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!
The Same Old Tune Even as the birds of springtime sing their new songs of the season, we must hit repeat as we report – once again –on our local market’s low inventory. A lack of available homes continues to dictate what’s happening in Bainbridge Island real estate. On April 1st, there were only 47 homes and 5 condominiums available for sale on the island. Within the overall market, certain price points have been more pinched than others (which is a snapshot in time and will change as the year goes on). For example, if you were looking for a home in the $600K to $800K range, you had only 5 houses to choose from and zero condominiums.
How Inventory Affects Sales & Prices This extremely limited inventory helped drive home sales down more than 20% from last year. There are plenty of buyers out there; there are just not enough properties on the market to sell. The scarcity increased competition and bumped median prices up more than 9% (and the average, which is more a function of the price ranges where homes closed, was u p more than 18%!). The median cumulative days on the market (CDOM) dropped from 26 in 2015 to 20 in 2016. To put this in perspecti ve, the CDOM in 2012, which was a good year, was 146 days.
The Story on Condominiums & Land The condominium market is also suffering from lack of inventory. Last year at the beginning of April, there were 16 condominiums available compared to this year’s 5 (both of which lie in sharp contrast to 2012, when there were 45 available). Consequently, sales dropped from 19 to 16, but the median price rose 23% to $430K. Land, on the other hand, experienced a 30% increase in sales to 13 parcels this quarter with a 26.8% increase in the median price to $225K.
The View From Inside One might assume that a market like this, with rising prices and inventory competition, makes our jobs easier. The reality is that there are some basic principles, goals and strategies that any good real estate professional seeks to embrace, all of which must adapt to an ever-changing market. Regardless of the climate, we want our clients to achieve the best possible outcomes – both at closing and in the future. This is sometimes easier said than done, especially when competition is fierce and time is of the essence. Given the complexities of the Bainbridge market, where most homes and locations are unlike any others, things can get even more challenging. It is not like buying or selling in a large subdivision where a product like Zillow has some merit. Here, each house has strengths and weaknesses and the success of a sale can pivot on those subtle nuances.
If You’re a Buyer For buyers in this market, supply is tight and prices are rising. You
almost have to assume you will be competing with others when you find the house you
would like to make your home. Is the price fair? How high should you go? The specter of 2006 and 2007 should be in the back of your mind, as the concept of paying “whatever it takes” came back to bite many homebuyers. An agent brings knowledge of the current market, the choices it offers, what might be coming and how an individual house fits into the bigger picture – including the history of the neighborhood and often of the house itself. An agent will know whether a price is in line or whether the seller is beingaggressive. (And, when there are limited comparable properties, this expertise becomes extremely important.) No one wants to hear, “You paid how much for your house?!”
In multiple offer situations, there are strategies to employ. You need to line up your resources to be “the best you can be.” Multiple offers often require that decisions be made quickly, so being prepared makes you a stronger buyer and one less likely to be disappointed later. If you are not a cash buyer, there are things you can do to compete with those who are. Get comfortable with the stack of forms you’ll be asked to sign. Understand what it means to omit certain forms. What about inspections? Title reports? Learn how to spot red flags that make certain houses less expensive. Being a buyer in this market can be difficult, frustrating and even scary. A good agent can help you navigate the winding road to achieve the best results and avoid mistakes.
If You’re a Seller Sellers may think they have it easier, but the reality is that a seller’s quest is the same in an ascending market as in a descending one. The two primary goals for sellers are to get the home sold in the timeframe desired and to maximize net proceeds. Buyers will be more attracted to, and will ultimately pay more for, a house that is optimized to appeal to a buyer and priced in a manner that a buyer feels is reasonable in the current market. Here again, knowing the current market, as well as past and future markets and how a particular home fits into all of them, is essential in achieving the seller’s ultimate goals. But the work is just beginning when buyers first express inter-est. You have to know which of them will have the greatest possibility of actually achieving a closed transaction. (It is surprising how many deals fall apart in this market.) Negotiating inspections? Appraisals? Seller’s liability? What do all those forms mean and what are your responsibilities? There are many steps between pondering selling and achieving your goals, and the reality is that sellers don’t always get everything they hope to get out of a sale – even in a sellers’ market. But an experienced agent will help you prepare, present and respond so you can get the most out of any market.
