By Allison Butcher, Senior Policy Analyst, MBAKS

On Wednesday, January 31, the Master Builders Association of King and Snohomish Counties (MBAKS) kicked off its first general membership meeting of the year—an economic forecast breakfast presented by the association’s Sales & Marketing Council.

The breakfast took place at The Westin Bellevue and featured presentations by Metrostudy Regional Director Todd Britsch and Morgan Stanley Financial Advisor Dan Becraft, C(k)P QPFC.

Becraft touched on highlights of Morgan Stanley’s investment outlook for 2018. In short, the report states that global economic expansion delivered strong returns last year but we should not expect the same in 2018. Morgan Stanley is not anticipating a recession this year, but rather that markets will begin to normalize.

The forecast already factors in recent tax cuts, Becraft said. A look back at the U.S. stock market over the last 37 years shows that tax cuts are not correlated to market performance. In the year after President Ronald Reagan’s tax cuts took effect in the 1980s, for example, the market dropped.

Morgan Stanley Financial Advisor Dan Becraft, C(k)P QPFC (Alabastro Photography)

Becraft offered additional observations, including ways in which demographics influence a country’s economy, predictions on interest rates (he expects they will stay low and may even be cut), and more.

The biggest risk to our economy going forward, he noted, is our national debt, which stands at $20 trillion. However, China’s national debt is significantly higher. Whereas the United States’ debt-to-GDP ratio is around 100 percent, the ratio in China is closer to 460 percent. Becraft said some are speculating this could lead to a move by China within 36 months to repatriate capital that has flowed out of their country in recent years. If this were to happen, it could result in investments being pulled out of real estate in the United States, including the Seattle market, and transferred back to China.

Britsch focused on economic and housing data in the Puget Sound region and provided compelling information in his presentation as well, particularly related to the lack of future housing inventories.

Britsch’s presentation highlighted the fact that population and job growth continue to be very strong in the Puget Sound region, with 137,000 jobs added since 2015 and continued low unemployment in King and Snohomish counties. Furthermore, data from the Department of Licensing show that net driver in-migration into the region has averaged more than 6,300 per month since 2012, for a total of 460,000 new drivers from outside the area.

Metrostudy Regional Director Todd Britsch (Alabastro Photography)

Britsch also stressed that housing supply is not keeping up with demand. Looking at the driver license data, he estimates this growth has created a demand for 100,000 owner-occupied homes between 2012 and 2017. However, during this time, we have built and sold roughly 60,000 homes, creating a housing supply shortfall and causing upward pressure on home prices. The average list price for new construction within formal subdivisions, Britsch stated, has risen 20 percent in Snohomish County and 24 percent in King County year over year.

Britsch warned we are running out of land at a rapid pace. With 10 months’ supply of vacant developed lots in Snohomish County, he said we’re at "crisis level" in terms of lot inventory. The North Creek market area, which has been very robust in recent years, has dried up, Britsch said.

Since 2009, the entire Puget Sound region has had a net loss of 3,018 lots coming out of the system, not to be replaced. More importantly, in that same time frame, the available finished lot inventory has declined by 17,879. Britsch also pointed to Northwest Multiple Listing Service data, which shows King and Snohomish counties have just over a two-week supply of homes for sale.

Although the current housing market is showing signs of weakening, Britsch believes it will remain strong. The housing market is all part of a cycle and we can expect an adjustment in sales, he said. Britsch predicts core areas from King County to South Snohomish County will continue to see double-digit appreciation due to lack of inventory.

Founded in 1909, the Master Builders Association of King and Snohomish Counties (MBAKS) has grown to become the largest residential homebuilders association in the United States. With 2,900 member companies, the association is dedicated to membership value, housing advocacy, community service, and financial stewardship throughout the Puget Sound region.

A MULTIFACETED CIVIL ENGINEERING FIRM

Land Development Consulting (LDC) is a consulting, engineering, surveying, and planning firm based in Woodinville. The company was founded in 2003 and currently employs 43 people.

LDC works in three different market sectors:

1. The first is civil engineering related to residential land development in the Puget Sound area, which includes surveying, permitting, and road and utility work for builders.
2. The second sector is helping cellular companies, such as Verizon, AT&T, and T-Mobile, with tower siting and installations in Washington, Oregon, Idaho, Alaska, and Texas. “It’s interesting and challenging work,” says Mark. “We’re often designing small cell systems in localized environments, like the Gorge Amphitheater and Seattle Center.”
3. LDC’s third area of work is in public works, specifically design and construction for large municipal projects.

