Recent trends in the real estate market in Sequim and the surrounding area give hints toward a recovering industry.

“Homes are selling like mad,” Elray Konkel, City of Sequim administrative services director, said to Sequim city councilors on Oct. 13. “Two or three new residences are coming in everyday. The market is very active.”

More sales equals less inventory

Echoing Konkel, Michael McAleer, managing broker with RE/MAX, has kept ongoing quarterly reports of the area’s (roughly the Sequim School District boundaries) real estate status since 2004 and concludes that 64 homes sold in September, which equates to the most homes ever sold for September, McAleer said.

Additionally, not only is the volume of sales gaining momentum, but of the 186 homes sold within the third quarter (July-September) buyers are paying on average 96 percent of the asking price.

“The trend is a good thing from the perspective of the homeowner,” McAleer said.

With an increasing number of homes being sold, supply and demand begin to come into play — driving up the average price. According to McAleer’s report, the average price increased throughout the third quarter reaching $273,000.

The average price of homes will keep pace with the increase in sales because the inventory (homes on the market) is lowering and therefore making those on the market more valuable, McAleer explained.

“The Sequim real estate market is recovering, but not booming,” Heidi Hansen, managing broker with Windermere Sequim East and president of the Sequim Association of Realtors, said.

Hansen is somewhat hesitant to begin celebrating the return of the local real estate market just yet because the recovery is slow. Within the Sequim School District, year to date sales are fairly even with last year’s at 515, however the average days on the market and inventory is declining, Hansen said.

“I’ve watched it (the market) kind of position itself over the last couple years,” Hansen said.

Given the decrease in interest rates and reduced inventory, most of the elements that would deter people from entering the market are fading, Hansen said. Yet, there is still enough inventory with 325 homes to sustain itself for about five months.

During the peak of the real estate market around 2005, inventory was scarce, whereas during the low in 2010 years of inventory were compiled, Hansen said. Slowly, but surely the real estate agents have been chipping away at the built-up inventory.

In 2005, the local real estate market kept about 200 real estate agents busy, but by 2010 the number of agents dropped by 55 percent. Since, there has been slight growth with about 120 agents.

On the upswing

The slow, yet positive trend of the real estate market is impacting homeowners, buyers and agents, but also the City of Sequim’s capital project budget.

With each sale within Sequim’s city limits, 0.5 percent of the sale price is collected for capital projects. Once collected, the Real Estate Excise Tax (REET) is split into two funds, REET1 and REET2, with varying spending restrictions. For example, some capital projects aided by REET1 include public works projects for planning, acquisition, construction, reconstruction, repair, replacement, rehabilitation or improvement of streets, roads and sidewalks, domestic water systems, parks, law enforcement facilities and libraries.

Reflecting the real estate market, the REET funds are 44 percent above the 2014 budgeted amount at $203,276.

“We’re ahead, which means we conservatively budgeted with very unpredictable revenue sources,” Sue Hagener, City of Sequim accounting manager, said. “Now we have more money for capital projects.”

Before mid-2013, the REET funds weren’t too active, Hagener said. In 2011, REET funds spiked primarily because three large property sales and another spike in 2013 following a transfer of controlling interest in Assisted Living Concepts, Inc.

Within the past six to eight months, Shelli Robb-Kahler, executive director of the Sequim-Dungeness Valley Chamber of Commerce, said there’s been an increase in requests for visitor and relocation packets through the chamber’s website and the city’s. The packets are being sent across the country and it is the most she’s seen in her tenure.

Robb-Kahler attributes the increased interest with the recent national news reports indicating Sequim is the best place to retire and be happy, as well as overall economy improvement and incredible summer weather.

“It’s a combination of all those things,” Robb-Kahler said.

McAleer points toward larger trends at play, noting there has been a “pent-up demand” for some people to move here, but they were unable to relocate because they couldn’t sell their existing home elsewhere.

The ongoing recovery of the real estate markets in bigger cities like Seattle and within populated areas of California is a reflection of the upswing being experienced locally, McAleer said.

“We tend to lag about two years behind the Seattle and California market,” McAleer said.

Land sales

Although the developed properties are experiencing high sale volumes, the same cannot be said for bare land.

“There were (July-September) 39 land sales, which is not great,” McAleer said.

Until the market drives up the price of developed properties with homes, bare land cannot compete given the expense associated with building a home and the permitting costs. According to National Association of Home Builders, a consumer is willing to pay 10 percent more to build.

The median price for land was at $75,000, according to McAleer’s third quarter report.

“I see more people buying a lot or a couple acres,” Hansen said. “Bare land has not been selling.”

One element possibly impacting the local real estate market since January 2013 is the Dungeness water management rule. The rule restricts water use within the Dungeness watershed and more so in the southern portion that includes lands like the upper reaches of Palo Alto Road, Taylor Cutoff Road and Blue Mountain Road, Texas Valley and even parts of Happy Valley.

“I have a lot of people that have a problem with the water rule,” Hansen said. “In many cases we help redirect people to properties that have been grandfathered in.”

Hansen “believes we’ll continue on the same trend” until homes within a certain price range are no longer available.

“It is great to be a retirement destination, but they depend on service-based industry and if there aren’t affordable houses for those working, we can get out of whack,” Hansen said.

Of the overall market “distressed sales” that include foreclosures, bank-owned properties and short sales, decreased to 9 percent, according to McAleer’s third quarter report. Compared to the beginning of 2011 when 41 percent of the overall market was accounted for by distressed sales, the significant decrease is another good sign, McAleer said.

Hansen agrees, noting that bank-owned properties and short sales represent a small part of the market at this point, but it is a very active part.