Thursday, February 23, 2006

Q: I read in a newspaper article recently that there are a lot of million dollar homes for sale on Vashon.

I was surprised! I knew prices were going up but had no idea it had gone so far. The agent they quoted said she had eight or ten million-dollar listings right now. Is that possible? It's probably because of rich Californians coming here, isn't it?

A: That quote had to be an error or you read it wrong. We had only six houses listed and sold for over a million in all of 2005. Those homes were listed by a number of different real estate agents. So far this year two homes have sold for just over a million and five are currently on the market at over a million, each with a different real estate agent. It isn't Californians who are "ruining" Vashon. We have people moving here from all over the country and a large percentage of our sales, I would guess at least a quarter to a third, are people who already live here.

The issue of gentrification on Vashon isn't about million dollar houses. The critical issue is that the bottom of the market, where you can find the most affordable homes, has changed dramatically in the last two years. It's getting very hard to find any home for under $300,000. It's also beginning to be difficult to find a home on acreage or with a view for under $500,000.

The increase in housing prices is certainly not restricted to Vashon or even to the West Coast. We've seen dramatic change all over the country. But in addition to general real estate values climbing, we have to accept the fact that Vashon Island is a "boutique" market. We have very little supply and a growing demand. It isn't even just "outsiders" who want to move here that are pushing our prices upward. Lots of local folks are trying to buy down for retirement, purchasing rental homes for investment, buying homes for aging parents or trying to move up to larger homes as their families grow.

Thursday, February 09, 2006

Q: I was amazed when you told me what my house is worth today.

I bought it for $260,000 in 1998 and, although I've done a few nice things to up-date it, I really haven't changed it enough to double its value. You pegged the asking price at about $525,000 and the listing agent you recommended to me agreed. How did all this happen? I'm not complaining, mind you, I'm just sort of stunned.

A: It's difficult with our tiny market to get a real handle on pricing. The best way for most of us to grasp the changes is by using situations like yours. There have been many homes sell over the last year that doubled in value in six or seven years. In fact, there have been some that doubled in much less time.

I took a sampling of 20 houses that sold in 2005 that had sold the last time in 1998 through 2000. Most had gone up at least 50%. Many had increased in value 80% or more! Of course there are specific issues with each property that can mean it will go up faster than the average. By the same token, some houses went up only 25% to 35% in that time period. But let's face it, that's still a huge gain.

We are not alone in this incredible cost spiral. Prices have gone up significantly all across the country. In the Western part of the country most major areas have seen an increase of between 15% and 40% over the last year and a half, according to the National Association of Realtors. Our Puget Sound region saw and increase of between 15% and 27% depending on location, over the course of 2005.

Add to that national and regional trend the fact that we have a high demand and a very low inventory of homes on Vashon and you have the recipe for inflated housing prices. There is no end in sight so be sure to reinvest your gain quickly.