Residential Building Permits Lagging but Seeming to Meet Demand

by Brian Kennedy and Dr. Patrick Jones

The impacts of The Great Recession can be observed quite well in the trend line of this indicator: the buildup of a higher than average number of permits issued between 2003 and 2007, then the sharp declines and historic lows throughout 2008 to 2010, and eventually the recovery from 2011 onward. Locally, however, that rebound hasn’t been as strong as it has been in other parts of the state.

According the U.S. Census Bureau’s Building Permits Survey, displayed in Indicator 1.5.3, there were 221 residential building permits issued in the county in 2018. It was the 2nd highest in the last ten years, nearly double the amount issued in the depths of the recession in 2009. This outcome is still behind the national and state benchmarks, but Walla Walla has been closing the gap with former.

In 2000, Walla Walla County issued 3.6 building permits per 1,0000 residents while the U.S. was at 5.7. Those rates reached parity in 2009 when they both fell to 1.9. Since then Walla Walla’s residential building has been growing in fits and starts, occasionally outperforming the nation until the most recent two years when Walla Walla began lagging the U.S. again. Yet currently, the rate of activity isn’t by nearly as low as it was back in 2000, with Walla Walla trailing the U.S. by only 0.5 permits/resident.

On the other hand, Walla Walla is still not growing nearly as fast as the state, nor as in most of the surrounding metro counties in Eastern Washington. Neighboring communities such as the Tri-Cities, comprised of Benton and Franklin Counties, and the Wenatchee metro area, comprised of Chelan and Douglas Counties, find themselves in the top tier for residential building permits issued. Respectively, both communities out-permitted Walla Walla by 3.0 and 3.1 per 1,000 residents in 2018. Spokane and Grant County, while not growing as strong and the Tri-Cities and Wenatchee communities, are still issuing more permits as well, 2.2 and 1.0, respectively. In fact, the only other urban county that Walla Walla exceeds is Yakima, and by over double. (Trending data for Benton and Franklin Counties can be found on Indicator 3.4.5, for Chelan and Douglas Counties on Indicator 2.4.1, for Spokane County on Indicator 2.3.3, for Grant County on Indicator 2.3.1, and Yakima County on Indicator 2.4.2)

While this does sound like there is little to no growth happening in Walla Walla County, it isn’t all bad news. It seems that the community is just responding to market forces. According to the Office of Financial Management, and displayed on Indicator 0.1.1, population growth for the county has been relatively low at just 0.6% in recent years, about a percentage point lower than the state. In the face of slower population growth, there are just more houses on the market in Walla Walla than across the state. Indicator 5.1.4 takes data compiled by the Runstad Department of Real Estate and displays the number of months it would take to sell the current inventory of homes if no additional homes were listed for sale. The trend shows that in the recent quarters where data is available Walla Walla’s inventory has been much higher than the state’s as nearly all price points.

So while it does seem that Walla Walla County’s residential construction has been underperforming when simply looking at the residential permits issued, it seems the market is just responding the demand forces. When population is growing at a slower pace and the housing supply is already relatively high, fewer homes need to be built.