Carole's Blog

Gig Harbor home sales continue nicely in “recovery mode”

In a nutshell—Gig Harbor home sales prices are up, inventory & sales volume are flat, upper tier is appreciating, & new construction is impacting buyers. Here’s my take for the September-November quarter for Gig Harbor & Fox Island, compared to a year ago…

Sales prices ↑ 6.2%

A 6.2% increase in Gig Harbor home sales brings the median sales price (the mid-way point in sales prices) to $378,000 for the quarter. The single month of November was $432,000 — 31% over October and 44% from last November. Prices for Gig Harbor home sales have been gradually strengthening all year after a low of $303,000 in January. This increase should allow more sellers to list – gaining some of the equity lost during the housing bust – and adding to the inventory the market badly needs.

Prices are down 20% from the 2006 third-quarter peak — at summer 2005 prices. Important to note, at the peak, new homes made up a substantial number of sales at $600-750,000, elevating over-all prices. The 6.2% uptick is realistic appreciation I believe, after a stagnant 3 ½ years, ending with second quarter 2014.

Resale non-distressed homes appreciating

These are sales of existing homes – not short sales or bank-owned. Sales prices have steadily been gaining since March, except for October – at $384,000 — down 14% from the 2006 third-quarter peak. The single month of November was $448,000 –the highest single month’s sales price since August 2006 ($475,000) when prices for Gig Harbor home sales turned the corner. However, too much cannot be read into this single month.  22% –11 of the sales were waterfront homes over the median sales price – never before seen in November.

Sales Volume ↑ 1.4%

Pendings ↑15.9%

Contracts written but not yet closed are up with renewed consumer confidence, threat of future higher interest rates and easing of loan requirements.

Inventory “flat”

Inventory is still low, which can lead to multiple offers and homes selling above their list prices. Routine in the Seattle area but it happens here too. Local brokers point to the quality of some homes plus unrealistic pricing in Gig Harbor. They say buyers often will not even look at a house they perceive to be over-market but wait for a price reduction before even viewing it.

New home inventory 26% of the market

With a quarter of all inventory new homes the market is decidedly different for buyers than a year ago when it made up only 16%. With fewer resale homes – and more new homes –some buyers are having to change search parameters – especially when it comes to lot size. The Growth Management Act regulates density where utilities can service it, forcing smaller lots. Half of new homes currently are on smaller square footage than the traditional 12,500 – 35% are on 5000 or less –and half of those on less than 2300. This can provide more buyer interest for resale homes on larger sites.

Short-sales ↓50% – REO’s flat

The distressed market continues to retreat — just 10% of Gig Harbor home sales. It was 13% last year.

Waterfront sales on par with 2013

Sales volume on the two peninsulas looks to nearly equal the 135 sales last year. But the real story here is increasing prices – we could see a median sales price uptick of $100,000 when all the dust settles—bringing it to the $600,000 range.  And even bigger news is the $1m plus tier for Gig Harbor home sales . 2014 will end with the same number of sales over $1m as in 2006 and 2007—21. Over 90% of the $1m sales came in the last half of the year – again low interest, good values, and increased consumer confidence. (See Resale Non-Distressed Sales above)

2015 will be a strong year for Gig Harbor home sales

I’m going out on a limb and predict 2015–even this winter–Gig Harbor home sales will be even more active than 2014. Here is why:

• The volume of pending sales throughout the Puget Sound—including Gig Harbor & Key Peninsula– is at a 9-year high. That is a turn-around from the slow earlier 4^th quarter and 1^st quarter.
• Interest rates are going to bump up, as much as 1% next year, according to Freddie Mac, encouraging buyers to make decisions sooner. A one point rate increase relates to 10% less purchasing power for the same payment. Credit is getting easier, with lower FICO scores being accepted and Fannie Mae and Freddie Mac are planning to offer 3% down loans.
• Owners are regaining some equity lost over the past 8 years and many have been waiting to market their home until prices improved. Many of those are looking for a lifestyle change. I estimate there is a “pent-up demand” by more than 200 waterfront owners alone who would like to make a move. I believe more of those owners will put their homes on the market next year, based on recent figures showing a volume increase of 25% between $750-1M and 50% over $1M in the past 3 months.
• Houses are sitting an average of only 75 days on the market, down from 108. Gig Harbor has just a 4.4 month supply of homes on the market, Pierce & Kitsap counties 3.3 months & King County less than 2 months. This puts pressure on Gig Harbor home sales.
• The median sales price for Gig Harbor home sales increased around 4% for the past 3 months — for Gig Harbor at $379,000 but is still swinging widely in Key Peninsula from $165,000 to $245,000. The higher tier has shown more improvement—$750,000-1M is up 5.8% and even $1M+ is up .2%.

Here’s my advice for today’s sellers. Technology has put the buyer in the driver’s seat, in determining what a house should sell for—so sellers cannot add “fluff” to the listing price, hoping to find a buyer who isn’t knowledgeable about the market. Buyers are knowledgeable.

And for buyers—keep in mind that one point in interest rate increase will buy you 10% less house, at the same time that prices are going up.