The Constant Real estate markets fluctuate all the time, sometimes favoring buyers and sometimes favoring sellers. This is simply the nature of the business. But in the midst of all those ups and downs, one thing remains consistent: the beauty and livability of Bainbridge Island. At Windermere Bainbridge, we celebrate our island community and all it has to offer.
A Market Regains It's Momentum
Inventory Continues to Drive the Island Market All in all, 2014 has to be viewed as a very good year for the Bainbridge real estate market. The primary challenge of the year was a lack of inventory, which meant that buyers had too few choices. As we begin 2015, the same low inventory levels that drove the market in 2014 are even more pronounced. So it’s not a stretch to imagine that we may be in for more of the same in the coming months.
The Availability‐Sales‐Pricing Triangle Fewer homes actually sold in 2014 than in 2013. We began the year with record low inventories– 70 homes available (on the market and not under contract to be sold) – and ended the year with even fewer available (a mere 56!). This actually dampened sales because buyers couldn’t find what they were seeking, so many opted to continue to stay where they were, rent or go elsewhere. Sellers were reluctant to put their homes up for sale because they were afraid they couldn’t find new homes should their houses sell. (Approximately 40% of the sales on our island are from people moving around on Bainbridge.) This created competition for desirable homes, which pushed prices upwards.
The Story Behind the Prices So what is going on with prices? We are showing an increase of more than 17% in both average and median prices. As with any statistics, it is beneficial to look at the numbers in some detail and in the context of the bigger picture. As we have discussed before, published price changes have as much, if not more, to do in the “short run” (three years or so) with the price ranges buyers are in rather than with the price changes of individual houses. In this regard, there were some profound changes between 2013 and 2014. In 2013, 46% of all sales were $500K or less, but in 2014 that number dropped to 34%. Conversely, in the $500K to $800K range, there were 164 homes sold in 2014 versus 154 in 2013. Above $800K, there were 101 homes sold in 2014 versus 69 in 2013. The demand for homes in the upper price ranges increased, stimulating sales of more expensive homes and boosting both average and median prices. This activity shift was welcome news to our middle and upper market. When looking at the market as a whole, the median price of a home on Bainbridge needs to increase another 13% before we will be at our 2007 peak, but we are getting closer every year to returning to that high mark.
One Address at a Time
But what about individual houses? How does this increased competition affect the marketing strategy for each home about to be listed? There are many factors that determine the best approach for each property, the primary one being the makeup of the buyer pool at any one time and how each home conforms to that group’s wants and needs. This is where a professional real estate agent who is active in the market comes in. There is always a desire to “push up prices,” and a knowledgeable agent can assess how quickly and how high to push. Houses sold about 21% faster in 2014 than 2013. Also, the median sales price percentage of original listing price increased from 97% in 2013 to 97.7% in 2014. Both indicate individual home price increases because they are selling more quickly and closer to list prices than they were before. If you are curious about your home, your professional real estate agent will be happy to give you an idea of where you are.
A Busy Condo Scene
The condominium market experienced improvements in almost all areas. The number of sales were up almost 9%, median prices up 8% and there were four sales over $1M. These were the first condominium sales over $1M since July of 2010! The bulk of the sales (67%) were $400K and below, but there were sales in all price ranges up through $1M. Again, inventory has been scarce, especially in some of the middle price ranges. There were times when there was no inventory between $600K and $800K. Even though the median price of $335,000 is well short of the peak price of $464,000 in 2007, the direction is positive.
