Meanwhile, employers may be forced to follow as affordable houses continue to be pushed farther from the job centers in downtown Seattle and Bellevue.

“It would not surprise me to see some of the companies that are growing in the area look at other locations,” says Conner. “We could see them move out to some of the edge cities that currently don’t have much in terms of jobs.”

“The fact that we are building too few homes now and that those skew to the higher end of the market has implications for the market long term,” adds Svenja Gudell, chief economist at Zillow. “We will not have the natural aging of these homes to become affordable.”

That means first-time buyers will be paying a higher price. And those prospective buyers, who are already paying hefty rents, may have to wait longer to save up for a more expensive first home or move farther out to a less expensive location.

“If we continue at this pace, it won’t be very long, maybe five years, before the median home price doubles and puts us equivalent with San Francisco today,” says Orser, who also serves on the Washington State Affordable Housing Advisory Board.

Orser would like to see more condominium development along the region’s light-rail system, which would give residents the option of working in an edge city or in downtown Seattle. “At this point, transit-oriented development is only a rental strategy and there is very little ownership opportunity in that corridor,” Orser says. “One [area] that’s severely lacking is condominiums, a higher-density, more affordable way to home ownership.”

Development of condos, however, has been limited by regulations that make developers vulnerable to lawsuits. Consequently, while there are about 1,100 condominiums going through the permitting process for downtown high-rises — many of them large enough to accommodate a family — most are quite expensive. Nexus, one of a small handful of new condo developments going up in Seattle, has its units starting “in the low $900,000s.”

While prices are expected to continue rising by 5 to 10 percent annually for the next couple of years, most agree they will eventually outpace the ability of buyers to pay. But rather than seeing falling prices, Britsch thinks a more likely result will be a significant drop in the rate of home ownership. He predicts that if prices for single-family houses remain high, home-ownership rates could drop to 50 percent in the Seattle area during the next decade.

That figure compares to a national home-ownership rate of about 63.7 percent.

With a million new residents expected by 2040, the region will need to accommodate a wider variety of housing types and strategies to create more affordable housing — from townhomes and condominiums to accessory units and cottages. Zillow’s Gudell hopes officials will be able to find a solution by offering incentives for certain types of construction or modifying zoning.

Holly Gardner remains optimistic. “When all the factors come together,” she says, “there may be a big straining moment of pause where everybody just hurts for a while. Then we’ll figure out how to get through it.”

But the solution likely won’t involve single-family homes. Those houses with the little gardens and the white picket fences will likely remain on the endangered species list in the Puget Sound Region well into the future.

AFTER THE DELUGE: An invasion of national firms has changed the home-building market here.

BY JEANNE LANG JONES

In 2011, as the local economy was recovering, giant home-building firms poured into the Seattle market. Among them were Richmond American Homes (Denver), Toll Brothers (Philadelphia), Henley Properties (Australia), Newland Communities (San Diego) and Lennar Corp. (Miami). They joined Shea Homes (Los Angeles) and publicly traded home builders D.R. Horton (Fort Worth) and Centex Corp. (Dallas), now owned by PulteGroup Inc. (Atlanta).

These new players quickly snapped up local home builders. Richmond American parent M.D.C. Holdings bought SDC Homes of Seattle. Toll Brothers bought Kirkland’s Camwest Development. Lennar bought Premier Communities of Puyallup. Henley partner, Sumitomo Forestry Group Housing, bought Bellevue’s Bennett Homes. These acquisitions provided the newcomers with local expertise and instant property portfolios.

To better compete, Quadrant Homes, a former Weyerhaeuser subsidiary, hired an industrial design firm in 2012 to do consumer analytics on the housing market. The research “brought in some different thinking and yielded great fruit,” Quadrant President Ken Krivanec says.

Krivanec relates that some well-heeled buyers were willingly paying $750,000 for a new home at a time when Quadrant’s average sale price was below $300,000. So the company developed a contemporary design aesthetic and decided to concentrate on the Eastside luxury home market.

Quadrant itself was acquired in 2014 by publicly traded TRI Pointe Group, which is based in the Los Angeles area and owns six premium homebuilding brands operating across eight states. Fueled by new capital, Quadrant began shopping for land — from Bothell to the Renton Highlands — and was able to win some very aggressive bids, says Bonnie Geers, Quadrant’s SVP of community development.

