Windermere Real Estate/BI, Inc.
With regard to the Bainbridge Island real estate market and its year-end numbers, the similarities between 2016 and 2015 are striking. In both years, the market struggled with a lack of inventory and strong demand, while the market trends (that actually began in 2013) continued to respond to this condition. What makes 2016 special is we surpassed most (if not all) of the records set in our last ascending market of 2004-2007. While it makes some people nervous to be in this rarefied air, with the uncertainty that can accompany it, we don’t foresee any specific event that will change our market trajectory in 2017 (with one possible exception, which I will discuss later).
The median price of a home sold on Bainbridge has never been higher than in 2016. Even more impressive is the growth in the median, which has risen steadily since bottoming out in 2011 following the difficulties that began in 2007. In only five years, our median has grown from $493K to the current $740K – an increase of 150%. In that time, we officially drew even with and then surpassed the 2007 peak median of $680K. This is welcome news to all those sellers who have been hanging in there, whether they wanted to or not, waiting for prices to climb back up.
Our upper end has been the last market segment to enjoy our market’s resurgence, and finally joined the party in 2016. Sales over $1M were up 32.4% from 2015 and up 88% from 2014. Not only did we set a new “highest price sold” of $5.97M but we had five sales over $3M. Previously, the highest price for a home sold was $3.497 in 2007. Also for comparison, in the ten years between 2005 and 2015, there were only eight homes sold for more than $3M (an average of less than one, compared to the five sold in 2016).
Our condominium market also experienced a resurgence. In 2008, there were only 42 condominium sales on the island; in 2016, we had 104 sales distributed over all price ranges – the largest number since 2007. The condominium valley floor was in 2012 with a median price of $297K. In 2016, by contrast, we raised that by 35%, reaching a median of $400,750.
Although land sales were down last year (for reasons that are unclear, but we suspect a cyclical reaction from 2015’s exceptionally strong sales), new construction seems to be everywhere (especially in community centers). There is a plethora of multi-home projects underway across the island. Some are being developed by local owners, but we have also seen an influx of off-island larger development companies. New communities under construction: Ashbury – Off Wyatt – 18 residential homes (off-island developer); Landmark – Off Wing Point Way – 17 residential homes (off-island developer); Ferryview – Off Wing Point Way – 11 condominiums (off-island developer); Roost – Off Baker Hill – residential, commercial and townhomes (island developer); Pleasant Beach Village – 14 view condominiums (island developer). There are also many multi-home projects in the planning/permitting stage (Weaver, Finch and Torvanger to name a few).
The development we’re seeing in places like Winslow and Rolling Bay addresses a sentiment we’ve been hearing from our clients for years: “We want to downsize and move into town.” As the higher end has become healthier, people have been able to achieve their goals of selling their larger homes (to enthusiastic new buyers!) and moving to smaller homes or condos in denser community centers. We anticipate Lynwood Center will also benefit from this trend as new homes come online (like The Roost and Pleasant Beach Village Townhomes and lots).
We’re keeping a close eye on interest rates, which are slated to go up again sometime soon. The concern is they rise to a point where they materially affect mortgage payments (and therefore home prices). Loan rates are still exceedingly affordable, so let’s hope they stay that way.
Demand will probably not be a concern for 2017, and supply will still most likely lag demand. We have new projects coming on-line now and throughout the year, but we still see some clients waiting to sell their homes (adding to inventory woes) because there aren’t yet enough choices on the market to justify the risk of having nothing to move to once they sell. The new projects will help, especially because they provide what current potential sellers have been asking for, but we see overall demand still exceeding supply. As much as last year? That could depend on what happens in Washington DC . . .
Will 2017 go down the same growth-oriented path as 2015 and 2016? Will the change in federal leadership have a negative impact on our market? Obviously, we can’t predict unforeseen events, but the economic outlook for our region is very positive. Professional and business services jobs are predicted to grow 3% in the Seattle Metro area next year. Computer and mathematical jobs up 3.5%. All that growth without any new transportation infrastructure only makes Bainbridge look increasingly appealing. People continue to look beyond King County, and many are excited to discover the beauty and quality of life found on Bainbridge Island.
Yes, you heard it. That was indeed the musical firetruck. The iconic tour around the island is already underway. Wasn’t it just Halloween? I am never ready for Christmas, but I must say the snow day we had last week did really nudge me into the holiday spirit. I love that the truck hits our neighborhood on the 23rd or 24th every year (because by then I am finally ready for Christmas) but I love seeing the truck out and about the island as we lead up to the merry day. Thank you Bainbridge Island Fire Department for this very Bainbridge tradition. Listen for the truck 5-9pm from now until Christmas Eve. Link to a larger version of the map and schedule here.
And note, if the truck has extra time they can make additional laps through your neighborhood. We have been lucky enough to see them twice in some years.
