A History Lesson 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.
Inventory 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.
Prices 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.
Condos and Land Interestingly, the strength of the residential market has yet to show itself in the condominium and land markets. Condominium sales are down almost 21% from last year, even though inventory is greater. Prices are up 8% from 2015, but the median price is still 13.7% lower than in 2007. Condominiums have been struggling with inventory issues as well as financing challenges, but can that explain why 52.5% fewer condominiums sold this year compared to 2007? 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.
Moving Forward 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, we opened our satellite office on Olympic Drive and Winslow Way. There we’ll 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. Our doors are open, so please stop by!
Over the last several years, many of the circumstances that triggered the previous housing bubble have changed. Windermere’s Chief Economist, Matthew Gardner, breaks down how tax policy, bank regulations, interest rates, lending standards, and home equity have improved our ability to avoid another bubble.
The Big Picture:
If you consider only the number of homes (or condos) that sold during the first quarter of this year, your initial reaction would probably be, “Ho Hum”. Look carefully, though, and you will see some interesting things. If you include what is happening now, in mid-April, you might get even more intrigued.
There were 55 home sales in the first quarter this year, compared to 56 last year, which indicates stability more than improvement. Nonetheless, these are good numbers compared to 2008 (when there were only 34 sales) and 2009 (with 37 sales). Condos dropped from 19 sales in 2011 to 12 this year.
So far, not a lot to get excited about. But when we look at the median price, we had a 6.2% increase. Our first quarter median price has been declining steadily since its peak in 2008 – until this year. When you look at the distribution of the sales, the median increase becomes clear. Sales over $800k were up 320% from last year. In all of 2011, there were 24 sales over $1 million; this year we have already had 12 just in the first quarter. (I cannot help but point out Windermere Bainbriddge was involved in 10 of those 12 sales and Winderrmere represented 50% of the parties involved.)
Stats Tell a Positive Story:
On March 30th, there were only 59 homes under contract. By April 5th, there were 74 homes under contract. By April 10th, there were 80. Of those 80, 22 are over $800K and 13 over $1 million. We have not seen these kinds of numbers in several years. Not only are the numbers good, they have grown quickly this month.
Over the past five years, we have had strong individual quarters like the first quarter just ended. But we could not sustain the momentum, and poor performance followed. In 2011, the first quarter was up 14% but then dropped 14% in the second quarter (from the previous year). Our market has gone up and down on an almost quarterly basis while prices have steadily decreased. Now we see a strong first quarter, prices inching higher and a very strong start to the second quarter. These are all positive indicators. Optimism is beginning to creep in, but it will take more time for many of us to feel comfortable making any proclamations. We’ve been lured by the sirens before only to find ourselves on the rocks.
Bainbridge Still a Stronghold
When one looks at market conditions around the Sound, there are active markets like ours and other areas that are not doing as well. Seattle has pockets of energetic activity while nearby areas are considered “stable”. North Kitsap is healthy, but not yet seeing the surge we are experiencing. The economic news is generally good, our regional economy continues to grow and the stock market is fairly stable. These are all positive indicators for our marketplace. The next few months will be interesting and- we hope-exciting!
Customer service is something that I put a lot of emphasis into. Therefore when I see it done really well, which is rare, I have to blog about it. My 16 year old son got his braces put on the week of his 16th birthday…I know it’s what every 16 year old boy dreams of, metal preferably to drive and not in his mouth!
So needless to say, he went forth with orthodontia care and we chose to work with Dr. Mark Heinemann (he has an office on the Island and in Silverdale).
It should be noted that anytime you put metal in your mouth and force teeth to move here and there, you’re going to experience discomfort and pain. You can’t eat, sleep and you pretty much live on milkshakes and soft foods the first week or so.
Around the 4th week, my son was in extreme pain. When I checked in his mouth, it looked like the gums were growing over the braces…OUCH! Of course it was Saturday evening and the doctors office was closed. Why does it seem like kids never get sick or need doctors care during regular business hours!
I decided to call the office in hopes of leaving a message requesting an appointment first thing Monday morning. To my surprise, the answering machine stated “If this is an orthodontic emergency, please call Dr. Heinemann’s cell phone”, and then gave the number. I really wasn’t sure if this was considered an “emergency” but decided to call anyway, in hopes of getting professional words of wisdom from the doctor to relieve my sons pain.
To my even bigger surprise, Dr. Heinemann not only answered his phone, but insisted he meet us at his office in an hour. I think it’s worth reminding you, this was a Saturday evening at 8 pm!
Within minutes after tweaking metal here and there in my son’s mouth, Dr. Heinemann had relieved his discomfort! It was his bedside manner and friendly “can do” attitude that made me have to spread the word of this doctors practice. He clearly LOVES what he does and is good at it! Think about it, he gets to run his own business, make peoples smiles prettier every day and make his own schedule. The fact that he chose to meet us, after hours on his weekend time off, was nothing short of outstanding health care that I’ve NEVER experienced before!
So, if you have children, or you yourself, would like a nicer smile with OUTSTANDING care, it is my opinion that Dr. Heinemann is your orthodontist! Tell him I sent you and ask him how he came to be an orthodontist…it’s a great and entertaining story!
Oodles of home grown green fun was had at this years Great Zucchini Race!
The creativity was astounding. Competitors of all ages joined in on the fun. There was a sparkly Tinkerbell mobile, Shrek driving monster mobile, horse drawn carriage, feathered friend, red bell pepper helmeted zucchini worm and much more. The only thing better than these green creations, were the proud smiles by their creators. An annual event not to be missed by Bainbridge Islanders!
Great Zucchini Race!