The high price of a home
Published 2:21 pm Thursday, October 2, 2008
The co-owner of Snoqualmie Valley Mortgage Co. has a
half dozen clients approved to buy a home. The only problem is,
they can’t find one in their price range.
The Valley is in the middle of a home construction boom. A
cacophony of hammers and saws fills the air each day as new
developments are built, while others wait to receive word
on whether they can go forward. Once built, the new homes
typically carry a price tag upward of $200,000. Many are triple
and even quadruple that amount.
And that’s what frustrates Wright, who worries that
the Valley’s middle-class, blue-collar workforce may be forced to let
go of their dream of buying a home, or move to a city where
housing is more affordable.
“We will always have hard-working
people who don’t make a lot of money, and they deserve housing, too.”
P. J. Wright
Co-owner of Snoqualmie Valley Mortgage Co.
she said.
Inside her office on Railroad Avenue in Snoqualmie,
Wright told of how she tried to help a retiree who had recently moved
out of his apartment secure a mortgage. The man, a veteran of
World War II, lived on a fixed income and collected Social Security.
He had taken to sleeping in his car because he couldn’t find an
apartment he could afford.
Through Wright’s efforts, the man was approved for an
$80,000 mortgage, only to learn that nothing in that price range existed.
“That one bothers me,” she said.
Prices and permits
Builder and developer Richard Clark said housing is
expensive in the Valley for two reasons: Land prices are sky-high, and
new home construction is overregulated.
“We are in the direct center of one of the highest growth areas
in this region,” said Clark, whose Snoqualm development sits
on more than five acres on Northeast Eighth Street in North
Bend. “There is tremendous pressure for growth here in the
Snoqualmie Valley. This pressure for growth is more extreme than most
any area statewide.”
At Snoqualm, Clark plans to build 14 homes, each
costing $600,000 to $750,000 and offering a majestic view of Mount
Si. He said he determined the price of the houses based on the cost
of the land and development improvements.
“The maximum I can spend percentage-wise for a lot is
25 percent of the total cost [of the home],” he said. “If it ends
up higher than that, the risk factor increases dramatically. This
is where builders and developers can get into trouble
financially, and the failure rate increases as the ratio gets higher.”
The owner of Clark Co Inc. and Emerald Pacific
Development Inc. said he is treading a fine line with his Snoqualm
development.
“I’ve got everything I own on the line to make this
thing [work],” he said.
Like Wright, he’s concerned there is a sizable portion of
Valley residents who won’t be able to buy a home, but he feels
much of the blame must be placed on politicians and bureaucrats
who decide how houses should be built.
“The reason there is no more `starter’ homes is because
we’re overregulated by our government,” he said.
Those regulations can consist of fees and permits, as well as
regulations on how to build each home. They can range from
what Clark deems “excessive” wind shear and seismic requirements
to being forced to use pressure-treated materials in
crawl-space framing, even though he thinks the benefit is minimal and
it “would raise costs that have to be passed on to the home
buyer.” Many of the regulations, he added, were intended for homes in
other parts of the country, where communities face different
weather and safety conditions than cities in the Pacific Northwest.
His assessment is echoed by Erin Shannon, public
relations director for the Building Industry Association of Washington,
a statewide organization of developers.
“Twenty-six percent of the total cost of a new home is
the direct result of government regulations, taxes or fees,” she
said. “That 26 percent often makes the difference between whether a
family can afford a home.”
She said much of the problem stems from the state Growth
Management Act, or GMA, which was adopted 10 years ago.
“The GMA certainly is to blame for a multitude of rules
and regulations,” she said, adding that the act is “out of control.”
“Since its inception, we’ve seen nothing but home prices
increase.”
She said the state’s Shoreline Management Act, which
oversees development along waterways, as well as the federal
Endangered Species Act would also impact how houses are built.
“I think we are only just beginning to feel the pinch,”
she said.
`Red-hot economy’
Rich Thorsten isn’t ready to lay blame at the feet of
growth-management practices for escalating home prices. The
urban policy director for 1,000 Friends of Washington, a
Seattle-based non-profit group that promotes strong growth management,
believes the reason is much simpler.
“The Growth Management Act isn’t responsible for
housing prices going up in King County. It’s the red-hot ecomony.
That’s a major reason why housing prices are going up in this area,” he said.
According to Wright, the owner of Snoqualmie
Valley Mortgage Co., the median income for those living in King
County is $62,600 a year. Travel south to Tacoma and it drops to
$48,900; head north to Bellingham and it’s $48,100.
Because people make more in King County, Thorsten said
it’s natural that home prices would be more.
“I think what’s happening is they’re [builders and
developers] responding to the market, which is able to spend more money
for larger, more expensive homes,” he said.
And it’s not just King County. Thorsten said studies have
shown that counties across the state are witnessing a rise in home
prices, even counties not covered by the Growth Management Act, and
that trend is also evident in other prospering communities in the
United States.
“In places where they have a strong economy, housing
prices are going up quickly in those areas,” he said.
“It’s a fallacy to assume that [urban growth boundaries]
and growth management are directly linked to these increasing
costs that are taking place.”
Moving out
Sitting in his office in downtown North Bend, Harry
Buhler, an associate broker with John L. Scott Real Estate, thinks
many Valley residents may be forced to rent instead of buying a home.
“Lots are so expensive, it’s difficult to build low- to
mid-income housing,” he said. “More and more people will be living
in condos and apartments in the future.”
While cities such as Bellevue, Redmond and Kirkland play
host to a number of high-paying, high-tech companies, much of
the Valley’s workforce can be found inside restaurants, grocery
stores and small retail shops, and those employees often don’t
earn enough to afford a monthly mortgage payment.
“If they’re working in the service industry, it would be
difficult for them to buy a house,” Buhler said.
He’s watched residents move south to cities like Puyallup
and Auburn to find affordable homes and then commute to and
from work, which adds to the region’s traffic problems.
Charlie Connor, president of the Bellevue-based Master
Builders Association of King and Snohomish Counties, said
in Redmond, 75 percent of new employees commute to work
from other cities, and some are commuting from as far away
as Thurston County to their jobs in the Seattle area. It’s also
occurring in the Valley.
“You look at what’s happening in Carnation,” said
Connor, the owner of Conner Homes Co. in Bellevue. “There’s been
no jobs created there. It’s a bedroom community.”
Finding common ground
The problem is both Clark and Thorsten are correct in
blaming regulations and the economy
