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Real estate forecast: A slow and painful return to good times
and AMANDA WINTERS
(Editor’s Note: Last in a five-part series.)
What does the future hold for the Sequim real estate industry?
Most of the real estate professionals we spoke with agree the industry will bounce back. They also agree it won’t happen anytime soon.
They say Sequim’s virtues as a place to live always will generate growth, particularly among retirees. The number of American retirees is growing at an unprecedented pace — an astonishing 10,000 baby boomers a day turn 65 and will continue to do so for the next 18 years.
That’s a lot of retirees and many surely will want the excellent weather, friendly people and spectacular vistas that Sequim offers.
Colleen McAleer, a seller’s agent with Re/Max Fifth Avenue, points out that Sequim has another advantage: “Our geography will always limit our long-term supply. We can’t just keep expanding like a Las Vegas or Phoenix due to the water to our north and the mountains to our south. With the long-term supply in check and the demand-side fed by those who will want to live in a beautiful place, we can feel good about long-term real estate values in Sequim.”
And in the meantime?
“The near future will be much more of the same, in my opinion,” said McAleer. ”We have a lot of bargain shoppers making purchases right now, but we still have foreclosures to burn through and a glut of unsold vacant land that must sell off before we can return to a balanced market. The overall economy in the country, specifically the creation of jobs, will dictate when the demand really picks up. When that will happen is anyone’s guess but we feel more optimistic today than we did a year ago, that is certain.”
Everything must go!
Kevin Estes, owner of Estes Builders, echoed Mc-Aleer’s comments but called today’s bargain shoppers “the smart money.”
“Everything is on sale,” he said. After two years of tight times, “the fat has been wrung out” of the cost of building a home, he said. He added that the recent drop in prices for land are particularly welcome. “It’s back at 2005 levels,” he said, making building more reasonable. “The prices … we’re not going to see these again soon, if ever. And the same goes for purchasing existing homes.”
Like McAleer, Estes said first the vast inventory of available properties in Sequim has to move. He said that will take a year or two and then perhaps the area will see “real market demand.”
Lex Morgan, vice president of Cornerstone Builders, sees the same trend. “From our position in the market, things are picking up, although they’re very slow — it’s a very slight slope.”
“My feeling for the longer term — a year or two years — is pretty positive. I can’t say exactly why things are changing,” Morgan said, “but we’re seeing more initial interest. We’re getting calls — a year ago the phone wasn’t ringing near as much. Nothing happens until we get that first contact and we’re getting more of that.”
Steve Lamb, owner of Legacy Builders, said he doesn’t know if he’ll stick around to find out. “I’ve been doing it for 40 years,” he said.
What about the next 10 years?
“If I can, I will.” Right now, Lamb said, “It’s pretty grim. I think the stuff the City of Sequim has done, that’s not helping. When you add up all the permits and fees they’re adding on before you put a shovel in the ground … I’ve got one home going and after that, nothing.”
National and local concerns
Greg McCarry, a local developer and builder of custom homes, said Sequim has several factors that make it unique and will affect the recovery of the local real estate market.
“Sequim has no industry to attract job seekers,” McCarry said. And the “median family income is $29,000. How does a median income of $29,000 support a median home price of $280,000? The answer is that equity-rich retirees are attracted to Sequim’s climate and amenities.”
That, McCarry said, results in higher real estate prices.
“Sequim is already known in many areas as an attractive retirement area,” McCarry said. And the boomers surely are coming, he noted. But right now, “Most of these retirees are living in job-centered communities and, therefore, the health of the national job market will be the key driver.”
“Sequim is likely to lag behind the national real estate recovery for a couple of reasons,” McCarry said.
“One, people tend to move after they put their home on the market, sell it and close it.” That means Sequim won’t enjoy the impact of an improving national economy until several months after other towns perhaps have seen a turnaround, he said.
McCarry also noted that retirees do their homework before choosing a home. “The increasing cost to build in Sequim makes other areas more competitive,” he said. “For these two reasons I think Sequim will lag other areas in recovery. This will prolong the pain for job seekers and city revenues, retailers (and) the service industry.”
Sequim city councilors, who have been the subject of criticism by real estate professionals for raising fees, respond that the rise in fees isn’t the make-or-break factor in the Sequim real estate slowdown. Councilor Laura Dubois recently pointed out that “you can look around and see that even during the worst recession in decades, we have seen lots of retail and commercial building going on in this city — even with higher general facilities charges and impact fees.”
The growth in big box stores, part of the city’s plan to make Sequim the shopping center of the peninsula, continues apace.
Construction on a 27,690-square-foot Ross Dress For Less and a 17,784-square-foot Grocery Outlet is expected to be completed by the end of June. The $4.5 million project by Madison Sequim LLC broke ground in December 2010.
That’s another reminder of the accuracy of a particular observation by Kevin Estes. In his role as a judge for the National Housing Quality Award, Estes travels throughout the U.S. to visit with those nominated for the award.
He notes that “We tend to get focused here,” and perhaps don’t see the big picture. Sequim is going through tough times, he said, but some other towns and cities he’s visited “make Sequim look healthy.”
The outlook for Sequim in 10 years, he said, is tied to the national economy. And there is much to be encouraged by.
“We still have tons of immigration” and population growth in the U.S., he said. When the economy recovers, there will be “pent-up demand.”
The return to good times is out there, he said.
Reach Mark Couhig at email@example.com.