Mark has several roles at LDC. As the director of engineering, he manages the day-to-day operations of the firm from a technical and financial aspect. He is also the de facto CFO and manages the company’s benefit and health insurance packages.

LDC HAS ENJOYED 13 YEARS OF MBA HEALTH TRUST BENEFITS

“We’ve been using the MBA Health Trust since the inception of our company. And over the past five or six years, as we’ve really been growing, we’ve shopped MBA’s pricing several times. Every single time, the competitor packages were not nearly as strong. They may have been cheaper, but the MBA always provided the best overall value.” Last year, Mark says, the MBA plan was “almost 9 percent less expensive and provided 20 percent lower deductible costs for individuals and 40 percent lower for a family.”

AFFORDABLE PLAN FOR THE COMPANY, ITS EMPLOYEES, AND THEIR FAMILIES

Mark says that the MBA has evolved with market conditions. LDC was able to transition from a PPO plan to an HSA plan four years ago to ensure more affordable health insurance for the company, employees, and dependents. Mark says, “95 percent of our employees are now on an HSA plan. It was a seamless transition. The MBA team walked us through the entire process and taught us to communicate it to our employees. The plan is working really well. There are no complaints from our employees and all the doctors who were previously available still are.”

REDUCING FINANCIAL STRESS

Mark adds that the HSA plan has saved his company enough money to increase its coverage for dependents. “Our goal,” he says, “was to reduce the financial stress on our staff’s families and the MBA Health Trust helped us do that. Overall, we get much better coverage for a much better cost. And we are now able to provide 50% of dependent coverage.”

Mark’s firm works closely with EPK, the administrator of the Health Trust plans. “They’re great to work with,” he says. “Every year they give a lunchtime presentation about what to expect for the coming year. They have continuously stepped up to the plate and provided the service we’ve needed for the plans we adopt.”

MBA MEMBER BENEFITS ALSO INCLUDE THE GRIP PROGRAM

LDC takes advantage of additional benefits provided by the MBA, including the GRIP program, which helps improve safety and reduces the overall cost of workers’ compensation for MBA members. “That service has been a huge asset in getting our safety procedures up to speed to make sure we are compliant,” Mark says.

Seattle Is the Nation's Hottest Housing Market… Still

Can you count to 15?

That's how many months the City of Seattle has worn the increasingly heavy crown of hottest U.S. housing market. The median home in Seattle now costs more than $718,000, a 16.2 percent rise over the last 12 months according to Zillow. The Seattle-based real estate company does predict the city's massive gains to simmer down to just 5.7 percent over the next 12 months.

Still, 15 months is an impressive streak. And that got us thinking—which streaks have we beat as the nation's fastest-growing residential market in the country, behind first- and second-place losers Las Vegas and San Francisco?

Lance Armstrong recorded seven straight Tour de France victories from 1999 to 2005. I forget what happened after that.

Retired NBA center Chris Dudley once missed 13 straight free throws in a row, one of which included an air ball.

Pro surfer and Baywatch alum Kelly Slater won 11 world surfing championships, including five in a row from 1994 to 1998.

Okay, maybe we're not quite at legendary status yet, but hey, give it time.

The Seattle-based epicenter of explosive home prices has for some time been distributing its affluent ash across the region, covering the greater Puget Sound landscape with extravagant home prices and happy homeowners—and despondent home buyers. But that's life in the Pacific Northwest right now.

Even while Amazon looks to expand its lush landscape and make traffic stand still elsewhere, plenty more workers will be testing our rich soil in the coming months and maybe years, though they'll be paying a hefty price for a spot in our Emerald garden.

Where might one find their dream home in the foggy future?

MBAKS member Quadrant Homes, for one, is looking to build 63 single-family residences near Laurelhurst on the 17.8 acres currently housing the Talaris Conference Center. If all goes according to Quadrant's plan, the homes would be hot property, with individual lots averaging 5,500 square feet upon which homeowners could enjoy high-end residential living and easy access to everything.

While we wait, we can keep counting months and finding new records to compare to…