An Active Land and Development Segment
As with homes and condominiums, there was not an abundance of parcels for sale. The number of sales decreased more than 17% from 2013 but that was a particularly active year. Excluding 2013, there were 30% more parcels sold in 2014 than the best year going back to 2007. On the development front, things are quite active. To name a few: Grow Avenue’s second phase is under construction; the Wyatt Way parcel down the street is in feasibility review for approximately 19 new parcels; and Lynwood Center has two projects in the development phase with Pleasant Beach Village Hillside and the “Roost” off Pt. White Drive and Baker Hill Rd. These last two developments alone will represent approximately 50 new homes and both are slated to be active in 2015.
Ring in the New Year
The coming year should prove to be an interesting one. Even though it is only January, the “buzz” is positive among buyers and sellers. The markets on both sides of us, Seattle and North Kitsap, are healthy. Seattle has quieted a bit from the craziness of the past couple years, but is still very robust while North Kitsap is experiencing one of the fastest starts ever. The region is looking good, the days are getting longer, no obvious storm clouds are in sight and we are off on the adventure of 2015!
Bainbridge Island Single Family Homes Sold 2014 (as of January 6, 2015)
Always a good time to be had at Bainbridge Islands annual Rotary Auction! Really its the social event of the season! A great way to catch up with friends and neighbors while getting great deals on everything from balls to garden gnomes.
A great place to update your recreational supplies! Every Islander should experience this phenomenon known as the "Auction" at least once. The people watching alone, is worth it! No lie, I've witnessed mothers directing small children with extensive play diagrams of "goods to get" that would impress any professional coach.
In the end A LOT of money is raised and the volunteer organization is impressive. These Rotarians are dedicated!
Waiting For Inventory To Blossom
The Heart of the Matter
Last year’s 1st Quarter in Review highlighted the increase in the number of homes sold during that quarter over the same period in the previous year. We probably could have made a similar claim this year because the demand was there, but the number of homes sold actually dropped this year compared to last. (We sold 69 homes in the first quarter of 2014 versus 80 in 2013 – a 14% drop). The reason? Low inventory. You have probably been hearing this (at least if you have been listening to us), so we thought we would take this opportunity to explore it in a bit more detail, as inventory numbers have been defining our market in recent quarters.
The Power of Buyers
Buyers were precious commodities in 2008, ‘09, ‘10 and even 2011. The growing pool of buyers was concentrated at both ends of the market during 2012, leaving the middle of the market languishing. This improved in 2013, creating a more balanced and, for lack of a better word, healthy market. As “normalcy” continued to assert itself after our recession, the pool of buyers continued to grow but the number of homes coming on the market did not grow along with it. Buyers today are smart, well informed and pretty disciplined in going after (which sometimes means waiting for) what they want. They are willing to rent or stay where they are until the type of home they want comes onto the market. When they see it they move – quickly. There have been instances where we get five new listings in a week and four of those five are sold two weeks later. The problem: we would normally see ten new listings in a typical week, so the competition among those motivated buyers is fiercer than usual.
If you look at the bottom line of the stats, you see the “available” inventory. These are our active listings; the buyers’ cu rrent choices. Keep in mind this is the total number available from $0 to $10,000,000 and includes “pre-sales” – homes not even built yet! With a mere 73 available listings over all price ranges, buyers do not have many choices. Even at the market peak of 2006, there were 93 homes available in the first quarter (27% more than today).
Chickens, Eggs and Pricing
Sellers continue to play a crucial role when it comes to inventory, because once they sell they enter the buyer pool and find themselves facing the same limited options as all other buyers. We hear clients ask over and over again, “If I sell, where will I go?” This so-called “chicken and egg” phenomenon is real. Good real estate agents have strategies to mitigate this problem (for example, this is a good market for contingent sales), but it is a stumbling block for many. Also, many people want to downsize and there simply aren’t many homes on the island that meet the requirements of people looking for homes they can live in through some of the transitions they will be facing in the foreseeable future. So pricing strategies are as important as ever. Prices are recovering rapidly from their recession-era lows, butare still far from the peaks we saw in 2006 and 2007 (and even into 2008). People who bought Bainbridge properties between 2005 and 2008 may very well still be upside down. If they aggressively financed their purchases, taking a paper loss may not even be an option as they may be “short” (with debt that exceeds current value). Other owners are simply waiting for the prices, and their equity, to go back up.
