She Said He Said

Deja Vu All Over Again - Home Loans

"This is like deja vu all over again"...Yogi Berra

Yogi's malaprop says it all about the current crisis in home lending.  For those of us who lived through the Savings & Loan meltdown of the late 80's, early 90's the headlines about the sub-prime loan crisis feels eerily familiar. 

Welcome to the world of real estate home lending and financing - never a dull moment.

This post will focus on how the current turmoil in home lending may impact real estate values and activity levels in the San Juan Islands. 

Surveying & Land Divisions

We are often asked questions about surveying and land division in San Juan County.  It is a complicated subject, and if you have a specific question, we obviously suggest you contact a local reputable surveyor such as Star Surveying, Inc.

Last month we had Tom Starr and Bob Anderson came to our weekly meeting and provide an excellent overview of the issues and questions asked of them, so we thought it would be good to pass that on to you. 

Let us repeat, this is a very complicated topic, so if you have a specific issue, talk to a licensed surveyor, do not depend on this information.  So with that disclaimer done with - let's take a look at the typical questions and issues regarding surveys and land divisions in San Juan County.

Mid Summer Market Update

Well it is July 28th, and just about the very middle of the “summer season” here in the San Juans.  By this time of year we have a pretty good idea of how the year is going to play out.  Very interesting year, very interesting.  There are many undercurrents in the real estate market, to include the national real estate slump, the sub-prime lending market problems, tightening credit markets.  All of those are a negative drag, and yet we still see signs of a relatively strong Western WA real estate market being fueled by a robust local economy and low unemployment.

Harry S. Truman famously said “I am tired of economists who say, ‘On the one hand…and then on the other hand.’  Send me a one-armed economist.”  Unfortunately there are no one armed economists that I know of predicting real estate trends here in the San Juans.

Thus as I look at the market data for San Juan Island year to date, there is definitely a mixed message - a two handed situation for certain.  Here are the real estate closed sales numbers for San Juan Island from the NWMLS and how they compare to 2006 at the same time last year.

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Summer Days, Summer Nights

Friday Harbor is full of life and activity now. I think that as islanders, most of us can appreciate the hustle bustle of summer that gives us so many great restaurants, shops, and galleries to enjoy year round. Without the two frenzied months of July and August, many of the businesses could not survive.

Short Season

  We owned a seasonal business on Orcas Island for almost a decade. In the spring we would anxiously anticipate the summer months when business would be good, and all of our creative efforts would  pay off. As summer got under way we started thinking about the off season, when we would not have people asking the same questions, employee issues, delivery shortages, and intense visitor overload. Fall, was always the best time, with gorgeous weather, some tourists, and the summer profit still in the bank. As winter approached, money would dwindle, employees became crabby about hours, and we considered closing for the “off season” and sometimes threatened to sell the business. As I said, we repeated this scenario for most of ten years.

Doughnuts & Vacation Homes

According to the San Juan County Assessor, approximately 25% of all homes in San Juan County are vacation homes.  We did a quick analysis of selected neighborhoods and found that it is as high as 40-50% in some areas.  The percentage of vacation homes is highest for waterfront properties, which means that the distribution of vacation homes is like a doughnut, with the "dough" on the outside, and year round residents in the middle, the "nuts".

Nationwide, vacation home sales rose by 2% in 2006 to 14% of total sales, while investment property sales dropped by 6% to 22% of total sales in the same time frame.   According to the chief economist for the National Association of Realtors, David Lereah, the vacation home market was able to escape the downturn because of strong demographic forces that are propelling vacation home sales.

Brazenly Lucid Wines

If you are going to buy wine in Friday Harbor, then you owe it to yourself to stop by Brazenly Lucid Wines located at 80 Nichols Street.  The owner, Stan Reitan was the wine manager at King's Market for many years, and he has an encyclopedic knowledge of wines.  Brazenly Lucid just opened this year, and Stan is quickly building his business with a savy and creative approach to marketing.

He has a weekly tasting event held every Thursday evening  from 4:30 - 7:00.  Each tasting has a special focus, one week it might be the wines of Argentina, another week the wines of San Juan Vineyards, etc.  Combined with Stan's knowledge and warm, friendly manner, his small wine shop is quickly becoming a local favorite. 

So take a minute to drop by, say hi to Stan, and buy a bottle (or two) of wine.

And if you like Cabernet Sauvignon here's a tip; try a bottle of Root 1, a Chilean Cab that is grown on  native rootstock instead of grafted rootstock.  It is a deal at $12, easy drinking now, or lay it down for a few years. 

Market Update & Outlook Thru May 2007

So what's the latest in real estate market activity on San Juan Island?  There's some good news and some bad news - sounds familiar doesn't it.  First the bad news, volumes of sales are down - residential sales YTD through May are off by 13%, and active listings are up by 21%.  Now the good news - the median price of resale homes is up from $440K to $454K for an increase of 3% while the average price is up from $709K to $770K or up 8.6%. 

So the prediction we made last month is staying on track, prices up moderately, with volumes down.  The question of the moment of course, is what will this trend hold for the balance of the year, and if so what that may mean if you are a buyer or a seller of real estate. 

Dual Agency - The 007 of Real Estate?

No, dual agency is not James Bond deciding to spy for the Russians too.  If you are thinking about buying or selling real estate you should know about dual agency.  First, what the heck is it?

Dual Agency is when a real estate agent represents both the buyer and the seller in the same real estate transaction.  Agents call it being on "both sides of the deal." 

It is important to know that it is absolutely legal.  The state of Washington, along with most states allow real estate agents to represent both parties at the same time.  But just because it is legal, does not mean that it is necessarily a good practice. 

Media Madness

One of my professional goals is to stay current on trends and activities in the real estate market.  My sources include magazines, syndicated newspapers, television, real estate websites and blogs, and even casual conversations.  But something is wrong, either I am crazy or the media has gone mad.  Why?

Because what I read and hear from the national media about the real estate market does not match what is happening here in the Pacific NW or the San Juan Islands.

When you read the news from national media sources, they are always talking about the real estate slump.  Yes, if you own property in Las Vegas, Phoenix, San Diego or Napa Valley, there is a slump, prices are down, "flippers" are not flipping, new homes stand empty, foreclosures are escalating, and life as we know it is ending.  But if you, like me, live in the NW,  where median home prices have increased 8% and sales volumes are approximately the same as last year, how does that become a slump?  It doesn't - there isn't one, not here anyway.  Maybe the end of the world will come next month, but right now it is still spinning.

So why does that not share the media spotlight?  Simple enough - news is not about "making happy."  Good news does not sell.  Headlines of "Plane Crash Kills 120" compared to "55,000 People Travel Safely Today".  You and I both know what we pay attention to and so do the media.

Anyway, here's the bottom line to this story/non-story.  All real estate is local, and you may be mislead if your source of information is the national media.  If you want to know what is happening to the value of real estate in your neighborhood, town, community or state - ask a local realtor.  If you are going to get an opinion, at least get one from someone who works every day and is immersed in the real estate activity and trends that affect you. 

New York and Los Angeles are still a long way away.

Thanks for listening - Peter

Postscript:  I found this interesting article at the Wall Street Journal On Line that discusses the market areas who are bucking the national trends.  Nice to see there is some news here after all...