Melinda Brein of Tumwater has been house-hunting in Lewis County for just more than a month, and she admits it hasn't been easy.
"Most of the houses we've looked at are already subject for inspection by someone else who's interested (in making an offer)," she said.
Brein wants to move her husband and two children to the Twin Cities to be closer to her extended family. But she also knows she's following an economic trend.
"In the Olympia area, compared to Centralia, you'd get a smaller house for the same price," Brein said.
According to real estate agent Mike MacDonald of Heritage-Pacific Reality in Winlock, the invasion of northerners to Lewis County stems from high property prices throughout the Puget Sound region, stretching as far as Seattle to Olympia.
"People are willing to consider an hour-plus commute time if they can find affordable housing," he said.
Lewis County offers some of the cheapest real estate along the Interstate 5 corridor in the western part of the state, according to MacDonald.
However, the influx of people has created an unusual housing demand, something MacDonald said the county, as a whole, hadn't anticipated.
"In many ways, we're stuck behind the eight ball and out of inventory," he said.
According to the Northwest Multiple Listings Service, 376 homes were on the market in Lewis County last month, down 7.6 percent from a year ago.
On average, a home was on the market for 99 days in March, compared to 108 days in 2004.
Greg Lund, vice president of Century 21 Lund Realtors, agreed there is a general shortage of homes up for sale in Centralia and Chehalis, but said this isn't universal in all parts of Lewis County.
"(The shortage) isn't necessarily countywide. Every geographical area is different," Lund said.
Serving areas from Mossyrock to Packwood, real estate broker Bill Truitt of Four-U Realty said he hadn't noticed any major effects of the housing boom in the East End.
"It's not as critical here, not like out west. A house being on the market for 18 months isn't uncommon here," Truitt said, citing that second-homeowners drive most of Packwood's market.
Fighting for the market
Jan Riske, an agent with Herman O. Adolphsen Real Estate, has seen potential buyers submit multiple bids on the first day a home is listed.
"Last week, there were four offers on a house," she said.
The most popular properties tend to be "fixer-uppers," homes in need of major repair, according to Riske.
"Right now, you're paying more than you'd expect for a fixer because prices are going up," she said.
Riske, a 12-year veteran of the industry, admitted this is the largest boom she could remember.
"But you can't really enjoy it as much as you'd like because there isn't enough to sell," she said.
As he prepared to show a new home in Napavine, Gary Fox of Century 21 Lund Realtors joked that property is selling so quickly that some agents are toting along laptops to showings.
"So that you just have to download the forms and fill them out, all right there," Fox said.
According to Fox, it isn't unusual for a single home to have multiple offers, often giving way to so-called bidding wars between buyers.
Supply not meeting demand is nothing new in the real estate industry, but Fox said he had been surprised by the length of the market's upswing.
"It feels different than previous times. It's lasting longer," he said.
In addition to more people moving into Lewis County, Fox cited encroaching investor activity as another driving market force.
"We're definitely seeing investors trying to snatch up rental houses, which further tightens the market," Fox said.
Johan Neff of Centralia plans to be one of those investors.
"I'm just now closing on the first house, but my goal is to have six houses by the end of the year," Neff said.
Neff lives in Centralia and works at a warehouse in Tumwater. He decided to get into the rental business because his wife wanted to work fewer hours as a nurse.
"I've seen the money in (rental investments). My wife's family is in it and they're definitely not hurting. They go on vacation when they want to," Neff said.
Neff's real estate agent, Bill Downey with Pete Bézy Realty, noted that today's sellers are more likely to get their asking price, partially owing to the increase in investors.
"More and more investors are trying to get into the market before it goes clear wild," Downey said.
Agent Pete Bézy agreed that investors are coming to Lewis County to buy.
"Properties here pencil very nicely," he said, meaning that the income from the property pays for the mortgage.
This isn't always the case in places such as King County, Bézy explained.
"If you purchase a property that's an income property in King County, you're going in the hole. You'll be in a negative cash flow for a period of time," he said.
Even Bézy's daughter, who lives Sandpoint, Idaho, has started investing in rental homes in Chehalis.
Bézy credited low interest rates for supplying much of the investors' buying power.
"If interest rates go back up to 12 percent, who knows what will happen," Bézy said. "Our economy is just too hot, but it might slow it down."
According to Cathy White, branch manager of Horizon Mortgage and Investment in Chehalis, interest rates have been climbing, but at a minimum.
"We're in a cycle where they're going up a little, but nowhere near the double digits like 10 years ago," White said.
Thirty-year fixed-rate mortgage reached 6 percent last month for the first time since the summer. Rates dipped down to 5.91 percent this week, according to national lender Freddie Mac.
On Wednesday, the Federal Reserve met, discussing the possibility of increasing interest rates.
According to economics professor Charles Nelson at the University of Washington, an increase is imminent.
"The risk is that the era of super-low interest rates is ending, and that more normal rates will crimp the real estate boom," Nelson said.
Housing tends to be more sensitive to the Fed's decisions than other industries. Originally, low interest rates were an effort to counteract the "depressing effect of 9-11," according Nelson.
"Now the Fed is more concerned with raising rates to head off rising inflation, so very likely the party is over," he said.
Bubble potential in Lewis County
In a recent study, the National Association of Realtors found that investors bought 23 percent of homes sold in 2004.
According to a commentary by David Berson, chief economist for Fannie Mae, investor share hasn't been this high since the late 1980s, just prior to the crash in real estate prices during the 1990-1991 recession.
However, University of Washington economics professor Neil Bruce doesn't think Lewis County is at risk.
"King County has some danger signs, but not as bad as in (say) California metropolitan areas," Bruce said.
According to Bruce, when the Fed increases future rates, the real estate market is likely to cool.
MacDonald in Winlock estimated that a significant percent of the city of Centralia is non-owner-occupied.
"Of the people we're dealing with, 30 percent are investors. There is some speculative buying going on," he said.
However, MacDonald said other economic factors, including the addition of a Cardinal Glass factory at Evaline and the expansion of the Fred Meyer distribution center, would likely allay a bust.
"There is enough synergy being created so that this trend stays in place. If interest rates stay in check, the good market will continue," he said.
Robin McGinnis covers business issues for The Chronicle. She may be reached at 807-8231, or by e-mail at rmcginnis@chronline.com.
