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“Sold” signs aren’t unusual at all these days. If homes are priced right they’re selling almost immediately — many with multiple offers over the asking price.
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From all indications, business will continue to be strong for local real estate brokers, with 2004 shaping up to be at least as good as last year — which was a banner year for most agents and brokers. The shortage of building lots in Kitsap County has impacted the sale of new homes, with not many being built. But the resale market is strong, commanding top dollar, and multiple offers above the asking price not at all uncommon in any part of the county.
A severe building lot shortage has been created by the supply and demand factors dictated by the Growth Management Act’s restrictions. This has been coupled with a housing affordability crisis brought about by the lack of tort reform in our state.
Buildable lots for the most part are only allowed inside the Urban Growth Areas (UGAs). The problem is most single-family lots inside the UGAs — including infill lots — have already been built on. The process for expanding the UGAs has to be done as part the county Comprehensive Plan update, which according to state law, only has to be updated every five years. Kitsap County has updated its plan annually, but UGA expansion hasn’t been a part of it. Making matters worse, is the fact the last Comp Plan update is currently under appeal to the Growth Hearings Board.
The GMA encourages high density residential inside the UGAs, which basically means apartments and condos. But not many are being built because tort reform has been single-handedly tied up for the past two legislative sessions by Rep. Pat Lantz (D-Gig Harbor). This has turned multi-family construction into a cash cow for attorneys who are allowed to sue builders for alleged construction “defects” for up to six years after a project is finished. Because of that, liability insurance rates for builders have severely curtailed the number financially capable of constructing multi-family housing.
These two factors have exacerbated the demand situation created by historically low interest rates. Where lower rates mean lower payments in most parts of the country, other places aren’t dealing with the one-two punch of GMA restrictions and tort problems, which have curtailed affordability statewide — especially for young families, the traditional first-time buyers.
According to figures from the Northwest Multiple Listing Service (NWMLS) the average listing price of a home in Kitsap County at the end of April (the last month for which figures are available) was $337,601, compared to $312,322 the same time a year ago, with the median price pegged at $253,500 compared to $240,800 last year. But the true indicator of supply vs. demand, the number of residential listings on the market, has decreased from 1,632 a year ago to only 1,143 at the end of April.
A random sampling of real estate professionals across the county found most saying the same thing: Business is great, but affordability is a major concern and multiple offers are the norm.
Jacqui Curtiss, broker at the John L. Scott office in Port Orchard, commented, “Business is great. When you hear people talk about the market, you hear them say listings are down, but we have a pretty good supply right now. But In the lower prices ranges — $125,000 to — $150,000 — they’re pretty scarce.”
When asked what was selling, she answered, “Over $200,000 there’s quite a bit of inventory, so even though those are selling well, there’s still some pretty good choices available.”
Curtiss added a caveat repeated by almost every broker and agent interviewed, “Houses that are in good shape, and are well priced, go quickly.”
When asked about new construction, she simply said, “There is a shortage of lots, which has impacted the builders negatively.” But she noted that it is fueling the resale market.
Curtiss added that there’s a new wrinkle she hasn’t experienced before — buyers from Seattle who are doing research on the Internet and having their agents send offers over on homes — sight unseen. Naturally, the offers are contingent upon inspection, but this is occurring because the price differential in what’s considered “affordable” between here and there is so great.
Linda Rowe, a partner at RE/Max Town and Country in Port Orchard echoed Curtiss. “Business has been great. Everything is selling — if it’s priced right.” She noted that business for her firm is better than it was at this time last year, and last year was an excellent one for her company.
“Anything considered affordable is selling quickly and we’re still getting multiple offers on homes in most price ranges,” Rowe stated, noting that waterfront is moving extremely well.
Fred Depee is an agent at the Port Orchard office of John L. Scott that works with land for new construction. About half of his clientele is smaller homebuilders. The severe shortage of building lots created as a consequence of GMA restrictions has impacted some of them very negatively.
“The lot situation is without a doubt driving the small builders out of business,” he lamented. “Small builders can’t find lots, and the ones that are available are priced so high that they can’t build affordably priced homes. A lot of them have moved into remodel work because they’re being priced right out of the market by bigger builders with deeper pockets.”
Depee added that when new subdivisions do become available, the larger builders are able to buy 10 or more lots at a time, which depending on location, in today’s market can represent an investment shadowing a million dollars. “Most small builders just can’t afford to do that.”
He also observed that many of the high-dollar lots — waterfront and view, or that rarity, buildable rural acreage — that come available are being purchased by people who want to build a personal custom home either now or in the future.
Jessica Kennedy, broker and partner at the Bremerton office of Windermere Real Estate, commented, “Business is very brisk. We have a lot more buyers than we have inventory and we multiple offers on practically every property. It’s a very short, fast market right now.”
Kennedy also observed that many buyers are fairly well prepared and knowledgeable, doing a lot of their research on the Internet before making an offer. “What they don’t understand is how fast the market is right now and how they can’t hesitate to make an offer. Also, that the offer has to be absolutely clean — meaning no credit problems and minimal contingencies on the offer”
She added that in many cases, if the buyer is pre-approved and they make a non-contingent offer, it could be as little as 30 days to closing.
