OLYMPIA - This year will be a year of transition for the state's housing market, and although the economy likely will make the transition from recession to recovery in 2010, the real-estate market still faces "bumps in the road," the state's top economist told the real estate community Thursday.
Chief Economist Arun Raha’s speech was part of the Washington Realtors’ “Legislative Day,” an all-day event in which about 600 members visited the Capitol Campus and met with lawmakers. Raha spoke for about 30 minutes Thursday before a packed audience at the Red Lion Hotel Olympia.
Raha said he expects the residential housing market to improve in 2011, while the commercial real estate market could take until 2012 to recover. Helping both will depend on the pace of economic recovery and some areas of the economy that still need to show improvement, he said.
This includes the easing of credit from community banks, consumer confidence and the absorption of excess housing, Raha said.
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Although large, national banks have started lending again, credit still is tight at state-chartered community banks because they are “disproportionately” exposed to the slower commercial real estate market, he said. Consumer confidence also hasn’t improved because consumers are largely influenced by unemployment rates and the price of gasoline, Raha said. Washington’s jobless rate hit 9.5 percent in December, according to state Employment Security Department data.
Another problem is that the formation of new households has slowed as a result of college graduates moving back in with their parents because they can’t find work, he said.
“Excess housing has to be absorbed before we get self-sustained growth in residential real estate,” Raha said. Other things to watch: The effect higher mortgage interest rates and the conclusion of federal tax-credit programs might have on the real estate market, he said.
Meanwhile, one of the “bumps in the road” is the slower commercial real estate market and the fact that it might not recover until 2012. Coldwell Banker commercial real estate broker Larry Gilliam, who did not hear Raha speak, said the market is great for buyers but harder for landlords because vacancies are taking longer to fill, and they are under pressure from their lenders, he said.
Gilliam is the listing agent for a commercially zoned parcel at Henderson Boulevard and Interstate 5 in Olympia. After a period of inactivity, the property owner there is willing to consider any and all offers that come forward.
“All the infrastructure is in place and it’s ready to go,” he said.
Gilliam couldn’t predict when the commercial real estate market will recover; what will help are more jobs coming to the county and more confidence from small, medium-sized and large businesses, he said.
Rolf Boone: 360-754-5403