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This time it’s personal
AND MATTHEW NASH
Editor’s note: Fourth in a five-part series.
Dozens, perhaps hundreds, of Sequim real estate professionals have seen their business fortunes decline in recent months and years.
Gina Valaske, executive officer for the Sequim Association of Realtors, says membership in her organization has dropped significantly since 2006 when the national “housing bubble” burst.
“That was probably the peak,” Valaske said. At the time the association had 210 members; today there are 124.
Valaske says she can’t be sure why so many have left the field but said in all likelihood, “It’s simply because of the economy.” She also said the individual stories aren’t necessarily tragic. Some members moved away and some retired, she said. Others were semi-retired and only had entered the field to take advantage of the boom times. “They went back into retirement.”
FaLeana Wech, executive officer of the North Peninsula Building Association, has a similar story. “Four years ago we had a really big membership drive,” she said, raising the number of members to “as many as 360.”
Since then the numbers have declined. “We’re stabilizing between 240-250,” she said. Regarding the decline, Wech said, “The market has been challenging, to say the least.”
Wech said the remaining builders now are working with clients who are seeking “extreme value.” That means modest homes, she said, simple and with no frills.
To make ends meet, “I think (builders) have expanded what they do.” Many who formerly built custom homes are “now doing any jobs they can get.”
Wech said the issue derives in part from the lack of available credit. In recent months several promising projects have collapsed due to creditor jitters. The problem, she said, is new construction often costs more than it appraises for. “I know of a couple of instances where people have had substantial — 50 percent — money down and were unable to get loans.”
Of course, statistics only tell part of the tale.
Real market woes
Ron Gilles, designated broker for Professional Real Estate in Sequim, says the past four years have been “real tough.” He described a small residential project his firm developed, saying in 2009 they sold two lots in the development and in 2010 none sold, despite a 50-percent reduction in the price of the lots.
Gilles said the last lot he sold in the development went for just $69,500 — “less than it cost me to create the lot.”
Gilles said the market is down and the inventory of lots is high. “And the cost to build is high,” he added.
Gilles said he recently sold a property in Sunland for $117,000. He said while it’s good to have a sale, Fannie Mae, which held the title to the foreclosed house, has reduced payments to agents. He picked up just 1 percent on the sale: $1,170.
“I’ve been working on that since last August,” he said. “Do the math.”
Gilles said he’s fortunate his wife, Andrea, now works for McCrorie Interiors. The couple has two children attending Peninsula College. “Fortunately, we set aside the money for the first years,” he said. “And they both have jobs.”
The effect of the downturn ripples through the economy. To save money, in the past year Professional Real Estate moved from a larger rented space into a smaller building — a building it owns.
Don Nelsen, owner of Heritage Homes of Sequim, has been selling manufactured and modular homes for 35 years. He says the market for his products “is tight.”
“In my lifetime I’ve never seen land and interest rates so low at the same time,” he said, but “people are still hesitant” to buy. “Nobody is really sure what our future is going to bring,” he said.
Nelsen mentioned the recent tsunami in Japan. “We have no idea how that’s going to affect us.” The unrest in the Mideast also will have an impact, he said.
Nelsen described himself as “an optimistic realist.” That means, he said, “we have to figure out, ‘How are we going to make it work?’”
He said Marlette manufactured homes are “the best in the industry,” and said he has a good customer base in the area. “The frustrating thing is getting people to commit.”
He also said potential customers are looking for smaller units, though there are occasional exceptions.
Nelsen has run the Sequim dealership in Sequim for 10 years. In the past two years he’s been required to put his own money into the business to keep it healthy. He said he had little choice in the matter: “I own the property.”
Nelsen retains his optimism: “To me the cup is always half full. I hope to get back some of what I put into it.”
Walt Schubert, owner and broker for Action Property Management, said his business is turning away more potential renters.
“The quality of the tenants out there looking for rentals is lower than before,” he said. “We have to be more careful with our screening.”
Every management agency screens potential clients to gauge their ability to pay and to be good tenants. Red flags go up when they spot large debts, poor rental history or a criminal record. Some causes are more benign, but no less critical, including an unstable work history.
Valerie Lape, broker and property manager with John L. Scott, agrees with Schubert that finding qualified tenants is tough.
“Job security is hard to get,” she said.
Lape said it’s also “difficult to maintain people who are qualified. If someone who comes in with a low-level rent (and) making minimum wage gets their hours cut, they ask if they can (pay) a lower amount.”
While people of all ages are renting in Sequim, the management companies say they are seeing more young, single parents, most of whom are uneducated and who are holding down low-paying service jobs.
Heidi Ennes, broker for Sequim’s Landmark Property Management, said she is seeing more roommates and extended families sharing the cost of renting a home.
“We have talked to home-owners who have decided to take in a lodger to help with the cost of maintaining their homes,” she said.
Lape and Schubert said several former homeowners now are renting from them.
“It’s pretty common,” Schubert said. “I have an average of one a month in my office. Most of them, they got sucked in on these sucker loans and when the balloon came along … They thought by the time the payments went up they could afford it. So those people either lost their homes or their credit is so messed up they can’t buy again.”
Reach Mark Couhig at firstname.lastname@example.org.