The second quarter results, which complete the first half of the year, in San Juan County and on San Juan Island reflect a continued slowdown in volume. Per the NWMLS, the dollar volume for the first half of the year in San Juan County was $109,748,679 with a total of 118 transactions. The numbers reflect a 29% decrease in dollar volume and a 23% decrease in number of transactions and as compared to the same 6-month period in 2023.
For San Juan Island, the dollar volume was $55,843,780 with a total of 60 transactions. This was an 11% decrease in dollar volume and a 20% decrease in the number of transactions.
This is an unusual market as our prices continue to increase but our volume and number of transactions are decreasing. The lack of inventory (Supply) has placed upward pressure on our median prices regardless of the amount of buyer activity in our market (Demand). Why are the prices continuing an upward trend if we do not have buyers competing for the listed properties? This trend is statewide as well.
The most important takeaway from this data is that our prices continue to rise with no expectation of a future decline. If a buyer is on the sidelines due to higher interest rates, they may be granted a slightly lower rate in the future, but they will be paying more for the property that they decide to purchase.
The median home price in the County is currently $925,000 when calculated on the last 12 months. Year-to-date, 44 home sales closed under the median price and 36 home sales closed above.
Buyers are not as active regardless of the category of property that our County offers. The Zillow generic buyer leads and inquiries on our listed properties are down in their numbers.
The NWMLS key boxes on listed homes reflect a similar level of activity in May 2024 as compared to June 2024. However, the number of NWMLS statewide property showings scheduled reflects a decrease from May 2024 to June 2024 of 7%.
As of July 1st, the inventory in the County is slightly higher than the totals on July 1, 2023, but not enough to attract more buyers into our market. For the County, a total of 292 properties are listed with 31 pending and 162 are active. That is a 2% increase in the total listings but unfortunately, we have fewer pending transactions for the same period. The number of pending sales has decreased 28% for the County.
The July 1st pending transaction number for San Juan Island was 11 which is a decrease from July 1, 2023, of 58%.
The first half of this year has not been a great market. The days on market for homes has also been increasing as well as the average percentage negotiated off the listing prices.
In the old days, one considered 4-6 months of inventory as a balanced market. The defining period is inventory over 6 months is considered a buyer’s market and under 3 months is considered a seller’s market. At this time, I do not believe this definition is applicable in our local market.
For the County, we have closed 209 homes in the last 12 months and have 170 active homes as of July 1st. This represents a 9.76-month supply of homes. The absorption rate calculation is just a frozen “snapshot” in time and does not consider any other future events that have an impact on sales; good or bad.
If the economic definition is used, then we are in a strong buyer’s market. If that is the case, where are all those buyers that desire to take advantage of a good opportunity to buy real estate in our market?
Buyers: The higher interest rates are affecting some of the buyers in our market for homes listed under $1M; therefore, some are forced to be on the sidelines. Some of the buyers for homes over $1M are enjoying stock market gains and are hesitant to transfer funds into real estate at this time, so they are also not very active. Many of my clients have said, “If the property is perfect, they will move forward but if not all of their boxes are checked, they will wait longer for the perfect property”.
The political environment is giving real estate uncertainty. Buyers tend to favor real estate as an investment when the stock market is unstable or on a downward trend. Until the election is finalized, it is most likely that the stock market will remain on an upward trend as both sides of the political spectrum are managing that direction. Higher income taxes will also move prospective buyers towards real estate purchases versus the stock market and other similar investments.
Sellers. The property owners in our market consist of primary residence owners, second homeowners and investors; private and institutional. Most of the primary residence sellers that have their property actively listed in our market are those that strongly want or need to sell at this time. They have moved on due to the typical reason of medical and/or desiring to be closer to their children and friends; they are motivated. Some of the second home sellers that have their property listed have decided for various personal reasons that they no longer need to own property here, and that reason is their motivational factor. Most of the investors appear to be waiting for more active buyers to return to our market so that they may benefit from multiple offers and possible bid wars for their property.
Most of the active sellers on the island are in the range of 65-85 years old. In the case of many of our property owners, their real estate on the island is one of the largest investments they own and may represent their entire support in the future. When they sell, they are hoping to obtain the highest price possible to afford the rest of their lives. As 60% of our buyers were from Western Washington originally, many of our sellers’ plan to relocate back to that area. The median home price in King and Snohomish Counties are the highest in the state, second only to San Juan County.
Conclusion: Stating the obvious, we are in a Catch 22. Part of the solution is improving the buyer selection via increased inventory. With more variety and options on the market, buyers have a higher chance of having all their boxes being checked. Many of our sellers are holding off waiting for a more favorable market to sell their property in. More inventory equates to more buyers which equates to a more favorable market for sellers.
When the buyer pool is diminished and only the sellers that need to relocate are in the game and waiting to negotiate, there is no pressure from the market to create a change. The sellers that do not need to sell are waiting for the change.
In real estate what goes around, comes around, whether you are a buyer or seller, not waiting for the perfect conditions can still offer great opportunities.
An unusual market equates to the inability to predict how the year will end up. Typically, by the end of June the pattern is formed, and I can express an opinion, but not this year.
Written By:
Merri Ann Simonson
360-317-8668
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