My Christmas tree is NOT up. Not even close. Is yours? Thanksgiving is officially over and the winter holiday season is underway. I am NEVER ready. But, ready or not, this weekend and next islanders will be out in force hunting down Christmas trees. Next week there are snowflakes in the forecast, so this weekend might be ideal. Brrr. If you don’t believe me, read Cliff Mass’ Weather Blog.
If you’d like to make a day of it and go out and cut your own tree, you will find the map below helpful. You could combine breakfast at the Port Gamble General Store with tree hunting. Stay warm! And remember, trees always look smaller in nature. Measure twice, cut once.
It’s election season, which means we hear assertions from candidates that sometimes warrant a bit of fact-checking. The same rules apply to real estate. At Windermere Bainbridge, we’ve heard a lot of mis-perceptions and embellishments about the state of our local market. “The bubble is bursting!” “Prices are being slashed!” “Prices are going up!” “Our market has peaked!” “Our market has gone crazy!” We’ve heard all this and more. So we’re here to set the record straight. Think of us as your real estate fact checkers. The fact is we are in the midst of a very healthy (not crazy) market that is moving in a manner we have been predicting for some time. Let’s explore the specifics.
ASSERTION: “Sales are down compared to last year and we are moving downward!”
FACTS: We have said for some time that the lack of inventory was holding our sales in check. When we started the 2016 business year (on January 4th to be exact), there were 53 houses available on all of Bainbridge Island. The first quarter ended with only 47 homes available. This lack of choices crippled sales and reflected a 21% drop from first quarter 2015 sales. But this lack of inventory also helped push prices up, bringing more sellers into the market. Consequently, our inventory began to grow, which meant sales did too. By the end of the second quarter, inventory had grown to 92 homes. (Still low compared to Q2 2008 when we had 291 homes available, or to 2012 when the recovery had set in and we had 189 homes available.) Our year-to-date sales number also dropped from 21% down to 15% by the end of the second quarter. Now, with the third quarter wrapped up, our available inventory is 98 homes (compared to 77 last year at this time) and the number of third-quarter sales rose by almost 5%. Hardly a sign of a decreasing market.
ASSERTION: “Prices are being slashed!”
FACTS: It’s true we are experiencing price reductions. This is a normal phenomenon created by sellers being unrealistically optimistic and buyers being informed and disciplined. The demographics of our marketplace bring more experienced buyers than many other markets. They are informed, know the risks of overpaying, seek professional advice and are careful. It’s like the old expression, “It’s the seller’s job to ask and the buyer’s job to say no.” Here also, sellers who seek (and listen to) competent professional advice in pricing will often experience less disappointment, along with a quicker and often more profitable experience. (There are reams of data showing that properly priced homes net more than overpriced homes that adjust downward.) Prices are still rising. The median price is up 17% from last year. The median price of homes sold during the third quarter this year was $765K, compared to $648K last year. This strength is reflected in the shift of sales in specific price ranges. There were 47 sales below $600K in the third quarter last year, but only 35 this year. Conversely, sales over $600K grew from 61 in 2015 to 78 this year! This indicates a shift upward in the prices of all homes. Hardly a sign of falling prices.
ASSERTION: “Prospects for new inventory are stagnant!”
FACTS: Developers from all over the nation are eagerly investing in our market, which is also a signal of strength. Two new home projects are currently being marketed in Wing Point and a project by DR Horton is under construction on Wyatt Way. The “Roost,” Grow Village Phase 3 and another DR Horton project at Torvanger/Sunrise are coming out of the ground. The long anticipated project at Pleasant Beach Village will start next month and another neighborhood at Weaver and Finch are in the planning/design phase. These projects will continue to bolster inventory and provide our healthy buyer pool even more choices. Hardly a sign of stagnation.
ASSERTION: “The condo segment is too limited to grow!”
FACTS: Our condominium market is experiencing similar strong activity. At the end of the third quarter last year there were 5 active condominium listings; this year there were 26 available. Last year, 25 condos sold during the third quarter; this year 42. And prices are up over 8%. As home prices continue to rise, condos provide attractive alternatives. Pleasant Beach and Grow Phase 3 are both great examples of single family home alternatives in areas where services and amenities are concentrated. They are both examples of our comprehensive plan to enable growth while maintaining our rural feel. Hardly a sign of a weak market segment.
We are very happy with our current conditions and don’t see anything on the horizon that would likely disrupt the trend in the near future. Crystal balls are dangerous (we certainly learned that in 2007/2008) but our region shows every indication of continued strength. Seattle is strong and more and more people are trying to escape from the challenges of its growth. Kitsap is also strong, with sales up and growing. Barring some big surprise, we see strength continuing at least through next year. The Bainbridge real estate market is looking good, and that’s a fact!
