For the past 10 years “Sunny Sequim” has been a magnet for those seeking great weather, spectacular views and friendly people.
The 2000 U.S. Census counted 4,334 people living in Sequim. New U.S. Census figures show that by 2010 that figure had grown to 6,606 — an astonishing 52-percent increase in one decade.
The influx of newcomers fueled unprecedented good times in the real estate and construction industries, with home and land prices reaching historic highs.
But that’s just one side of the story. Despite Sequim’s remote location, and despite its atypical retiree-fueled economy, Sequim is just as vulnerable to national economic downturns as any other city in the U.S.
In the past four years Sequim has been hit hard by the recession. Home and land sales are down, home values have dropped and new construction is at a virtual standstill. Beginning this week the Sequim Gazette will provide a five-part series on our real estate industry woes — “The Lowdown on the Slowdown.”
In this issue we provide a statistical portrait of the residential real estate market. In the following weeks we’ll look at the difficulties of securing financing, builder and developer woes, and the personal impact of the downturn on virtually everyone in Sequim, from homeowners to developers to real estate agents. Finally, we’ll talk with the experts about the future of the real estate industry in Sequim.
While “everyone knows” the Sequim real estate industry is in the doldrums and house and land values have fallen, determining exactly where we stand requires facts — and that means numbers. We turned to several local real estate agents to provide us with a snapshot of where we are in regard to the sector that has the widest impact on Sequim citizens: residential real estate.
First the good news: Colleen McAleer, a seller’s agent for Re/Max Fifth Avenue, said the number of homes sold in Sequim was up in 2010, with 379 houses changing hands.
She added that between 2009 and 2010 the number of homes for sale on the Sequim market dropped by about 30 percent.
Now for the bad news: The bump in home purchases was likely only a temporary result of the Obama Administration’s tax credits for new home buyers, which ended April 30, 2010. During the second half of 2010, after the incentives expired, “the number of transactions plunged to the lows we saw in the early to mid-80s,” McAleer said.
The median purchase price of all homes sold in 2010 was down $18,000 from 2009, dropping from $248,000 to $230,000.
That $230,000 median sales price is also $60,000 less than the historic high of $290,000 set in 2007. In the first quarter of 2007 — perhaps the height of the boom — the median price was $317,000.
By contrast, the median asking price in 2010 was $300,000, providing a whopping $70,000 differential between what the owners were seeking and what they settled for.
McAleer also said that while the number of homes up for sale dropped from 690 in June 2009 to 400 in January 2011, that doesn’t mean 290 homes sold. McAleer says the owners are just as likely to “have given up.”
Many of those who listed their home for sale are retirees, McAleer said, who at one time perhaps decided to downsize and put their home on the market. When they couldn’t get the return on their investment they were seeking, they pulled the for-sale sign from the yard. “Now they’re thinking, ‘maybe I’ll hire a gardener instead,’” McAleer said.
Local broker Michael Piper of Piper Discount Realty adds a few facts that provide more detail, noting that in January/February 2011, the number of home sales slightly exceeded (43 to 40) those in January/February 2010 when the Obama tax credits were in place. He called that surprising but was quick to note that “the prices were certainly lower.” In fact, he said, if you grabbed the $8,000 Obama tax credit, “you’ve probably already lost that equity.”
Piper attributed some of the difficulties in the Sequim market to even greater difficulties far away, particularly in California. The recent crash in home values in the Golden State means fewer retirees are arriving with massive amounts of cash in hand to juice up the Sequim real estate market.
On the other hand, “I do believe we’ve hit our low,” Piper said. He also notes that “in the very long run,” Sequim remains “very desirable.”
In fact, she said, “This year is projected to be the highest ever for foreclosures.”
One Sequim real estate agent said the number of foreclosures is so great that lenders are finding it impossible to process quickly the paperwork required to bring them to market. Millet suggested some banks are simply “holding on to them to avoid flooding the market.”
Piper noted that the presence of foreclosures provides downward pressure on prices. He said buyers will choose a neighborhood, and a low price, and don’t particularly care if the house is for sale by the owner or is under foreclosure. In the current market, the ability to “buy it under market value” is key to a potential buyer, he said.
McAleer says of the 400 homes now available for sale in Sequim, 33 are owned by “the bank”: They are in foreclosure. Of these, she said, 16 had purchase contracts as of mid-February.
McAleer also said she is seeing an increase in “short sales,” an industry term for homeowners selling their home for less than they owe. That’s not surprising, she said, given that since 2006 home values in the Sequim area have dropped about 29 percent. (She is quick to note that many submarkets are showing different results.)
Citing the Standard & Poor’s/Case-Shiller price index, McAleer said that’s “right in line with the average drop nationwide.”
That, of course, strikes with particular cruelty those houses listed for $1 million or more. The statistics again bear that out. McAleer says 24 $1 million-plus houses have sold in Sequim since 1998. That includes five in 2005, seven in 2006, four in 2007 and three in 2008. In 2009 and 2010, none sold.
Dave Tall, managing broker for Strait Realty, specializes in lots and land. The only good news he sees in his market niche is the ongoing market correction: “Prices need to come down,” he said. In the last four years, he said, they’ve done exactly that.
Tall said by volume the land market currently is just 10 percent of its former size.
According to McAleer, it “will take years (for the land market) to recover to a point where prices begin to increase again.” She said waterfront raw land has held its price, but there were only two sales in the Sequim area in 2010.
She notes the median asking price for land is still $130,000, “yet the median selling price is $72,000.”
The peak sales year for land was 2003, when 459 properties sold with a median sales price of $49,000.
From 2004-2006 the number of land sales fell precipitously, from 441 in 2004 to 180 in 2006. In 2006 the sales price for land peaked, with a median price of $168,000. In 2010, a total of 76 parcels sold with a median sales price of $72,000.
McAleer describes 2005 and 2006 as a boomlet, with many speculating on water view properties. “The feeling was, ‘I gotta get mine,’” she said. In 2006, 61 water view parcels sold, with a median price of $224,950. In 2010, just 13 water view parcels sold, with a median price of $80,000.
She noted the decline in the value of water view properties has caused much of the overall decline in land prices. “The ones that went up were the water views; the ones that went down are the water views.”
Tall said a client of his recently went through a short sale on her five-acre parcel on Lost Mountain.
Because it has both water and mountain views, it was “a coveted piece,” he said.
Tall’s client purchased it in 2007 for $350,000. It sold in December 2010 for just $190,000. Because she’d made payments for three years, Tall’s client lost $150,000 on the deal, he said. The lender, Bank of America, took a $70,000 loss.
The statistics used in this article, however, do not include certain real estate transactions, including mobile homes in parks and manufactured homes on rented land. That means, for example, that transactions within Hendrickson Estates are excluded.
A self-described geek with an obvious enthusiasm for statistical analysis, McAleer is quick to point out that while all of these figures are useful, they can be easily misunderstood. When you have a small data sample — “and Sequim is a small market” — the figures are easily skewed. As an example, McAleer pointed out that in December 2009 the median sales price for land in Sequim was $290,000. “Sounds good,” she said, until you realize only three parcels sold that month and two were waterfront. “It gives completely false information based on accurate data.”
In order to avoid that impact to the greatest degree possible, McAleer most often works with median figures, saying those are normally reported by statisticians and economists.
A median price isn’t the average price, but rather the “middle figure.” If 11 properties sell, the median price is the one with five higher prices and five lower prices.