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.
The Heart of the Issue
Writing about the last quarter, and indeed the year to date, presents an interesting conundrum.
So far, 2013 has been a strong year. The third quarter was great, outperforming expectations.
But even before our illustrious government began its farcical play, there were concerning elements
that cast clouds on our sunny outlook.
Single home sales have improved in almost all categories since mid-year. Overall sales are up
a healthy 15% for the year while September sales were up a whopping 59% from last year. In
past reports, we have commented on how the upper half of our market has lagged this year
from last, thereby dragging average and median prices down. This year, the true heart of our
marketplace, from $400K to $800K, saw a 37% increase from last year. We had 15 sales over
$1M in the third quarter, surpassing last year’s 11 sales. (However, two of last year’s third
quarter 11 were over $2M while we have had none that have sold above that mark so far this
year.) The result is that our average price decline for the year has gone from -13% at mid-year
to -6% for the three quarters, with the median now at par. This is solid improvement.
Strong Condo, Land and Development Segments
The condominium and land markets have experienced similar successes. Through the first three quarters, condominium sales
have risen 30% (from 56 to 73) with improvement in both average prices (from $306K to $324K, or a rise of 6%) and median
prices (from $310K to $318K, or a rise of 1.3%). Land, which is always a good indicator of confidence, rose from 24 sales in
2012 to 38 this year (a spike of 58%!), with an average price increase of 11% (from $179K to $199K). There are a number of
multiple home projects underway, with more on the boards. (We will be doing
a special “spotlight on new construction” soon.)
Predictions on Hold
Even with all this success, we are reluctant to predict a smashing fourth
quarter. The first obvious potential obstacle is the government shutdown.
The shutdown has had two primary effects: 1) it has hampered buyers’
ability to borrow, and 2) it has cast a pall of uncertainty on the market
(including questions about the debt ceiling). Our economy appears to be
chugging right along, but people are concerned about the amount of damage
our politicians can inflict, particularly when it comes to residential real
estate investments. There are also some issues in the lending marketplace
with certain services (including the IRS) temporarily closed, which can
stretch out timelines for loan approvals and funding. All the while, we have
little information about ultimate outcomes, which can make everybody feel
more than a little nervous.
The Problem with Inventory
There are also other bumps along the local real estate road these days. Even when the government gets its act together and
buyers feel more confident about proceeding forward, the inventory is at extremely low levels. You cannot find active inventory
numbers this low even going back to 2005. We believe there are plenty of buyers out there. Agents have clients looking and
open houses are well attended. However, it is not a “heated” market; buyers want to find an emotional attachment and/or real
value before getting serious enough to make an offer. Additionally, we are entering a period where many sellers feel they need
to wait until spring to list, which creates an additional seasonal inventory constriction. With fewer houses to choose from, fewer
sales are made and this could put a definite damper on fourth quarter sales.
Ready and Waiting
All of these pieces make for an interesting puzzle. We know that there are buyers waiting in the wings, so if the uncertainty
recedes as the inventory rises, it could make for a very active fourth quarter. Kenneth Harney, a nationally known real estate
columnist, recently wrote about a study that drew a direct correlation between good schools and higher property values. Although
it was not an exhaustive study, we in the local industry know many people include Bainbridge Island in their initial
search because of our schools’ high ratings. Granted, the island’s charm and our interesting variety of real estate choices contribute
to people’s decisions to move here. But our great schools give people the impetus to pay slightly more when push
comes to shove. (As citizens of this island, we need to help our schools maintain this high level of excellence. Remember that
when you open your red envelope.)