Midway through a good year!
A Bustling Springtime Even though the first quarter of 2017 didn’t start that slowly, it sure felt like it did. But the second quarter was a different story. We were flat-out busy between April and June. There were 141 home sales on Bainbridge during Q2, which was a 31.8% increase over last year and a 306.5% increase over 2009 (for those of you who remember those days). The only second quarter to get even close in the past decade was 2013, when 125 homes sold.
The Mechanics of Price Still, a curious piece of data accompanies all those sales: the median price of homes sold in the first half of 2017 increased only 3.6% over the comparable period last year. That is the slowest growth of prices since 2012-2013 (when it actually went down). Here’s why this is significant: even though there is healthy demand, buyers are showing restraint and patience. The basics of presentation, pricing and negotiating (which good agents bring to the table) still prevail. You cannot just take a house in any condition, throw a price at it and expect success. This is one of the factors that differentiate Bainbridge from the Seattle market. The flip side is that a major source of new buyers on Bainbridge are frustrated Seattle buyers who are tired of dealing with the city’s growth and market conditions. Our office was involved in 96 Bainbridge transactions during the first six months of this year, 30 of which (or 31.3%) involved Seattle and Eastside buyers. When we expand the circle, we see that out-of-state and Seattle buyers accounted for 51% of our transaction in the first six months.
Goings-on with Condominiums and Land Our condominium marketplace has had a booming first half of the year. Sales climbed from 38 in 2016 to 50 in 2017 (almost a 32% increase!) and the median price rose from $404,500 to $499,250 (up 23.4%), finally surpassing 2007’s previous record of $468,000. It took a decade for these numbers to return, and we’re happy to welcome them back.
Land is now the only remaining soft spot in our market. Sales were down 39% from last year but median prices rose 14%. We attribute this mostly to no new large parcel sales and the possibility that people are intimidated by the new construction process. The planning and designing phases of any new project are exciting, but then come permitting, the search for contractors and all the costs. With quite a bit of new construction coming on line, people seem to be waiting to see what someone else has built.
A Construction Zone There is quite a bit of new construction on Bainbridge, which means the development topic is getting a lot of attention among locals. Bainbridge Island is such a great place to live that the pressure to grow comes naturally. History tells us that restricting growth will push up prices and eventually affect the market’s diversity. However, growth is a concern to existing residents who fear it will spoil what makes the community desirable in the first place. So the community stance has been to try to limit development to specific pockets of the island as a way of preserving rural character in general. When we map the major new construction projects, we see that this goal has largely been met:
Winslow: Grow Village, Wyatt Way (DA Horton), Weaver, Bainbridge Landing, Finch, Freestone Landmark (Wing Point), Freestone Ferryview (Wing Point)
Lynwood Center: The Roost, Pleasant Beach
Rolling Bay: Sunrise Square
These projects are all within designated growth areas. Indeed, the only multi-home development out of the growth centers is the 10-home project going in at Torvanger/Sunrise Drive, and that’s being built on a 12-acre parcel.
Favorable Conditions How long will this pressurized market last? Anyone who experienced the 2007 market, which was also quite active just before it changed dramatically, is reluctant to make long-term predictions. However, there are some key differences between 2017 and 2007. Today, the lending and banking environments are far healthier. Also, job growth is the primary fuel of real estate growth. And our local economy is far stronger now than then. Windermere Chief Economist Matthew Gardner had this to say about regional job growth in his Q1 2017 report:
Washington State continues to add jobs at a steady rate. (We) continue to see unemployment fall and I anticipate that we will see this rate drop further as we move through the year. In all, the economy continues to perform at or above average levels and 2017 will be another growth year.
Ever the Rock Yes we have growth and new construction, but there is diversity in the construction (family homes, homes ideal for downsizers, and homes close to services). When you drive around the island, you find most of it untouched by new developments. We also have the best parks, hikes, beaches, bays and communities in Puget Sound. Our region’s star is still rising as a great place to live and work and we are one of the premier neighborhoods in it. Growth pressure will continue; it’s up to all of us to work together to address it in ways that honor the past, present and future of this great place.
What a Long, Strange Trip it's Been:
It's About Time-
Even during the darkest hours of 2008, we knew one thing for sure: Bainbridge Island real estate would recover because our market is supported by fundamental strengths, including the fact that it’s a great place to live. Looking back at the first three quarters of this year, we can happily report that we were right. The market is strengthening. The
goal now is to analyze our recovery, discuss sustainability and plan our way forward.
A Solid Three Quarters-
First, let’s revel in the good news. In the first nine months of this year, 293 island homes sold. This is 36 more than sold all last year and more than twice the number of homes sold in the first three quarters of 2008. You have to go back to 2005 to find a more active
nine months, and all the way back to 2003 to find the record-setting 375 homes sold. So far this year, there have been 40 sales over $1 million – a number not seen since 2007 (when 59 homes broke the record for >$1M in the first nine months).
The Condo-Land Report-
Both condominiums (56) and land (24) had their best numbers since 2007. Land sales are up 33% from last year (and up over
140% from only 10 sales in 2008) but are still way off the pace set in 2004 (when there were 80 sales through September). Although we are pleased with the condominium improvement, there is lots of room for growth if we want to approach the record set in 2004 when there were 137 sales.
The Price is Right, Except When it's Not!
What about prices? Here, things get a bit muddier. We are showing strong gains in both average and median price
growth, but a lot of that can be explained by renewed strength in market segment versus individual homes experiencing
dramatic price gains. One of the important contributing factors to our price drop was the fact that the market over
$600,000 was very weak for a number of years. This year, the number of sales of $600K + homes was up 104% from last
year and up 46% from the average of 2008, 2009 and 2010. This re-shifting to a more balanced marketplace will have
the opposite effect that the unbalanced market had for the periods 2008 through 2011. Mathematically, it will bring the
average and median prices up. That being said, prices have definitely stabilized and are showing incremental upward
movement in certain market sectors. Still, we rarely see contracts being put together at the listing price or above, even
in multiple offer situations.
What's Inventory Got To Do With It-
We still struggle with available inventory, and low inventory is a two-edged sword. Yes, it can help push prices up. However,
there is an even higher probability it will slow the market down, which is what we seem to be experiencing. We
have not seen sub-200 available homes at this time of year since the heyday of multiple offers in 2006 (when there were
181 listings on the market). Here’s the problem with low inventory: it usually means that there is a higher percentage of
homes on the market that buyers have already viewed – and for whatever reason rejected. While interest rates stay low,
buyers pull back until new inventory comes on the market. The challenge with our current market is there are many sellers
also waiting to put their homes on the market until they can list at higher prices. Like a convergence zone, both parties
are waiting for an event that may or may not take place in the near future. The result is a slowdown. Judging by the
market activity so far in October, that’s exactly what we’re experiencing right now.
Bainbridge Island Single Family Homes Sold July 1 through September 30
So what will happen? We predict that the market will work itself out. We just have to be patient. Prices will go up a bit more, which
will prompt sellers who are tired of waiting to make some moves. We know this from analyzing statistical data as well as working and communicating every day with buyers and sellers. As Windermere professionals and residents of this terrific community, we know that things are headed back in the right direction. Bainbridge Island continues to be a great place for investing in real estate and in a wonderful quality of life.