We actually considered re-posting the 2014 1st Quarter in Review for this issue, because that’s how similar this year’s start has been to last year’s. In truth, though, it would not have been completely accurate because we like to think of 2015 as “2014 Plus.” The year got off to a slow start: January’s home sales were off 40% from 2014 and February was off 15%. But the buyers started getting off the sidelines during February and when the dust settled at the end of March, we had 70 homes sold for the quarter, the second best in the past eight years. (Only 2013, when there were 80 sales, surpassed this year.) The amazing thing is that we achieved this number in spite of yet another quarter of record low inventory.
Bainbridge Island has a population of more than 23,000. The census counts 9,400 households on the island. As of April 8, there were 108 active listings. When we add condos to the equation, this means that 1.4% of the homes in our community are on the market across all price ranges. This gives us a sense of two things: how few homes are for sale and how high the hurdles are for buyers. The usual response to inventories this low is upward-creeping prices. You might be surprised, therefore, to see that the average and median prices show little change. But gross numbers such as average and median prices can be misleading. They are driven by how many houses are sold at what price, not by a particular house’s movement along the price ranges. We look at a couple of other indices to see how strong prices are: how close to original asking prices did homes sell and how quickly did they sell? Lots of people want to know why so few homes are currently for sale. The primary reason is nothing new: more than 40% of our sales continue to be islanders moving around on the island. With little to choose from and the rental market as tight as the sales market, people are afraid to list their homes for fear of not having a place to go. This is not an easily rectified condition and consequently we may be facing our current low inventory situation for some time.
In a strong market, owners and real estate agents normally want to push the price of any individual home up. The question, usually, is how much. Determining price is a combination of science, art and experience. You do not want to sell for too little, but there are always upper end thresholds as well. If you surpass those limits, the home will not sell. In some cases, price reductions to a final sale might even drop below the original possible price because homes that have been on the market awhile are viewed differently by buyers than homes new to the market. So if you look at how closely homes sell to their original listing price, you can get a feeling for how aggressively buyers are behaving (and consequently letting prices to be pushed up). Good agents are following these trends and have a more refined sense of the market, but these are difficult things to quantify. As an indicator of how well it works to push up prices, we looked at how many homes and condos sold for 97% or more of the original asking price and also at 100% or more. The first quarter numbers are impressive: 74% of the 89 homes and condominiums that sold in the first quarter were at or above 97% of the original asking price, and 42.7% were at 100% or more.
Another indicator is cumulative days on market (CDOM) which tells us how fast homes are selling. In the first quarter of 2013, which surpassed this quarter’s sales, the average CDOM was 144 days, or 4.7 months. As the stats show (below), the available inventory for that quarter was not that high (under 100 homes). Last year the available inventory dropped over 26% and the CDOM dropped to 79 days – a much “quicker” market. This year the inventory dropped another 21% and the CDOM dropped to 67 days – less than half of 2013. The median CDOM for the first quarter was 26 days. So we know most people are pricing aggressively. Not only are they getting their numbers, but they’re getting them quickly. This tells us that prices are going up. If you’re curious about how your home might do in today’s market, give me a call. I’m in the fray and can help you find the right number.
What about our neighbors in Seattle and Kitsap County? A way to compare our performance against theirs is looking at months of supply. This is where you take the number of active listings on the market and compare it to how many homes are selling in a month. Right now, Bainbridge has about 57 active (not already under contract) listings and there were 36 sales in March so we have ~1.5 months of inventory. Zero to three months is considered a “seller’s market” (and probably means rising prices), 3-6 months is a “balanced market” (and stable prices) and more than 6 months is a “buyer’s market” (with prices probably declining). So our 1.5 months places us firmly in the seller’s market category. Seattle is less than one month (and their average CDOM is 40 days). The Seattle market is as active as it has been for the past 3 years. Of the 19 Northwest Multiple Listing Service areas in Kitsap County, 18 are in the 0-3 range with the lowest being Silverdale at .8 months. Kitsap has improved from 11 of 19 in the 0-3 range last year to 18 now.
On April 8th, there were only 16 available condominium listings in all price ranges on the whole island. Last year we thought the inventory was extremely low and that was when we had 26 available listings in mid-April – ten more than we do now! Clearly, we don’t currently have many choices. Of the 19 condo sales so far, 18 were below $500,000. There has yet to be a closing between $500K and $1M, and only one between $1M and $1.1M. However, the median price has increased 9% over last year to $350K. Land has better inventory numbers (56 active this year vs. 47 last year) and the median price of sold properties is up 14% to $165K but sales decreased from 13 to 9 in this year’s first quarter.
Are we in a bubble? Is this 2007 re-visited? It is always dangerous to make predictions but there are very few indicators that could dampen rosy projections. Seattle is very busy and has maintained its upward push for over three years now. And we are constantly hearing of the newest company moving downtown. It also looks like the rest of Kitsap County is experiencing the same market push. It is difficult to come to any other conclusion: we expect to have continued limited inventory, strong buyer demand and rising prices further into this year.
So far, 2015 is heading in the right direction and we’re optimistic that things will continue to trend in a way that reflects the positive nature of our great community. Whether you’re a long-time Bainbridge resident or considering a move to the island, I’d welcome the opportunity to work with you to strategize the best move for you and your next real estate adventure.