Time Will Help
As we’ve seen with most market eras, time will correct many of these challenges. Prices are going up at a healthy pace and will lure more sellers back to the market. More builders are re-entering the market and some already have mature buyers in mind. The risks, however, are still real. The interest rates may go up more (they are already 1-1.5% higher than their lowest levels) and rising prices may begin to shut certain buyers out. One of the undeniable benefits of our real estate correction was that Bainbridge became affordable to families once again; rising prices may gradually force them back out. It is a very interesting, complicated and exciting time, depending on where one is in the market.
Condominiums and Land
The condominium market is also very interesting right now. There were 21 sales in the first quarter, up 40% from last year’s 15. Of those 21, 17 were below $500,000 and four were over $1M with nothing in between. Land sales are up 30% from last year and developers are actively looking for potential sites.
Beyond the Island
What’s going on in our neighboring markets? As our market trends usually lag behind Seattle’s, North Kitsap traditionally lags behind us. We’re pleased to report that North Kitsap had a strong first quarter, with sales up 12.5%. Their average price was positive although me-dian price was down 3.5% (2014 first quarter median price was $262,750 versus the 2013 median price of $271,900). That being said, they are currently experiencing a predominately “seller’s market,” which will help bring price points up. So things are getting exciting and looking encouraging throughout the region.
It's a new year and I'm declaring that it will be an outrageous one! In the interest of seeing the positive expand I thought, why not go for a big, positive word like "Outrageous"! I can't wait to see that expand and what incredible things come from it. Personally, it's going to be exactly that… My grandmother turned 100, my son is turning 18 and going off to college and my daughter turned 13, my husband starts a new career with Amazon and we are so excited about it…lots of new chapters for sure!
What does your year look like? Wouldn't it be great to look at 2014 and see all of the new changes as positive, blessings a plenty and simply outrageous! I'm choosing to go into 2014 with a positive outlook, coming from a place of plenty, rather than not enough. It feels so great!
In fact one thing I've started is a "2014 Blessings Jar" or "Year in a Jar". It's very easy; simply get a a jar, any jar will do, slap a label on it that is colorful and inspiring, maybe add a ribbon and get to writing. Anytime you feel like it was a great moment, blessing, a gift, accomplishment, LOL moments, etc. write it on a slip of paper, fold it in half and stick it in the jar. Won't it be fun to read them all next New Years Eve! It's a great way to remember even the smallest of things that brighten your day! That's just one of many things you can do.
When I find myself feeling gloomy, usually around this time of year, I try and do things to bring a bit of light in and beat the blues.
-Go for a walk. Breathing in the fresh air and taking a moment to appreciate this beautiful Island really clears my head. Ask a friend to join you and it becomes a great way to catch up! Be active.
-Meet a friend for coffee/tea or a glass of wine. People need people and catching up with a friend is great therapy!
-Help or give to someone in need, this is my favorite. It takes you completely out of "your stuff" and you gain so much from the give or help. It doesn't need to be anything grandios, it can be a simple smile to a stranger, pay if forward in the Starbucks line and treat the person behind you without them knowing, help someone to their car with groceries, tell someone they look beautiful, drop a family member a hand written note just to say "I'm thinking of you". There are so many ways to brighten someone elses day and you'll find that it brightens yours as well!
-Volunteer in some capacity; at the senior center, library, church, school.
-Create something; try a new recipe, draw, paint, scrap book…just be creative!
-Put a bouquet of bright fresh flowers on your kichen table. I love having this in my home, especially on dreary rainy days. When my nest is cheery I'm happy!
For me, being around other positive people energizes me! So get out there, get involved in your community and then sit back and feel the light come pouring in!