Quadrant also sold five properties in Seattle’s Columbia City neighborhood, where it once planned to build more than 100 townhomes. The properties had appreciated significantly in value. “Selling the assets in Seattle let us keep our energy focused in the direction we were heading,” Geers notes. Quadrant currently has three townhome sites on the Eastside — in Kirkland, Newcastle and near the planned light-rail line in Bellevue.

Meanwhile, Charlie Conner, owner and president of Conner Homes in Bellevue, says his company had to become more nimble to compete against the larger home builders. At its peak in 2004, Conner Homes built about 220 homes a year. After suffering a dip in production during the recession, Conner extended its reach into the South End market and partnered with another business with significant land holdings there. The geographic expansion enabled Conner to return to a pace above 200 homes a year despite the downturn.

Conner now has a presence in seven communities, from Sammamish in the north to Edgewood and Buckley in the south.

While the business did slow in 2009, says Conner, support from its banks enabled the company to continue building throughout the recession. One advantage of being an independent home builder, Conner adds, is that he can be more creative in the type of house he builds on a particular parcel that might not fit a larger builder’s stock house plans.

Like Quadrant, Conner is also building townhomes. He sees them as a good alternative for empty nesters and others who don’t necessarily want a big yard.

But Conner says the competition remains “pretty fierce” from national companies that can spread their risk across projects nationwide. “People build in inflation, assuming prices will continue to go up 10 to 15 percent per year,” Conner says. “If you operate all over the United States in different markets, then perhaps you will gamble here and there and pay the upper price for land.”

By contrast, says Conner, “We have to make it work here because we are a local company.”

Puyallup-based Soundbuilt Homes has also adjusted. Before the recession, Soundbuilt was doing 600 to 700 homes a year. It has scaled back production to about 200 homes annually.

“All the nationals are here and it’s hard to get land to do that kind of number,” says COO Kurt Wilson. “We have to be nimble and able to do various types and sizes of projects that we may not have done 10 years ago.”

Soundbuilt builds houses in King, Pierce and Thurston counties, from Renton to Gig Harbor south to Yelm. Soundbuilt also develops and sells land to national home builders when the properties don’t fit into its production timeline, Wilson says. The company is working on some big projects that were acquired before or during the downturn and are being built in phases.

THE CONDO MINIMUM: New units are hard to come by and that's not likely to change anytime soon

BY ELAINE PORTERFIELD

Seattle is awash in new luxury apartments, with tons more set to open in the next 18 months or so. But just try buying a new condominium in Seattle.

With the exception of Luma — a luxury condo building on First Hill that sold out a few months after completion in 2016 — virtually no condos have been built in recent years due to what local real estate experts call a perfect storm of factors. And that means an extremely tight to nonexistent supply of both new and existing condos, a blow for some first-time buyers who were relying on condominiums as an affordable entry point for home ownership.

“Why is there a condo shortage? Well, it could have to do with the number of quality Seattle condo projects currently involved in lawsuits or arbitration,” says Fionnuala O’Sullivan, managing broker and owner at Gerrard Beattie & Knapp, a Seattle real estate company. The core of the issue is the Washington Condominium Act, which includes provisions requiring developers to warranty their construction work for four years.

Basically, it comes down to the fact that anyone who builds a condo in the city will likely face some form of legal action, says Matthew Gardner, chief economist for Windermere Real Estate. To offset that likelihood, developers feel compelled to buy “insurance” against a lawsuit, so they choose to build apartments that can later be sold to institutional investors at a good price.

And don’t expect developers to convert local apartments into condos anytime soon. The economics seldom pencil out when adding up the costs of purchasing the property, making improvements, paying taxes and covering other expenses.

“You can’t start repairs until the last tenant leaves,” Gardner explains, “so you have no revenue coming in in terms of rent, but [the mortgage] stays the same.”

One rare new downtown condo development coming on the market is Nexus, a 41-story, 382-unit complex in the Denny Triangle neighborhood. Dean Jones, principal and owner of Realogics Sotheby’s International Realty, which represents Nexus, says such is the pent-up demand for new downtown condos that hundreds of potential buyers lined up last year, including some who spent the night waiting in line, to put down a $5,000 refundable deposit for right of first opportunity to purchase when the homes are officially released for sale.

Ben Kakimoto, a condo specialist with Keller Williams Realty, says he knows of only two other condo complexes underway at present: Gridiron in Pioneer Square, with 107 units, and Hendon Condominiums, a boutique-style development of 32 units on Phinney Ridge.

“We are shocked how few condos there are [under construction],” Kakimoto says. “There is such a need.”