2017 The Year in Review
CELEBRATING THE NEW YEAR
As we welcome a new year, let’s explore some dynamics that played out while we marched through the 2017 calendar. Our market saw a decline in the total number of residential sales for each year between 2013 and the start of 2017. Despite healthy buyer demand, the lack of inventory caused buyers to become wary of over-paying. Buyers weren’t confident that they wouldn’t get caught in another correction. As the new year progressed, we saw a shift in buyer confidence and people were willing to spend more to get what they wanted. The result was an 18% increase in the number of homes sold last year. There were 435 residential home sales in 2017; the first time we’ve seen more than 430 sold on the island in any year since 2005’s record 442 sales. (The low was 187 in 2008.)
Even with an uptick in sales, we are not experiencing the same craziness as our Seattle neighbors. Our average cumulative days on market was 52, more than double Seattle Metro’s 20-day average. Our average price increased by a healthy, but not record-breaking, 10.7%, compared to Seattle’s 17%. (The record was set at 26.74% in 1990, followed by 21.5% in 2005.) There were many homes that experienced substantial price reductions and others that failed to sell at the sellers’ desired numbers. But when homes were properly priced and presented, buyers were willing to act – even if it meant spending more than they originally anticipated. This willingness can only come from a place of confidence of good value and a sound investment. We were assisted by strong buyers from Seattle and California, a rising stock market, smooth financing and appraising with rates that have remained “comfortable,” even with a rising prime rate.
A prime beneficiary of this strong market were luxury homes. There was a 44.6% increase in sales of homes over a million dollars and sales doubled for homes over $1.5M (133 total with 52 over $1.5M). Home sales increased 49% in the $800-$1M range. On the flip side, affordable homes were scarce, and sales of homes priced less than $600K decreased 34.7% from last year. This overall shift in the market pushed our median price up more than the average (>13%) and our condominium market was affected by these market forces as well. This certainly illustrates our trend away from affordability; which Bainbridge struggled with in the early- to mid-2000s until the 2007-2011 correction.
The condominium market benefited from these improved conditions in a couple of ways. The number of sales grew more than 21% (from 104 in 2016 to 126 in 2017) and the median price jumped 31% (from $400,750 to $525,000). Though sharply higher, the median price of $525K was substantially below the 2016 single home median of $838,000. Consequently, we saw more individuals and families coming to the condominium market. Condo sales were also helped by the strong upper-end residential market.
Many residents have been waiting on the sidelines for their homes to get to a price point where they felt comfortable selling and downsizing to smaller, more manageable and easy care, i.e. condominiums. Complexes such as The Grow Community, Residences at Pleasant Beach and the Roost all experienced strong sales last year as they completed with condominiums for market share.
Many condominium buyers stress the desire to be closer to Winslow for the walkability, an interest in a complex that offers a sense of community, grandparents following their adult children to the great Northwest, and those who want the easy lifestyle and affordability of condominium living. Fortunately, we have had some good choices for our buyers this past year and experienced a total of 126 condominium sales in 2017. The only sector of our market that struggled last year was raw land. This category was hampered by a lack of choices, financing difficulties, hurdles with building permits, and escalating construction costs.
It is hard to find any economist predicting a substantial slowdown in our area’s economy or real estate in the near term; not to say that there aren’t clouds. The new federal tax law is not beneficial to a higher-end market like ours; financing interest and property tax deductions now have limitations. The prime interest rate will undoubtedly rise and even though mortgage rates have been incredibly low, rates will probably go up but stay below 4.5%. In the midst of all this activity, one thing remains constant; Bainbridge Island is desirable and a great place to live.
Values are high, and our inventory is at an all-time low. If you are considering selling your home this year, now is the time to get started so you are not competing with the typical spring rush.
2017 3rd Quarter In Review
Leaves Fall – Markets Rise
The Big Picture
To paint an accurate portrait of the Bainbridge Island real estate market during this autumn season, it’s important to put it in the context of the broader regional economy. Through that lens, things are looking very good. Estimates for September 2016 through September 2017 indicate an employment increase of 76,100 in Washington. According to the U.S. Bureau of Labor Statistics, the private sector added 61,400 jobs while the public sector gained an estimated 14,700 jobs over the year. Windermere Chief Economist Matthew Gardner backs that up in his Third Quarter Report, writing, “I maintain my belief that the Washington State economy will continue to outperform that of the U.S. Given such a strong expansion, we should also expect solid income growth across Western Washington.”
The Seattle job market continues to be a huge draw for people moving here from across the country and around the world. As the number of residents in the Puget Sound area rises, Bainbridge Island has been and continues to be a viable and attractive residential option. The desirable amenities are obvious: from the rural feel to the vibrant community to the relative ease of a 35-minute commute by ferry versus an hour and a half by vehicle in the Seattle Metro area – just to name a few.
Another factor that affects our market is Buyer fatigue. We’re seeing an increase in Bainbridge Island buyers who are fed up after multiple failed attempts to purchase in Seattle, where real estate market is extremely competitive, and choosing to look in our direction for alternatives. This very real and frequent market dynamic contributes to the health of our local market.
A Positive Price Report
The third quarter of 2017 saw continued upward pressure on prices. As the chart on page two shows, we saw near double-digit price gains in terms of average and median sales prices over the same period last year. This resulted in a dramatic increase in sales activity in the high-end market with a 34% increase in sales between $1 to $1.5 million and a whopping 85% increase in sales over $1.5 million. Having to list sales that exceed $1.5 million in a separate category is solid evidence of our changing market.
Our price growth has been consistent over the last several years. The strong population and employment numbers mentioned above help to move the market, but low inventory continues to limit Buyers’ choices. A nominal but consistent decrease from the third quarter of 2016 inventory of 98 homes on the market to the 2017 third quarter inventory of 92, suggests a continued upward price movement is inevitable.
Keeping Things in Check
In a transitioning market, we need to look at data from every angle. Given the positive signs summarized here, Sellers should not assume that they can sell their homes in a matter of days, without regard to condition and elevated prices. This is clearly a Sellers’ market, as 2.4 months of limited inventory would suggest but realistic expectations are critical. While there are multiple-offer scenarios, those have become less prevalent over the course of the year. Instead, we have experienced more price reductions as aggressively high pricing will not draw Buyers or even, perhaps, pass appraisals. It’s important to remember that every house, every neighborhood and every transaction has its own distinct characteristics. A Realtor is essential for navigating the latest market conditions and getting the highest and best price for your home.
Traditionally, real estate activity tends to slow down in the fourth quarter, but this year has been quite different. In October, our office has nearly doubled the number of sales compared to this time last year. Open house activity has been robust, indicating an energized pool of Buyers just waiting for that perfect home to come along. If these trends continue, we could be in for a very exciting close to an already strong year. Here’s to a healthy and hearty season in all corners of our wonderful Island community.