Economist: Valley lags in building multifamily units
Apartment construction is soaring in many parts of the country, but not in the Rogue Valley.
Avista Corp's Chief Economist Grant Forsyth told a Chamber of Medford/Jackson County Forum audience Monday that the valley is not keeping pace with other regions when it comes to multifamily housing.
He pointed out apartments constitute 48 percent of new residential unit construction in Avista's home region of Spokane, Washington. In the Rogue Valley, however, apartments accounted for 14 percent of new construction. In Portland and Seattle, Forsyth said, apartment complexes are dominating residential construction.
"You're completely different. There are hardly any apartments being built here," Forsyth said. "As a share of permitting for the last two years, you have not shared in the apartment boom that's occurred in the rest of the country."
The ramifications are widespread, he said, from energy consumption to workforce housing.
"In terms of energy use, single-family houses — even if you're talking about a small house — has a lot different energy profile than an apartment," he said. "As I talked to builders over the last couple of years in the Rogue Valley, it's pretty clear that a lot of the houses built are in the $300,000-plus range. For most communities, that's probably not what you would think of as workforce housing."
The National Association of Home Builders' Housing Opportunity Index for the second quarter of 2017 showed 43 percent of the homes in Medford were affordable for those earning the median family income. Of the 71 West Coast markets surveyed, Fairbanks, Alaska, was ranked No. 1 with 87 percent of the people there being able to afford the median-priced home of $235,000. In Spokane, 71 percent of the homes were affordable for those earning the median family income, and in Boise, Idaho, 60 percent of the homes were considered affordable. Medford ranked just above Seattle, where 41 percent of the houses were within the affordable range for those earning the median family income, and Portland, where it's 38 percent.
"Rest assured, the median price is way higher in Seattle and Portland, but remember they're calculating this relative to income," he said. "You do have a bit of an affordability issue. That's one thing to consider when you think about in-migration and drawing people here. It not only effects the amount of in-migration, but who can migrate in."
One of Forsyth's tasks for Avista is to gauge market demand, including the Rogue Valley's aging demographics.
"As you move through your life, your consumption behavior changes, and that includes energy," Forsyth said.
Population shifts also influence housing prices, he said.
Rogue Valley home prices peaked at an average of around $360,000 in 2006 before a precipitous six-year plunge. Pointing to a trend line, going back to 1990, based on 5 to 6 percent annual growth in annual price, even though the region's average selling price for new construction is nearing $400,000, it still trails the pre-recession trend.
"Home price growth here has been very robust, but your correction was so deep, you still haven't recovered to that trend had the bubble never occurred," Forsyth said.
He said Jackson and Josephine counties will see a combined 1,200 residential units permitted this year.
"We haven't seen a thousand for a very long time," Forsyth said. "What we're seeing is a gradual recovery in part because property values are no longer collapsing. It's a lot easier for financial institutions to issue loans on new housing, if existing housing prices are not collapsing."
A recovering economy has led to more solar panels going on roofs and elsewhere with costs sharply declining and builders learning to install units quickly, he said.
In Jackson and Josephine counties, Ashland accounts for 38 percent of the solar permits, Medford 18 percent and Grants Pass 8 percent. Forsyth said it has less to do with politics than means.
"Ashland has the resources to make it happen," Forsyth said. "You look around the country, it tends to start out in communities that have relatively high incomes and home ownership. Personal preference and politics might play a role, but it turns out their income is quite a bit higher. If you don't have the money to do it, you can't do it."
— Reach reporter Greg Stiles at 541-776-4463 or email@example.com. Follow him on Twitter at www.twitter.com/GregMTBusiness or www.facebook.com/greg.stiles.31. Listen to his podcast at mailtribune.com/podcast.