Tri-Cities’ hot market attracts outside buyers

By Andrew Kirk

A woman from Hawaii recently bought a home in Tri-Cities with cash and outbid other buyers by $10,000.

Real

estate shoppers from Seattle, Portland, California and beyond are a growing

trend in Tri-Cities, said Dave Shinabarger, president of the Tri-City

Association of Realtors.

Lance

Kenmore of the Kenmore Team in Kennewick said his office is getting about

15 percent to 20 percent more calls from outside of the state than

usual—for commercial, residential and property management services.

Shinabarger

said the buyers are selling property in their markets and buying here in cash.

Not only can they “sell high, buy low” comparatively, but in the Tri-Cities

they can expect healthy appreciation over 30 years. And in the meantime, they

can collect reliable rents in the market, thanks to its 1 percent vacancy

rate, he said.

Commercial

real estate agent Charles Laird of Tippett Company in Pasco said outside

investors buying buildings here is not new. For years they’ve looked for

opportunities in this area when they didn’t like what they saw in their own

cities, he said. The amount of activity in the last two years is what’s

different, he said.

“I’m

quite surprised by the amount and pace of activity that’s occurring,” Laird

said.

Making

those national lists of “best places to live” and “cities with lowest costs of

living” grabs the attention of investors who are looking for multi-family

dwellings or commercial property, said Ben Murphy, a property manager with SVN

Retter and Company in Kennewick. Partly it’s the region’s strong economy but

also it’s just a sign of growth, he said. In the 1990s, the majority of

building owners were local. Now it seems most are regional, he said.

More

office buildings and shopping centers from regional and national developers

comes with population growth, said property manager Jerry Abrams of Jerry D.

Abrams Company Inc. of Richland.

“We’re

on the map. We’re getting noticed,” said Mark Trout of Retter & Company

Sotheby’s International Realty. “They cite our economy, the potential for

appreciation, the favorable vacancy rates for rentals. It makes good business

sense.”

Vista

Pointe Developments has taken notice of the area. The company is building

Windsong at Southridge—a 56-bed, $6.1 million memory-care facility on Quillan

Place and 24th Avenue off Highway 395 in Kennewick. Vista Pointe owns

memory-care homes in Colorado and Oregon. This is their first project in

Washington state.

“We

do a thorough look-around to see where we want to grow,” said Don Harris, a

developer with Vista Pointe. “Tri-Cities is growing and it’s not oversaturated.

… I like the area.”

Wes

Romine, development services manager for city of Kennewick, said there’s

definitely an uptick in outside firms seeking applications to build commercial

buildings. It’s always happening—like the national chain At Home taking the

place of Shopko on Columbia Center Boulevard. He said there’s been a definite

increase, and many are seeking permits to build and service the health care

industry serving the area’s growing senior population.

Holly

Logan, communications and marketing manager for city of Richland, said she has

no data on where applicants are from, but agreed there’s been a noticeable

increase in applications in 2019 alone.

It’s

interesting that people turned homes into rentals during the great recession

out of necessity, and now it’s a trend for investment purposes, said Michael

Erickson of Crown Property Management of Kennewick. But the only significant

increase in out-of-area clients he’s seen is for smaller-scale commercial

properties and multi-family dwellings. He believes there are fewer options for

those investments in Seattle, Portland and California right now.

What

does all this mean for Tri-City residents?

Kenmore

said it’s definitely having a “creeping” effect on the median sale price. In

May, the median home price was $302,900.

When

out-of-state developers compete with west side firms for commercial property,

or out-of-market investors compete with locals and transplants for homes, the

supply-and-demand result is median prices creep up, he explained.

The

local real estate market is so hot right now because the population is growing,

but the supply of housing isn’t keeping up with demand. That means there are

only 500 to 600 homes for sale most months and turnaround is fast.

The

Tri-City Association of Realtors reported the median sale price in August 2016

was $229,000. A year later it was $250,000. Last year it was $292,000.

“The

market began heating up three years ago,” Shinabarger said. “It’s still

double-digit appreciation and that’s expected to continue through June 2020.”

This

time next year the market is predicted to cool a little, and some evidence of

that is already showing this summer, he said. But year-to-year appreciation

could still exceed 7 percent in the near future.

“A

lot of equity was created in the last three years,” Kenmore said.

Erickson

said the present market puts his mind back to the previous decade and the

recession. But even though current levels of appreciation aren’t sustainable,

he was quick to clarify he is not pessimistic about the future.

The

people who could be adversely affected are those making $20 an hour or less and

hoping to save up for a home with 1,500 square feet, Shinabarger said. Those

properties are up to $250,000 right now.

The

solution is city and county incentives for creating the right kind of

affordable housing, he said.

Too

many people seeking public office think affordable housing means tall apartment

buildings and smaller lot sizes, Shinabarger said. This isn’t what the Tri-City

market is calling for, he said.

Incentivizing owners to renovate less-desirable properties in older

neighborhoods is a good option, as is tearing down old homes and building anew

on the lots. Considering the need for inter-generational housing in Tri-Cities,

allowing more auxiliary dwellings to be adjacent to or behind existing homes is

another solution, he said, adding that making smart decisions while respecting

market trends is how more people can get in on the current appreciation.