built single-family homes remained unchanged at a solid 67 reading in September of 2018 on the NAHB/Wells Fargo Housing Market Index (HMI).
“Despite rising affordability concerns, [nationally] builders continue to report firm demand for housing, especially as millennials and other newcomers enter the market,” said NAHB chairman Randy Noel.
“A growing economy and rising incomes, combined with increasing household formations, should boost demand for new single-family homes moving forward,” said NAHB chief economist Robert Dietz. “However, housing affordability is becoming a challenge as builders face overly burdensome regulations and rising material costs exacerbated by an escalating trade skirmish. Interest rates are also forecast to keep rising.”
Locally, the housing market appears to be on a constant rise as well, but not without similar struggles for professionals in the building industry. Mike Auderer, Owner of Olympia Construction, states “There is more than enough work in the area, yet, we have had to recently turn a number of projects down. Lack of labor, cost of materials, and regulations (which are getting better, but still have a long way to go), the cost of new housing has been driven way up, which in return affects the big picture of affordable housing.”
Angela White, Executive Officer for Olympia Master Builders adds, “There is a misconception out there that because the housing market is up in Thurston County, builders are making a large profit off new construction based on the end costs of production. What they don’t understand is the actual underlying costs, including permits, surveying, etc. that go into that new construction before the project even hits the building stage. Builders then have to work diligently to manage construction costs, including labor and materials to keep homes competitively priced, which usually comes off the profits.”
The impact of housing prices and the shortage of inventory can also be seen boldly in the local real estate market. Tommy Lowe of Greene Realty couldn’t agree more. “The market is booming with clients looking to buy in the area but are quickly discouraged because of the high prices of new construction and homes listed on the market and because of the low inventory available. The end result is many potential buyers are deciding to stay put in their current homes and remodel instead of buy, which hugely impacts the real estate market,” he says.
“In terms of policy, this is an exciting time for residential construction” explains Erin Hall, OMB Government Affairs Director. “City and county governments have realized that housing shortages hurt their community. As a result, they’re working with organizations like OMB more collaboratively and creatively than ever before. Homebuilders are being seen as vital partners in community success.”
According to Jan Himebaugh, Building Industry Association of Washington (BIAW)’s Government Affairs Director, at the state level, BIAW and a variety of stakeholders are working to providing a broader range of housing options for Washingtonians which includes condo liability reform and general regulatory streamlining so that homes can get to the market quicker.
Locally, efforts to address process inefficiencies, speed up permitting times, to reexamine land-use and zoning concerns and increase the diversity of allowable housing-types are all part of the local-level strategy to decrease the costs of building. As the local perception of home-building shifts, it has caused positive ripples through all the associated industries. “As a result of many market conditions; jurisdictions, Realtors, lenders and builders are collaborating more than ever before to develop new ideas for affordable housing solutions,” says Barb Whitlow of Olympia Federal Savings.
Some solutions are longer term. The shortage of labor plays a significant role in the pace and cost of construction. The OMB Education Foundation is committed to making change by supporting workforce development in all five counties served. The Foundation awards scholarships to further industry education as well as getting out in the community to talk directly to youth and encouraging them to consider careers in construction.
Even with supply-side construction hurdles, such as shortages of labor and lots and increases in the price of building materials, the shortage of housing Thurston County means new construction and home remodeling industries will thrive and benefit from local policy innovation for the foreseeable future.
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