There’s a new ‘normal’ in local real estate market

Foreclosures in Gig Harbor are fewer than other markets

Kay Barnhart

Special to the Gateway

If ever there was a “perfect storm” for eroding real estate market values, the last year has been the roughest on record.

The combination of Wall Street’s reckless abandon, the banking industry’s lack of constraints, and consumers’ blind faith in real estate’s escalating appreciation have resulted in record foreclosures, job losses, deteriorating retirement funds, and mind-numbing depreciation of property assets.

But Gig Harbor real estate hasn’t been rocked as hard as other markets by the foreclosure bogeyman, says Alison Ybarra, broker of John L. Scott Real Estate in Gig Harbor.

There are even signs the downward trend is slowing.

Foreclosure has a huge, negative connotation due to the national media stories about Nevada, California, and Texas, where prices have plummeted. However, Ybarra said, of the 1,427 residential properties currently for sale in the Gig Harbor area, (Gig Harbor, Key Peninsula and Purdy to the Kitsap County line) only 138 are bank-owned. An additional 210 are short sells.

Foreclosures are unilateral sales forced by the lien holder, usually a bank. A short sell requires consent by both the lien holder and homeowner when a house sells for less than the balance owed on the property’s loan. Compared to foreclosure, short sells are less expensive for the bank to process and less damaging to the homeowner’s credit.

Despite the national media’s tendency to paint a picture of real estate fire sales, Gig Harbor’s distressed properties are roughly 25 percent of active listings.

“This doesn’t mean sellers aren’t taking hits, but often they’re equity or profit hits rather than out of pocket losses,” Ybarra said.

The low end in Gig Harbor has dropped to $350,000. Previous low ends sat between $400,000 and $450,000.

Most of the buying activity has been at the entry level. From list to close, selling time is now three to four months. However, homes in the $700,000 range and up are taking more than 20 months in selling time.

“It’s almost like two separate markets. The middle to lower end versus the middle to higher end,” Ybarra said. “Higher end prices are still coming down.”

The Average Price For Sale and Sold graph demonstrates the dramatic difference between listing and sold prices over the last 14 months. These are median values, meaning some of the homes are much more expensive and some are far less.

Despite the gap in listing and sold prices, serious buyers still have to do their homework. They have to know the neighborhood, the comparable values, and deal with a nearly unpredictable mortgage market. Sellers have to be prepared to list at a competitive level and hope to break even.

As more properties move, activity tends to increase in the middle to high end of the market. Ybarra estimates it will take four to five more years for the higher-end market to recover.

“The market won’t be back to ‘normal’ until the short sells are committed, until all the foreclosures are on the market and done,” Ybarra said.

The skyrocket days of buying, fixing, and selling a house a few months later for a $100,000 profit are probably gone for good. But homeowners in the middle to lower range who purchased homes earlier this year are starting to see a tiny, steady increase in equity as prices stabilize.

Ybarra also points to the number of pending sales today compared to 2001.

“Pending sales are more of a true reflection of the marketplace since it measures deals struck,” she said. “And the numbers now look very similar to what we saw in 2001-2002 minus the wild swings from the last few years.”

Any number of variables could affect the local housing market. The $8,000 tax credit for new homebuyers expires at the end of November. Mortgage rates could take a leap. Banks could tighten the reins even further on loans. And banks continue to release small quantities of foreclosed properties back into the market, which drags out the recovery. And the Pacific Northwest tends to lag behind national trends.

Still, Ybarra insists, facts are facts and data doesn’t lie. Inventory stock is dropping. Lower end sales are moving through escrow at a timely pace. Pending sales have stabilized to 2001-2002 levels. Realtors in her office report positive trends like second looks at homes by buyers, seeing offers and counteroffers again. This return to the “arm’s length transaction,” where a willing buyer and willing seller reach an agreement at a price fair to both, signals a stabilizing trend in pricing.

“We’re entering new territory,” Ybarra said. “This market is not a momentary blip. The normal we’re talking about won’t be like any market we’ve faced before.”