As noted below we had a correction in our market relating to dollar volume and number of transactions during 2022. We returned to a much more balanced approach with transaction negotiations during the last half of the year.
In reviewing the year-end results for 2022 the sales dollar volume for the real estate market in San Juan County per the Northwest Multiple Listing Service was $380,610,000 which reflects a decrease in volume of 33% as compared to 2021 when the volume was $567,862,152. The County closed 375 transactions which is a 43.5% decrease from last year. The average number of transactions per month was 31 compared to 55 last year.
Total volume on San Juan Island in 2022 was $172,672,400 as compared to $241,242,793 in 2021. The decrease was 28% in volume with a decrease of 47% in number of transactions. The average number of transactions per month was 14.
Orcas was similar to San Juan Island with a 32% decrease in dollar volume and a 37% decrease in number of transactions.
These year-end results were expected for our area as we all realized that the last two years of numbers were all record breaking for our County and not sustainable.
The more stable level of activity that we had during the last 6 months is a much more predictable market for buyers and sellers; it is more equitable to both parties. In a balanced market, sellers feel as though they are getting market value for their property and buyers feel that they are not paying too much.
Most of our sellers decide to sell for personal reasons, not because the market is a frenzy of activity with escalating prices. Sellers decide to leave their property in paradise to be closer to family members, children, grandchildren and medical facilities. Selling in a market that favors them is a nice bonus.
Most of our buyers decide to purchase for personal reasons regardless of the market conditions. A lifestyle change, school system, working remotely and nearing retirement are the top reasons that I hear from my clients new to the island. Buying up in home size, quality or less maintenance is what my local clients mention.
Generally, investors typically only purchase when the prices “pencil” for their return on investment; however, on the island, nothing residential “pencils” because our prices and rents are not in line, even in a down market. “Pencil” is defined as rents covering the expense of utilities, taxes, maintenance, insurance and mortgage payments.
In the expected market conditions for 2023 buyers will be granted time during their transaction to process their financing, home inspection, feasibility study and perhaps even close a home they have sold somewhere else. These are good contingencies for our sellers as the buyer is able to determine that the property is suitable and not process their purchase under the pressure of multiple offers and a frenzy. We have fewer transaction rescission from the buyers as they can take the time to understand the results of their feasibility study and not be up against a tight deadline. Further, fewer disagreements between buyers and sellers occur in a more balanced market.
Highlights of our market:
· The median home, condominium and manufactured home price for a 12 month period ending December 2022 for San Juan Island was $852,000 which is a 25% increase over 2021 when it was $681,288. The median home price for the same period for the County was $921,000 which is a 14.5% increase over 2021 when it was $805,000. The median is a typical market price where half of the homes sold for more and half sold for less. Median price is not an appreciation calculation but merely a trend. It lags the market as in the case of this market correction. The median home prices should decrease during 2023, if the market remains on the current trend.
· The average days on market number (DOM) for homes, condominiums and manufactured housing on San Juan Island was 53 during 2022. The DOM was 72 during 2021 for the same 12-month period; however, it does vary on the price range. The average days on market for the County during 2022 was 53 days which is down from 82 in 2021.
· On San Juan Island, 57 sales for all types of real estate closed in excess of $1M each with a total 118 for the County. This is lower than 2021.
· Inventory levels in the San Juan Island and the County for all property types remain very low. On San Juan Island the total inventory as of January 3rd was 72 with 61 active and 11 pending. The total inventory for the County was 154 with 130 active and 24 pending. Inventory totals are down from January 2, 2021, 1% and 11.5% for San Juan Island and the County, respectively. The most notable is the percentage of pending transactions which is down 43% and 55% for San Juan Island and County, respectively.
· During the last 6 months of the year, sellers negotiated on average 3.7% off the list price of homes at the time of sale on San Juan Island and an average of 4.5% off the list price of homes in the County. This is remarkably similar to the percentages in 2019. During the peak of the season around May 2022, the average percentage was 5% over list price .
Many of the national economic forecasters working for Zillow, Red Fin and the National and Washington Association of Realtors are predicting that mortgage interest rates have most likely peaked. There may be a few more FED rate hikes during the beginning of the year to control inflation, but that doesn’t necessary equate to a change in mortgage interest rates. They are more influenced by the bond markets and other indexes.
Additionally, we are noticing more creativity with the lender programs during the last half of the year as well. The adjustable rate mortgage and front-end interest rate buy down programs have returned to offset the higher interest rates. We also used a lender last year that offered a cross collateralized loan that allowed the buyer to use their equity in their existing home as the down payment for the new home. Basically, they didn’t have to sell their existing home to purchase the new home or process a refinance or HELOC to free up their equity. It is a great program to use as selling one home and buying another often creates a homeless period that can be stressful.
As a hardworking agent in real estate on this island, I feel good about the market in 2023 and am looking forward to it. I much prefer a more balance approach to the price negotiation and transaction management. I admit a balanced market makes it more difficult for the parties involved versus a market which favors one party over the other and the answer is always “no”. I sleep better at night when I believe the transaction that I worked on produced results that treated all parties fairly.
Showcase of Listings: The Coldwell Banker San Juan Islands Showcase of Listings deadline this year is March 31, 2023. If you are considering selling your property this year, this is an excellent publication to be included in. The showcase is a handout at our Friday Harbor and Roche Harbor offices as well as on the ferry system. Contact Terri or me should you have interest in selling and want a free opinion of value for your property.
Merri Ann Simonson