Seattle area sees surge in new homes
Seattle-area builders are starting to build houses again at a robust rate, though still far below the pre-bust years.
Seattle Times business reporter
After a long, recession-induced hiatus, Seattle-area builders are starting to build houses again.
It's another facet of the local real-estate market's modest recovery in 2012. Sales volume is up, in part because of record-low interest rates. Prices have bounced back from last winter's post-bust lows.
Experts generally anticipate more of the same for 2013.
New-home construction is on a pace this year for its best showing since 2007. Builders and analysts expect that surge, too, will continue into the new year.
"I don't know what's driving it — pent-up demand, or job growth, or something else — but the market is strong. Land prices are climbing," says Bill Hurme of Kirkland new-home marketing firm TeamBuilder JLS.
Through October, local governments in King County had issued about 3,300 building permits for new houses, the U.S. Census Bureau estimates.
That's up 36 percent from 2011 — and up a whopping 99 percent from 2009, when new construction hit bottom.
It's still nowhere near the heated pace of the pre-bust years — local governments issued more than 4,600 single-family permits during the first 10 months of every year from 2002 through 2007.
But builders aren't complaining.
Observers attribute the resurgence in homebuilding to several factors, including at least two that are particular to this recovery:
• While overall home sales are up, the number of houses listed for sale — old and new — has hit its lowest level since at least 1999. That's partly because many homeowners and potential sellers still owe lenders more than their houses are worth.
"The builders can sense what everyone else can sense — that there's not a lot of inventory out there," says real-estate blogger Tim Ellis of Seattlebubble.com.
"It's kind of a no-brainer" that they would build more houses to help fill the gap, he adds.
• Since the recession, national homebuilders have jumped into the Greater Seattle market in a big way, bringing a different mindset and resources that may not have been available to small local builders who once dominated the scene.
"They filled a void," Todd Britsch of New Home Trends, a Bothell research and consulting firm, says of the national builders. "Without them, we wouldn't have been able to keep up with demand."
CamWest Development of Kirkland, one of the Seattle area's biggest homebuilders, sold fewer than 200 houses in 2011.
This year it's 284 and counting, President Eric Campbell says.
Who's buying new houses?
Some are moving to the Seattle area for new jobs, Campbell says. The region's employment growth over the past year has been among the most robust in the nation.
Then there are local folks looking to "move up," but frustrated by the lack of resale inventory — and rising prices for the little that is available. "They're saying, 'We can buy new, and customize,' " he says.
Finally, Campbell says, about 15 percent of CamWest's sales are to overseas buyers — mostly from China and Korea — who have business here and want a place of their own when they're in town.
Campbell sold CamWest a year ago to Pennsylvania-based Toll Brothers, which bills itself as the nation's largest luxury homebuilder. It was one of several recent deals that brought big national builders into the Seattle market for the first time.
Miami-based Lennar bought Premier Communities of Puyallup. Richmond American Homes of Denver acquired SDC Homes, also of Puyallup. Australia's Henley Properties took over Bellevue's Bennett Homes.
D.R. Horton and PulteGroup, the nation's two largest builders, also have entered the local market.
Their arrival probably has resulted in more new-home construction than would have occurred otherwise, analysts say.
Big national volume builders are less sensitive to the vagaries of the local marketplace. "They were put on the planet to do one thing," says Seattle land-use economist Matthew Gardner, "and that's build stuff."
National builders — many of them publicly traded — also have better access to capital, Gardner and Britsch say.
During the recession's darkest days they could self-finance and pay banks cash for foreclosed lots, when many smaller local builders probably would have had trouble qualifying for loans.
Toll Brothers' cash allowed CamWest to buy distressed properties and ramp up construction in anticipation of rising demand, Campbell says.
The company broke ground on about 180 houses in 2012. Next year he expects that number will grow to about 260.
"We're just running out of our supply of inventory," he says.
Most of the new houses CamWest and other builders are building are out in the suburbs, because that's where the land is.
How does that jibe with the much-touted penchant of "Gen Y" — young adults, especially educated, well-compensated ones — for big-city living? They're the likely homeowners of the future.
"People want to raise their families in a single-family home and not a condo," says Teambuilder JLS' Hurme. "It still comes down to that."
"When you start to get older and get married and have kids, you're not going to live downtown," he says.
He offers this observation: According to at least one definition of Gen Y, its oldest members turned 30 in 2012.
Eric Pryne: firstname.lastname@example.org or 206-464-2231