Jerry Reid, who owns the largest independent real estate firm in the county, with offices in Bremerton, Silverdale and Port Orchard, as well as one out in Belfair in North Mason County, commented, “Business for the last year has been red hot in both Kitsap and Mason Counties.” Like many other brokers, he attributed it to the historically low interest rates for the past several years. He also noted that the demand has escalated prices well beyond what most people would have imagined just a couple of years ago.
“Not too long ago, properties in Bremerton were selling in the $50,000 to $60,000 range,” Reid said. “Today, it’s extremely hard to find anything under $100,000.”
Reid said that people are opting for longer commutes as a trade-off for cheaper housing. “We’re seeing people going farther and deeper into Mason County. Properties I originally developed out there in the late 60’s and early 70s as recreational property that sold in the 20s and 30s are now selling as permanent homes for a lot more than that.”
It’s the same story in Silverdale and Central Kitsap.
“It’s a very interesting market,” said Phil and Mary Broms of RE/Max Platinum Services, which has offices in Silverdale and Poulsbo. “It’s probably the same as everywhere else. A lot of the communities that are 10 or 12 years old or newer have seen price increases of 15 percent or more in just the last year. A house in a quality subdivision like Point of View for example, which sold for around $250,000 a year ago is selling for up to $300,000 today,” said Phil.
“The Ridgetop is hot. Houses that are priced right are on the market less than a week,” added Mary. “Ridgetop is definitely a sellers market.”
Ron Liechty or the Windermere office in Silverdale was a little more analytical in his comments. “We continue to see an aggressive sellers market. It’s not as hot as it was two or three months ago because inventory remains low, but we’re starting to see a slight improvement, which is consistent with days on the market, which is going up slightly as well. Those homes in the $160,000 to $190,000 range are selling as quickly as they come on the market.”
Dave Patmon of the Poulsbo office of John L. Scott agreed with most other Realtors interviewed. “The interest rates having turned slightly up has moved people off the fence, and we have an extremely aggressive market because of that,” he commented. Patmon also pointed out that the lack of inventory has restricted buyer’s choices and that has made it a seller’s market. “Inventory isn’t increasing, but is down and quite limited. And while the meat and potato’s market is the workforce, the most active segment is between $200,000 and $300,000. If there’s anything on the market lower than that, there isn’t much, unless you go to townhouses or condominiums.”
“It’s on fire!” exclaimed Brenda Prowse, owner of Brenda Prowse Properties in Poulsbo. Everything is selling if it’s priced right. There are buyers out there worried about interest rates rising and they want to buy — now. If your property is priced right and marketed correctly, it’s sold.”
“It’s been very competitive with low inventory — yet probably the most number of over a million dollar sales ever,” exclaimed Susan Felten of RE/Max Unlimited on Bainbridge Island. “We just can’t seem to get over about 130 active listings here on the island. When things come on the market, they go right away. If they’re reasonably priced or a great location they sell immediately.”
Georg Syvertsen of Deschamps Realty on Bainbridge Island commented, “The market is doing very well, but we’ve seen more of the typical, seasonal adjustments than in some previous years. But comparing year-to-date sales from 2002 and 2003 until now, it doesn’t take a rocket scientist to see that because of the news media hype about interest rates, people are getting off the fence and not waiting any longer to buy.”
Like Felten, Syvertsen also noted that a lot of high-end homes on Bainbridge have sold this year — and most with multiple offers. “A lot of the buyers are coming from out of the area, Seattle and Bellevue, because of the lack of inventory over there,” he observed.
He also commented that some sellers are caught up in the market frenzy and believe their homes are worth a lot more than what the market will bear, but insist on pricing them that way. But like every other agent interviewed, he said, if the home is priced right, it will sell quickly. “The only reason a home isn’t selling in this market is that it’s overpriced,” said Syvertsen. “I’m counseling my sellers that are caught up in that to either reduce the price in the first few weeks, or wait a few months until the market catches up to it. It all depends on how motivated they are to actually sell.”
Penny McLaughlin of RE/Max Platinum Services in Poulsbo has traditionally been one of the top five producers in Kitsap County for the past decade. She offered an interesting aside to the pricing issue mentioned by others when she commented, “The key is pricing the property properly to draw multiple offers over the asking price, which of course, nets the seller more money.”
McLaughlin noted that upper end properties on Bainbridge Island — especially those new to the market — are selling quickly while drawing multiple offers. She added that “affordable” properties, which on Bainbridge means anything under $300,000 — and $200,000 and under in North Kitsap and Poulsbo — are also selling rapidly. “The newer and remodeled upper end properties are selling — especially on Bainbridge.” However, like Syvertsen, she noted, “But if they’re not priced properly, they sit on the market and get stale, until they’re chasing the market,” she observed.
But one thing is very clear, if inventory continues to decline, interest rates keep edging up spurring buyers into action, and there is no improvement in lot creation or the tort reform situation, there won’t be much inventory left to chase the market.
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