Snohomish County’s housing boom is over.
Builders are laying off workers, houses are staying on the market longer, and the overall number of permit applications has dropped by hundreds compared to last year.
“Nearly every developer has or is contemplating layoffs, and it’s because of the slowdown in the market,” said Mike Pattison of the Master Builders Association of King and Snohomish Counties.
Now, Snohomish County plans to cut at least 20 vacant positions from its building department; no one will get a pink slip. At the same time, the county expects to collect $12 million less in permit revenues and real estate taxes next year.
That’s after what many call the largest building boom the county has ever seen, marked by bidding wars and rabid pre-sales of homes. During that boom, a 5,000-square-foot vacant lot went for as high as $247,000.
“The housing peak is over,” said Todd Britsch, president of Bothell-based New Home Trends, which tracks new construction. “These type of frenzies come around every 20 years.”
Instead, the region will see a normal and healthy housing market, Britsch said.
“The market is going into — and homebuyers need to understand this — a normal, sustainable, healthy housing market, and we’ll see an average appreciation of 3 percent a year for the next three or four years. Then we’ll start this cycle all over again. In five years, we may reach 10 percent a year.”
When things were hot, homes on the market sold in just a few weeks on average. That time slid to 47 days last fall, and to 67 days this past August.
“What we’re seeing is the natural cycle of the real estate markets,” said Nathan Gorton, executive officer of the Snohomish County-Camano Association of Realtors. “We had the top three years ever in a row as far as sales go, and builders were working hard to keep up with that demand. All of a sudden sales are cooling off. Instead, we’ll have like the eighth-best year.”
Some builders are stuck with some of the leftover inventory because the number of buyers isn’t as high as it had been, Gorton said. Consequently, builders are “taking a deep breath,” Gorton said.
Fewer vacant building lots are being bought, plummeting from 889 in the first three months of the year to 145 sales in July, August and September, said Toby Barnett of Barnett Associates Real Estate in Marysville.
After seeing where the market was heading and what projects they had on their plate, Lake Stevens-based builder Barclays North Inc. decided to lay off 20 percent of its work force this summer, company vice-president David Toyer said.
“It’s based on the market slowing down a bit and what’s in production,” Toyer said.
Barclays is listing nearly 1,400 lots worth $74.3 million in Snohomish County, according to the company’s Web site.
The sales of homes in 2007 mirror those in 2002, Britsch said.
“The market’s not falling off the end of the planet,” Britsch said. “We still have only a 4½-month supply of homes under construction. That’s a fantastic number. When the housing market was absolutely booming, we had 2½ months on the market. In a bad market, you have an eight- to 12-month supply. Sales have not slowed to that point.”
A significant number of developers in the heart of the housing boom frenzy of 2005 had gone out the year before and negotiated for land, Britsch said. Property prices reflected the expectation of 30 percent in profits a few years down the road. That worked until 2005.
“Developers paid so much for the dirt that what they need to charge for the lots isn’t what the consumer is willing to pay,” Britsch said.
Some developers will sit on the land, some have investment groups and “some developers will become builders and build out their own stuff,” Britsch said. “Until we eat up some of the inventory, builders are not buying land.”
Even as the market shifts gears, county government is preparing several moves that worry builders.
A 20-percent increase is proposed for all county building permits, and a quadrupling of a transportation fee crucial for improving traffic in the most congested parts of the county is possible.
New design requirements are on the table, and so are policies that would restrict developers from cutting down trees. That will limit how many houses will fit on the land, said Pattison of the Master Builders. New storm water rules are expected to force some retention ponds to double in area, eating away even more land.
“It’s a wave of regulation and costs that could not come at a worst time for the industry,” Pattison said. “That’s my biggest concern. The market is tough enough, and government is not helping us out at all right now.”
Most builders and real estate agents are staying positive through it all.
“Three hundred thousand people will move to Snohomish County in the next 20 years,” said Gorton of the Realtors group. “For the time being, yeah, I think the initial building boom has cooled a bit, but I will not be surprised to see it pick up again.”
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