The one constant in our real estate market is change. Ten years ago (yes, it has been 10 years!), we were in a very competitive market. Inventory was tight and prices were going through the proverbial roof, setting new highs. Then, in September 2007, that came to an abrupt end and we began a downward trend toward the largest correction since the 1980s. It took until 2012 for the market to shift yet again and gradually pick up speed toward recovery. By 2015, we returned to familiar territory: an extremely competitive market with record low inventories and rapidly rising prices. On July 1, 2015, there were 58 active listings on the island. Now, just one year later, data suggests a potential market transition with inventories rising and price reductions becoming increasingly common.
We in the industry do not view this as a repeat of 2007. There are too many positive factors in our financing infrastructure and regional market that separate this climate from its predecessors. (Indeed, the financing environment is so much more conservative now that securing funding can actually be a hurdle in some transactions.) We are still in a very competitive market and the statistics bear this out. While we may be slowly moving towards a more “balanced” market, we are not there yet. Let’s look at some of the leading indicators that give a glimpse at where we are.
One year ago, there were 112 home listings, 54 of which were under contract. For a market the size of Bainbridge, 58 active listings in the middle of summer is a crazy small number. On July 15th of this year, inventory had ballooned to 162 listings, 64 of which were under contract (leaving 98 active). Yes, this was a substantial improvement from last year. But when compared to the absolute top of our last market peak in July 2007, the 162/64 stat still looks very tight compared to the 2007 numbers, which were 289 listings with 62 under contract. The percentage of pendings to listings is 40% today compared to 21% in 2007. This year’s second quarter median cumulative days on the market is still a brisk 11 days, equal to what it was for the same period in 2015. (In 2007, it was 52 days.) It is still a very competitive market. Our inventory is growing because our price levels are finally bringing in more people from the sidelines. When you look at the history of the sold listings, there are scant few people who are “flipping” or who have bought recently and rapidly selling for a profit. Instead, many of the homes that recently sold were last sold in 2001, 2004, or even 2007 and 2008. It’s also interesting to note that people who have held onto their homes for a more extended period of time (since before the boom years) are realizing very healthy increases over what they paid.
We have finally drawn even with and are even beginning to pass our peak prices of 2006/2007. When we checked the history of all the homes sold in the second quarter, all those that sold in 2006/2007 did better this year. Our year-to-date median is $755,000, a 14.4% increase over last year. This number is exacerbated by the price ranges of the homes sold. Overall, sales were down almost 17% and almost all of the decrease came in homes below the $600K price point. This phenomenon can be partly explained by our old nemesis: lack of inventory. On July 15th, there were 13 homes available on the whole island for less than $600K. Not many choices.
However, we are now seeing more price reductions than even in the first quarter. This is another indication of a healthier market. Pricing still matters, as sellers can’t just ask for anything. As we mentioned in our last newsletter, this is one of many areas where professionals can really help. Overpriced homes usually end up selling for less than properly priced homes, a statistic that has been borne out in all types of markets. This becomes especially important when a market is going through a gradual shift. The bottom line is that prices are rising and healthy. True, the rate may change and is very neighborhood and property specific. But the competitive nature of our current market will help bolster prices.
Interestingly, the increase in inventory has not yet been felt in the residential condominium market. Due to low inventory the volume of condominium sales are down almost 21% from last year. Prices are up 8% from 2015, but the median price is still 13.7% lower than in 2007. In addition to the shortage of available condominiums buyers face potential financing challenges specific to that type of property. In the land segment, sales are down more than 30%! Median price for land is also off 6.5%, which is 47% of the 2007 median. This is perplexing as land sales improved quite a lot between 2014 and 2015.
So our changes are subtle at this time, but in process. On the residential side, the greater inventory gives buyers more choices and potentially more sales. Sellers are seeing price levels that entice people to return to the market-place and support a competitive environment. The regional economy outlook continues to impress and our position in that marketplace remains strong. (What other community can still claim the same commute time to downtown as twenty years ago?) The outlook ahead is all very positive!
This summer, our office is opening a satellite office on Olympic Drive and Winslow Way. There our agents will be able to greet ferry passengers as they first arrive to the island. Our goal is to give our clients more exposure to pedestrian and vehicle ferry traffic and have agents on hand to answer questions. We hope to have our doors open before Labor Day, so please stop by.
EXCITING NEWS! The Seattle Seahawks and Windermere Real Estate have joined in an exclusive partnership that will make Windermere the Official Real Estate Company of the Seattle Seahawks. At the center of this partnership is a new campaign entitled #tacklehomelessness in which Windermere will donate $100 for every Seahawks tackle at home during the 2016 season. On the receiving end of these donations is YouthCare, a Seattle-based non-profit organization that has been providing services and support to homeless youth from across Puget Sound for more than 40 years.