Friday, August 25, 2023

Are Prices Falling in Clark County?

The data suggests that home prices are pretty stable. All of the negative data about sales volume are really based on our lack of inventory. You can't sell allot of houses when you have no inventory to sell. This lack of sales volume has led to doomsayers in the media claiming that the market is in decline. The market is neither hot nor cold right now. We are truly in a middle market that would be dead neutral if we had more people willing to sell their homes.

If we were to see a rapid rise in new listings, then perhaps a market downturn could happen but I suspect that new home construction would suffer more than resales in that scenario. New homes have been taking up the slack in the resale market lately. New homes also represent a ceiling in the resale market. Generally a buyer is willing to pay 5-10% more for a brand new house versus a resale all else being equal. 

There has also been chatter in the media about price reductions that are occurring in the marketplace right now. Yes sellers are reducing their prices when they start out too high. In a neutral market buyers tend not to overpay for homes. Overly ambitious sellers will find themselves without offers if they keep the price above market. One only needs to look at the results when sellers are properly priced in the market to see that there is plenty of demand. We still see many homes selling in a matter of a few days when priced right.

Overall this is a good time to sell and for buyers it is a challenge. Rising interest rates are slowly squeezing buying power and sellers remain reluctant to exit their low interest loans by selling and buying another house. It is a bit of an economic stalemate right now but to answer the title query, no prices are not falling.

Friday, August 18, 2023

Mortgage Rates Hit 20 Year High

That sounds like an ominous thing. It really isn't as bad as it sounds however. The last 20 year cycle saw the lowest 30 year mortgage rates in the history or 30 year mortgages. We spent most of the last 15 years with rates under 5.5% So the headline sounds terrible, which is why every news outlet is running this very headline. They however do not take the time to cover the context, so I'll do that for you here.

According to over the last 50 years the average mortgage rate has been 7.81% Yes 7.81%. During that 50 year period we had both the highest and lowest 5 year stretches ever recorded. From 1980-1985 the average rate was 14.32% From 2017-2022 rates average 4.17%. Here we sit today with a national average mortgage rate at 7.09% well under that 50 year average but painfully higher than the recent lows of just a couple years ago.

The rates had a rather rapid climb and that creates a psychological shock which tends to makes things seem worse that they really are. Sure many homeowners have decided to stay put and enjoy their 2.9% 30 year mortgage they got back in 2021. This has created a scenario whereby there is a lack of homes for sale at a time when we should see lots of activity. Generally the period immediately after a rapid rise in home values leads to a bit of an equity grab as people sell their homes and move up or downsize. We are not seeing that nearly as much as we should. This may actually be staving off a market correction that should have happened right about now.

So the good news is home values are holding up well, the bad news is, it is tougher to buy in to this market right now. don't let a 7% mortgage scare you away from buying a home. It may limited your buying power but rates will come back down and an opportunity to refinance into a lower rate will arise in the future.

Friday, August 11, 2023

Why so many mid-rise buildings?

You may have noticed a trend in mid-rise development from small cities to large cities all across the fruited plains. Even larger cities with extremely built up city centers featuring 30-50 story towers are seeing a lot of developments with mid-rise structures. Builders are often choosing these shorter towers even when local zoning allows for high-rises. So what gives?

As buildings get taller, they require more and more engineering to ensure the tower is stable and can support its own weight. This is why skyscrapers are so expensive to build. But high-rise buildings in the 10-15 story range are low hanging fruit for engineers and architects. We have been building these for 150 years. Why would a developer choose to build a mid-rise project on an expensive property when zoning allows for 10-15 stories? Well, it often comes down to cost and construction time. Current building code allows for residential wood framed structures of up to 5 stories so long as the height is 85 feet or less off the street. There is some minor wiggle room but that is the general idea. Mid-rise structures of 6-8 floors can typically fit into an 85 foot height envelope. Anything taller than that generally requires more traditional concrete and or steel framed structures. 

The Aria on West 6th, June 2020.
2 level type one podium under 
5 levels of wood frame
So the trend has been to build a podium of concrete and or steel to a height of 1-3 stories above ground and then add 5 stories of wood frame up top to stay under that 85 foot envelope and squeeze as much as possible onto the land. This modern mid-rise formula is much less expensive to build for a few reasons. The engineering and design required to support the structure is far less complex and the wood frame portion can be built with a more readily available labor force. Wood framing also goes up faster in general than concrete. To build a 10 story building versus an 8 story is much more expensive and time consuming and thus may not be a financially rewarding for the developer. This is largely why you are seeing high-rise residential buildings going a bit taller to the 12-16 story range to maximize the land use and balance the greater expense of type one concrete construction.

You can see this decision making in a recent development proposal here in Vancouver on Block 11 of the Waterfront. The FAA height limit for the block is more than 140 feet which would easily accommodate a 12-14 story residential tower. Holland Partner Group, a Vancouver based developer of urban residential proposed both a 12 story and 8 story tower with the latter being a wood frame over podium design. After running the numbers they decided to pursue the mid-rise option with 100 fewer units. There is some formula these developers use to determine how long it takes to recover the extra costs of type one construction with the extra units gained and in this case Holland felt the numbers don't add up for the high-rise. Of course another developer might think it pencils fine for the taller structure. Short game, long game, high risk, low risk it all goes into the mix and many developers these days are liking the mid-rise option. 

Other advantages to mid-rise designs include a less intrusive build that in smaller cities might be easier to sell to citizens wary of a large built up landscape. Daylight can filter down to the street easier with shorter towers even if the building rises straight up off the sidewalk. This lends itself to creating a more walkable neighborhood. 

I believe we will continue to see more mid-rise wood frame over podium projects in cities of all sizes all across the country as we attempt to increase our housing stock which is pretty low in some areas, including Vancouver, WA.

Friday, August 4, 2023

New mid-rise condos proposed for the East side.

Graphic from Cascadia Development Partners.
A recent article in the Columbian outlined plans by developers to build hundreds of new housing units at the Columbia Palisades area at 192nd and Brady Road. Although the entire area is in the City of Vancouver, it is immediately adjacent to Camas and feature Camas' zip code. The new residential buildings will rise up 5-7 stories each and two of them will be condominium towers available for purchase. 

The plan is to have an urban campus type layout with a little bit of a waterfront style vibe. The density will not be as high as the waterfront, but the general vibe will be urban. Getting in and out of the area should be easier and more convenient as the 192nd corridor at SR 14 has plenty of capacity.

There is no word on pricing as this is in the early development stages. I would imagine these will be mid to upper priced condos. Columbia Palisades and its neighboring HQ development on the west side of 192nd will feature a city center style layout offing a little city style in the suburbs. Vancouver is also pursuing this theme with the Heights District that is also going to provide an urban oasis in the suburbs there as well.

We are still several years out from having a vibrant and busy area here, but things are moving and structures are rising up. Its exciting to watch the former rock quarry be put to good use.