By Morf Morford
Tacoma Daily Index
It’s not your imagination, and it’s not just you. The real estate market is officially crazy.
Prices are getting higher, with selling prices often passing 20% above asking prices.
A recent NPR Marketplace program (https://www.npr.org/podcasts/381444600/marketplace) pointed out that nationwide, and certainly in the greater Puget Sound area, there are more real estate agents than available properties.
By any criteria, real estate, especially residential, is a strange business.
A grocery store, for example, makes small profits on a continual stream of sales.
Clothing stores rely on seasonal sales of clothes, ideally over the course of a lifetime.
Real estate agents earn their commission, under normal circumstances, on a single sale. (In some situations a home may be sold more than once by the same agent, but that is, at least for now, relatively rare).
A home, for most of us, is our single greatest financial investment. And, by far for most of us, our greatest financial obligation.
Plus we live in it.
If we have an unpleasant experience with our groceries or with clothes we buy, we can return our item or decide not to shop there again.
With real estate it gets a bit more complicated.
If there is a problem with a house, previous owners, agents and inspectors may plead ignorance or deny culpability and financial responsibility.
Or the previous owners may have died or left the area.
Or, as in the case of the majority of homes in Tacoma, older homes, though solidly built for the most part, still show signs of age and hidden (or cleverly disguised) problems.
Paying for a house, again, for most of us, is a near lifetime obligation. The word “mortgage” after all, is premised upon the French root word “mort” where we get words like “mortal” or “mortality”.
Buying a house, for most of us, as individuals, is then, a near lifetime commitment.
Home ownership, like marriage, is one of the hallmarks of membership in the middle class.
Home ownership is one of the core defining features of the American Dream. It is, perhaps, one of the very few signature acts of adulthood.
It would be easy to argue that there are more laws, tax guidelines and zoning regulations wrapped around home ownership than any other aspect of citizenship or human experience.
It makes sense.
How can a family be stable, let alone productive, without a home.
And one of the few areas where liberals and conservatives usually agree is that a safe and stable family is central to any and every stable and healthy society.
But the housing situation in our area, and much of the country, even much of the world, is a mess.
It’s taken us years to get here. And many short-sighted, if not destructive laws and policies.
Most housing takes years to plan and build.
The cost of materials can change over those years.
The cost and availability of land is always an issue.
Interest rates can change, and besides being one of the defining features of a home’s construction cost and ultimate sales price, the fluctuation of interest rates, whether up or down, can doom a housing project.
Once in a while, every ten years or so, we have a housing boom, where something like a gold rush mentality sweeps through the real estate market.
If there were ever convergence that should never happen, it would be the “fever” mentality of the gold rush meeting up with the lifetime commitment of home ownership.
Yet here we are.
There is one unrelenting rule of gold rushes; they don’t last.
We are not in a real estate “bubble”.
For a variety of reasons people are moving here. Forest fires in California, droughts and inhospitable weather in much of the country, demographic shifts and, of course, more people from across the country, if not around the world, are “discovering” the Pacific Northwest. And they are moving into our neighborhoods.
And driving up prices.
There are other, even opposite, forces at work as well.
The median home price in Pierce County as of May, 2021 was $500,000.
Last year it was $405,000.
Total listings in Pierce County were down by almost half (47%) over that same time span.
The average time on the market (from listing to sale) in many Tacoma neighborhoods is five days.
Many out-of-the-area buyers are buying properties sight-unseen. Some, at most, with a video tour.
Housing construction projects – and nearly immediate sales – are increasing faster than most of us can keep track of.
These new properties sell almost immediately, but they aren’t always occupied.
Many are investments by those who will never see them.
Meanwhile, for newcomers and young families, the cheapest “starter homes” in Tacoma are well over $300,000 – closer to $400,000.
Even the lowest mortgage payments are well over $3,000 each month. By the standard real estate equation, housing should demand no more than 30% of a family’s income. How many families make $9,000 a month?
If this isn’t textbook craziness, I don’t know what is.
To put it mildly, pay scales have not kept up with the increase in home prices.
Home is the investment we live in, the most practical, and in today’s real estate market, the most speculative, financial decision we will ever make.
As real estate prices increase, more locals, and certainly more young families, are priced-out of the market. Some become semi-permanent renters, others are pushed entirely out of the housing market.
It’s the free market in action.
And like every gold rush in our history, there are clear winners and losers. We work or live alongside the winners and see the losers on our streets and sidewalks. Or they leave the area.
Nothing is more central to our identity, our self-worth and our sense of belonging than where we live.
As more and more of us are excluded from the basic promise of the American Dream, it might be time recalibrate our entire approach to housing.
