Hot topics discussed at annual builder breakfast
By Kellee Bradley, Public Relations Manager for John L. Scott Real Estate
On Friday, November 6, 2015 over 100 Puget Sound real estate brokers, builders and developers gathered for the 19th annual John L. Scott Builder Breakfast at the Bellevue Club in Bellevue, Washington. Lennox Scott, Chairman and CEO of John L. Scott Real Estate, gave the invocation and an update on the current real estate market as well as projections for 2016. Marc Stiles, real estate reporter for the Puget Sound Business Journal, moderated a panel of three industry newsmakers, including Suzi Morris, Senior Vice President of Lowe Enterprises, Mark Gray, Area President of Shea Homes Washington, and Jon Scholes, President and CEO of the Downtown Seattle Association.
Hot topics for the panel included new residential construction, condo development, Millennials, transit, and Seattle's Housing Affordable Living Advisory Committee (HALA) recommendations regarding Mandatory Inclusionary Housing (MIH) and the Affordable Housing Impact Mitigation Program.
Lennox Scott kicked off the morning with a salute to our veterans and a positive real estate market forecast. "It will be another fantastic year for real estate in 2016, " said Scott. "People are talking about how sales are slowing down. We came off a frenzy market in the summer, but the market has not slowed down at all. Low inventory, strong job growth, and historically low interest rates are continuing to drive the market."
A positive 2016 forecast was further substantiated when Stiles asked panelists if they anticipated an uptake in the supply of homes; Gray confirmed that he believes "the supply of new construction will continue to grow and be the vibrant market it was in 2006."
With the median home price in King County currently at $480,000, it's tough for first time homebuyers, like Millennials to buy a home. Stiles asked the panelists if there was a tipping point where builders say "this market is hot, but financially it's not penciling out?"
"Consumers and homebuyers both get sick of costs going up," said Gray. "Something has to be done about it but it won't keep us from being in the marketplace. Whenever builders or manufacturers increase product offerings or add things that are trendy, like granite, it adds cost."
"As you underwrite deals you factor in escalation that will happen," added Morris. "At some point something's going to give. Rental rates and sales costs will make construction not cost effective. That point may come in a year or two."
Will Millenials still want an urban lifestyle after they get married and have kids?
"They want walkability, whether it's an urban village in Redmond, Kirkland, or downtown," commented Scholes. "They don't want to be in their vehicles all day. That will continue to drive urban development."
Morris remarked that the quality of schools will be a major factor for Millennials. "It should make the Seattle School District get their act together," she said. "If not, Millennials will move to suburban areas based on their proximity to work."
Sound Transit 3 (ST3) will build upon the existing mass transit system of light rail, commuter rail and bus services to take people farther and faster to destinations throughout King, Snohomish and Pierce counties. When Stiles asked about Prop1, the ballot measure to fund ST3, and how important it is to areas outside of Seattle, the panelists were all in accord.
"I think it's critical," said Gray. "I don't think they can have it fast enough. Keep in mind that there are other city centers in other counties. Access to those city centers is a priority as well."
"ST3 will radically change the way people travel and how they feel about where they work and live," agreed Scholes.
Morris said the lack of capital providers and risk premiums were important considerations to new condo development around the Puget Sound. When Stiles asked about Bellevue development, she predicted one or two new high-rise developments in the next 5 - 10 years. As to outlying city centers like Burien, Kent or Mountlake Terrace, she cited cost differentials as the main deciding factor.
"The questions I would ask is can you buy a house easily in those markets versus the price you would have to sell the condominium for," she said.
"It would depend on the size," said Gray. "As long as you're willing to look at it on a smaller scale as opposed to large scale then I would say yes."
Looking to the future, Scott asked the panelists about the criteria they use when determining whether or not to go forward with a project. The overall consensus was that when cities and jurisdictions see the value in making the permitting process as easy as possible, it's like setting out a welcome mat for developers.
It's clear that the topics and issues discussed at the Builder Breakfast will continue to make headlines in the Puget Sound region, but they aren't insurmountable, and discourse is imperative to finding solutions.
"This breakfast is very informative," commented Morris. "Any opportunity in this industry when you can get together and listen to trends in the market strengthens our community."
Scholes said it was a great opportunity for him to get out of Seattle proper and hear about what's going on in the rest of the Puget Sound area. "This even really helped me understand the market and product types from a regional perspective, and how it affects the economy," he said.
"The John L. Scott Builder & Development Breakfast brings together some of the industry's most knowledgeable players to share ideas and discuss the year's top issues," said Stiles. "It was an honor to moderate the panel discussion, and I hope that attendees found the event informative."