Despite the COVID-19 pandemic — or perhaps, because of it — Vancouver is experiencing a major housing market boom. Prices are rising, demand is outpacing supply and the city is on track to issue about 65 percent more single-family construction permits this year.
As of Dec. 23, Vancouver had issued 494 new single-family permits in 2020 compared with 300 in 2019, according to Jason Nortz, Vancouver development review division manager.
The rapid growth is all the more surprising in light of the impact the pandemic had on the housing market in the second quarter of the year, when Washington’s initial stay-at-home measures froze all home construction and caused a substantial slowdown in real estate transactions. It wasn’t until the fall that activity truly peaked.
“It really turned on about halfway through the year,” said Patrick Ginn, CEO of Vancouver-based homebuilder Ginn Group.
The Building Industry Association of Clark County attributed the surge, in part, to lifestyle changes brought about by the pandemic. In a Dec. 7 press release, the association stated that the increase in employees working from home this year means houses are now functioning as “offices and playgrounds.”
Ginn offered a similar assessment. The long months of lockdown have prompted families to put an increased focus on their home situations, he said in an email, which can take the form of remodeling and landscaping projects or a search for a new and bigger house, often farther out from Portland’s core.
The single-family surge isn’t mirrored in other categories. There were slightly fewer remodel or addition permits issued in 2020 compared with the prior year, as well as fewer duplex permits, according to Nortz. Multifamily permits were also down, Ginn said.
“This shows the move toward home ownership and having more space,” he said.
Ginn and the Building Industry Association both cited historically low interest rates as another factor driving the higher demand, as well as Vancouver’s reputation as a growing employment hub.
Those factors were already present at the start of the year, Ginn said, so there was cause for optimism even back in January and February, but there was also some uncertainty in the industry about how things would fare in the fall, particularly heading into an election season.
Overall, the industry was expecting a good year with a modest increase in building rates, he said, but the pandemic undermined everyone’s expectations twice — first with the construction freeze and then with the surge that came afterward.
The city’s development review staff continued to process permit applications online during the freeze, according to land use program manager Greg Turner, so the slowdown was all on the physical construction side.
Demand picks up
Demand for new homes began to pick back up as soon as the initial lockdown period ended, but it took a while for the surge to reach its full height. New home sales exceeded construction project starts by historically large margins at the end of the summer, according to Avaly Scarpelli, executive director of the Building Industry Association of Clark County.
“I think for me, it wasn’t until really August, September that I started saying, ‘Wow, this thing is going and continues to go, and the backlog is growing as opposed to shrinking,’” Ginn said.
Construction and sales both advanced at a breakneck pace through the fall. Southwest Washington’s inventory in months — an estimate of the time it would take to sell through all of the region’s existing listings — plummeted from 2.5 in April to 1.0 by September, then 0.8 in October and November, according to reports from the Regional Multiple Listing Service.
Ginn said he’s cautiously optimistic that the surge will continue in 2021, but the high pace of construction creates new challenges in the form of land inventory supply constraints and rising lumber prices.
Labor availability is also becoming a problem, Scarpelli said, with some Building Industry Association members reporting having to take up to two extra months to finish building a house due to material shortages and subcontractor schedules.
The white-hot market also poses affordability issues for homebuyers, Ginn said, because the high demand and low supply have been pushing prices consistently higher.
“I think we will need to see continued focus of this in coming years,” he wrote. “A hot residential real estate market with increasing prices leaves many behind.”