Kitsap’s economic future – and prices – are heading skyward

KEDA officials see workforce demands as a critical near-term challenge

By Mike De Felice

Kitsap News Group

PORT ORCHARD — Higher living expenses at the grocery store, gas pump and housing expenses are issues Kitsap County residents will be facing for the foreseeable future, according to business observers.

In addition, certain types of companies in the county will continue to face workforce challenges in finding and hiring qualified candidates for available jobs. These are some of the challenges the county will face, according to Joe Morrison, executive director of the Kitsap Economic Development Alliance (KEDA).

Joe Morrison, executive director of KEDA (KEDA photo)

Joe Morrison, executive director of KEDA (KEDA photo)

KEDA is a Silverdale-based organization that promotes economic growth and investments in Kitsap County.

Cost of living expenses

The cost of living is on the rise in Kitsap County, Morrison said. The cost-of-living index (COLI) compares the expenses the average person needs to acquire food, shelter, healthcare, and other routine needs among different regions. The average ranking on the index is 100, meaning if a city or area ranks above 100, residents there have a higher cost of living than most Americans; if the ranking is below 100, residents pay less for their daily expenses.

In the past, Kitsap ranked 110 on the index, Morrison pointed out. “These days, largely due to price changes in housing, we are higher in the index by about 10 points. We sit around the 120 range,” he said.

The main reason behind the county’s increase is rising home prices and rental costs, Morrison explained.

“You might have noticed changes in some of your costs — your rent prices going up, the amount you pay in mortgage [costs] might go up. It’s more difficult to buy a home. You are paying a higher share of your income than you used to for putting a roof over your head,” he said.

That Kitsap County is viewed as an increasingly popular locale to live in has increased demand for houses currently on the market. In turn, this increases asking prices, according to officials. It no longer is a stretch for an individual working in downtown Seattle to live in Kitsap County and enjoy the region’s quality of life.

“Kitsap’s distance from the greater Seattle region by water just doesn’t matter as much as it used to. People can work from home. Maybe they are not going into the office five days a week — maybe they are going in two or three days a week. If you really need to get to Seattle, you can do so by boat from north, central or south points,” Morrison said.

Kitsap County’s desirability is not the only factor contributing to higher local housing prices.

Skylar Olsen, Ph.D., is senior director and principal economist at TOTO Networks, a digital mortgage company. The Bainbridge Island resident was the keynote speaker at the KEDA’s annual meeting and economic preview last month. More than 200 business people signed up to participate in the virtual session.

Olsen told conference attendees that average mortgage rates jumped “aggressively” during the first two months of the year from 2.65 percent to 4.42 percent.

“This hurts the ability of buyers to purchase,” she said.

Interestingly, despite higher mortgage rates, home sales in Kitsap didn’t slow down. In February, on average, a home here was on the market just 11 days before it sold, she said. Last year at the same time on average, homes sold in 29 days.

Even amid the pandemic, home values across the hot Kitsap County market soared, the economist added. Home values have risen 26.8 percent annually, Olsen pointed out. “Kitsap County remains an incredibly attractive place for people to move to,” she said.

The local economist is concerned that because of higher mortgage rates and home prices, those new buyers will primarily be affluent individuals, many being transplants from other states like California.

“Who is able to access the quintessential middle-class American asset becomes challenged when incomes have not grown as fast as home values have. I worry a lot about getting real first-time homebuyers in the door,” she said.

KEDA director Morrison pointed out that Kitsap County is not the only suburban area seeing home prices climb.

“Plenty of other communities are seeing these cost increases in the Greater Seattle region and beyond. Smaller cities in the Puget Sound region and Pierce and Snohomish counties are seeing significant price increases for housing, too,” Morrison said.

There is no way to forecast how much the cost of living may change in the county, he said.

“It’s too early to draw any firm conclusions or forecasts,” he said. “There are a lot of dynamic things going on in the economy right now that make that very difficult to forecast — unprecedented stimulus and a changing international relations dynamic and the pandemic.”

Workforce shortages

Another challenge expected to continue to impact the region is employers being unable to find enough applicants to fill job openings.

“No matter what your industry is, for the most part, it’s difficult to hire and retain employees currently — period,” Morrison stated.

“Kitsap has a strong technical and skilled trades component to its workforce. There is a lot of demand for those skill sets, both by private employers and the largest public employer, the naval base.

“We have hands-on, we-build things, we-fix-things, we-repair-things [economy] and maritime industry. That is how our economy is shaped. That is what is going well and needs more employee capacity,” he said.

Since trade positions make up a significant portion of the local economy, the county should play to its strengths and promote such fields, Morrison said.

“I think a best practice for Kitsap is to invest heavily in its technical and skilled tradespeople and to make sure we have the right pathways for people who want to enter that line of work.”

Offering educational opportunities is the way to steer more individuals into these expanding fields, he said.

“This can mean increasing science, technology, engineering and math classes in middle and high schools, as well as pre-professional options that are hands-on and focus on the trades. It is smart to invest in those fields for the workforce of Kitsap while looking to the future.”

Kitsap County’s economic future

Even though Kitsap County is experiencing challenges associated with higher home prices and workforce shortages, KEDA’s Morrison is optimistic about the region’s future.

While some other communities are confronting the difficulty of having residents move away and local businesses shut down, Kitsap seems to be going in the opposite direction on both counts.

“We are positioned for great things in Puget Sound,” he said.

“We believe that Kitsap’s economic future is brighter than ever. Yes, there are some challenges associated with the growth we are seeing, but these are good times in Kitsap. Given the presence of our defense industry, the Navy, the popularity of Kitsap, the ability to work from home more than ever before, we think there are going to be more economic options and opportunities for our community.

“We are really excited about what the future holds.”

Editor’s note: Terry Ward, vice president of Sound Publishing, is also a member of the Kitsap Economic Development Alliance’s board of directors.