Like tulips and daffodils heralding spring, rising prices typically mark the end of the real estate winter slumber — until this year.
Bubble or no bubble, a trend of declining home prices has arrived in Kirkland and area real estate agents are wondering what it will take to lure the buyers back. They say sellers are dropping prices 3 to 5 percent in some neighborhoods, but mostly on the more expensive homes and condos.
“It’s a buyers market,” said Windermere managing broker Lew Mason. “So where are the buyers?”
Recent history in the Puget Sound’s real estate markets almost always favored the seller, until a national credit crisis began affecting businesses and homeowners here last fall. After years of real estate values appreciating at several times the rate of inflation, Mason said a combination of factors related to the crisis are stalling the traditional pricing run-up during warmer months.
Mason, who manages 104 agents from his Kirkland office, indicated sellers are reluctant to lower prices, and buyers are spooked by news of an economic slowdown and falling home prices eroding their equity. But Mason said activity was beginning to pick up, with reports coming in of multiple bids on properties offering many amenities and “reasonable” prices.
Using Northwest Multiple Listing Service (NWMLS) numbers, Sound Realty broker Ardell DellaLogia estimated the median sale price for a home in Kirkland in 2007 was $590,000 (condos sold at $329,000). Sellers are now asking a median list price of $799,000 for a home and $415,000 for a condo, but those numbers are expected to go down.
“I think a normal supply and demand market will eliminate this stickiness (on price),” Mason said. And he believes the buyers will soon come back to this marketplace.
Recently released NWMLS real estate numbers show both pending and closed total sales in March are down by nearly 50 percent from the same time last year. On a positive note, however, Kirkland’s indicators of economic vitality are generally strong: more jobs, low unemployment and few foreclosures.
But the residential market has become saturated. Despite construction slowing considerably, Mason estimated the Kirkland area currently has an 11 month supply of homes and a seven month supply of condos, an over 50-percent increase from last year.
That’s too much to maintain current values, Hallmark Realty broker Doug Davis said.
“That’s the most we’ve had in a long time, 10 years or more,” he said. “We’ve had a little bit of a stalemate here.”
He said part of that stalemate comes from what the high-price of a home here means. With nearly half of the 443 home listings in Kirkland going for $1 million or more, Davis said he has seen a number of buyers unable to close on homes because of the loan size. With the sub-prime mortgage crisis, lenders now ask for additional credit-check assurances to go with such large financial commitments.
But the market also means selective home-buyers are now in the driver’s seat when it comes to negotiating a deal.
One of those returning to the market after a fruitless search last year is first-time home buyer Michael Leccisi. A 37-year-old Redmond software company employee, Leccisi lived in Seattle for a time, but found the 60-minute commute too long. He searched for a home closer to work on the Eastside last year, but found the inventory was poor and the prices too high — despite his ability to secure financing on above-median properties. Now, nearly a year later, Leccisi said he is pleased by the variety and expects to be able to negotiate down if he thinks a price is too high. He’s searching for what he calls “the package deal.”
“The style of house, the quality of finishing, fixtures, view and attractive design,” he said. “It can’t be a great house with a nice view sitting right next to the freeway.”
Affected by buyers like Leccisi who are now re-entering the market, this summer’s sales prices will go a long way toward predicting whether year-over-year declines will continue or plateau, Davis said.
“We’ll know a lot more in the next three months,” he said.
