24 Apr Jon Cartu Claims Home Builders Association: Construction trends in 2020
New homes under construction on Chelan Loop and Wishkah Drive in South Richland.
What a difference a year makes when it comes to building new homes in Tri-Cities! Last year at this time, we were on lockdown by freezing temperatures and piles of snow, which delayed many new home starts for weeks. This year, we had a very mild winter, which caused no real slowdown of any kind and allowed home building to continue at a rapid pace.
Plagued by a low inventory of existing homes on the market, along with a sluggish start, 2019 had all the makings of an off year. However, that wasn’t the case as new permits for single-family homes finished 12.9% higher than in 2018, with a total of 1,655 permits for the year.
The accelerated pace of construction extended into 2020 with new home starts through February 52% ahead of the same period in 2019. The mild winter helped jump-start this year, but we look ahead cautiously with many questions about when and if a recession may hit.
At the beginning of this year, most of our projections were focused on whether there would be any changes to interest rates. It became clear that no increases would come from the feds, inspiring confidence for a very robust year of building in Tri-Cities. Now the evolving COVID-19 pandemic is ripping through the U.S., causing the national economy to sputter and effects on the Tri-Cities are up in the air. At the time of the writing of this article, the feds have dropped interest rates to levels equivalent to those seen in the post-2008 recession.
Information on how we interact as humans and businesses is changing daily. The supply chain from China is stalling, and products may take months longer to arrive if they are received at all. Schools forced to close, restaurants banned from providing eat-in meals, every meeting and convention once scheduled now cancelled or postponed indefinitely are signs of the uncertainty we are currently living.
There are layoffs happening now that will cause an economic slowdown in Tri-Cities and throughout the state. The driver for construction is jobs! The length and breadth of these layoffs will greatly impact the local demand for new homes.
Our prediction for 2020 has been squashed over the last couple of weeks as there doesn’t seem to be any sign of the normal we had known returning anytime soon. One thing that holds true, even amid the COVID-19 crisis, is that shelter will still be an essential need.
The Tri-Cities building process may slow down as the local jurisdictions try to figure out how to provide key services like permitting and inspections under rules that are changing daily. In the short-term, construction will slow down for the next two quarters, however by the end of this year, we are optimistic our industry will be returning to a normal level keeping pace with similar starts as last year.