Last year, Sequim saw its highest median home sale prices ever.
In his year-end report for clients, E. Michael McAleer, managing broker with RE/MAX Prime, reported that Sequim’s 2022’s median home sale price hit a high of $545,000. However, last year’s 536 home sales was also the lowest since 2012, he wrote.
“The big downturn in our sales volume can be attributed to two major factors — increases in interest rates throughout the year, and our historically low inventory,” he wrote.
With low interest rates in the last two years prior to recent upticks, Brody Broker, managing broker for Keller Williams Olympic, wrote in his 2022 year-end review, that “it was very easy for somebody not making a lot of money to buy a very expensive home [and] this caused luxury markets nationwide to explode, and almost every residential market in the country reached new price highs.”
He said buyers in the past two years now have affordable payments and “are also in no hurry to sell them to buy a lesser home for a higher monthly cost.”
“Because of that, inventory is still very low and homes that are priced accurately are moving quickly,” Broker wrote.
Some Sequim homes didn’t spend a lot of time on the market in 2022 as the median number of days a home was on the market was nine days last year, compared to six days in 2021, according to McAleer.
Eileen Schmitz, president of JACE Real Estate Company, said “Covid was a perfect storm” with home interest rates around 3 percent and “unlike any other market we’ve seen.”
“When coming out of this strange real estate market, and we have sellers selling in three to four months [rather than in a few days], the first question they ask is ‘what’s wrong?’” she said.
“But I’m saying it’s a normal real estate market, and with interest rates going up, it’s being a sticker shock to buyers.”
Schmitz says if you ask people about buying their first house, a majority will say their home loan’s interest rate was in the 7 to 8 percent range.
“My first home I paid just over 9 percent, and as much as I like 3 percent, a majority of the time it’s been higher,” she said.
“It hurts coming out of a fireworks-everywhere market. I was here during the recession and the sky really did fall then and I took listings knowing they’d be on the market one to two years.”
Greg McCarry, CEO and president of Westerra Homes, said when he started in the business in 1975, rates were about 7 percent.
“Today, consumers think it’s sky high, but we’ve been climatized to low interest rates,” he said.
“[The rise] happened so abruptly. Even in the 1980s when it was 16 or 17 percent, it never moved that fast.”
Deon Kapetan, Highlands Residential Mortgage Sequim branch manager, said buyers are now seeing rates of 6 to 6.5 percent and the most recent federal interest hike didn’t affect mortgage rates. Last January, rates were around 3.25 percent, she said.
“We’re not seeing a bidding war anymore like during most of Covid,” Kapetan said.
“While [buyers may] qualify at higher rates, they have more power with the seller, and we are anticipating most people who bought in the last six months to refinance at some point.”
Schmitz said buyers now have more options.
“Two years ago, buyers had to make a decision that day,” she said. “Now buyers can go back for a second and third viewing.”
While Sequim’s median home sale price in 2022 at $545,000 was the highest ever, it was also due to a second quarter high point hitting an all-time high for a quarter at a $575,000 median sale price. Then numbers fell to $550,000 in the third quarter, and to $513,000 in the fourth, according to McAleer.
Last year’s fourth quarter averaged 96 homes on the market (which McAleer calculates at the beginning of each month) and was Sequim’s smallest fourth quarter since the McAleer family started tracking the market in 2004.
Looking at Sequim’s January 2023 sales, Schmitz said the median sale price was $550,000 with only 13 stick-built homes sold compared to 28 in Jan. 2022.
“[This means] buyers have the opportunity to look at more houses before they make an offer, and sellers are adapting to a longer or more normal time on market,” she said.
For Jan. 2022, she said the median sale was an all-time high of $634,500 but it “was an artificially inflated number” as Sequim recorded the most sales ever of homes over $1 million.
Going into Jan. 2021, the median sales price was $540,500, she said, and prior to the pandemic in Jan. 2020, the median sale was $399,900, and $372,500 in Jan 2019.
Land sales also went down in volume last year as prices remained high. Sequim sold 138 land parcels in 2022 — down from 248 in 2021 — while the median sale price was at $155,000, the highest since 2006. McAleer said of the 138 land sales, 34 were in the City of Sequim, which could be attributed to “expensive hookup fees and limited high density zoning areas.”
Broker attributes the sale decline partly to high building prices, high land prices, and increasing loan rates. He added that “inventory reached an all-time low and was often priced above market value.”
“Since buyers did not anticipate that sellers would negotiate, they elected not to offer on properties listed much over market value,” he wrote.
As land inventory remains low, he said now is a good time for owners to take advantage of a market that favors them, while for land buyers he anticipates sellers becoming more negotiable as the market slows.
McCarry said last year’s market was good as demand remained strong for development mostly until the fourth quarter, but it “required a lot of flexibility and intensive management” due to supply change issues and rising costs.
He said his business was split between building custom homes and spec homes. So far into 2023, he said business is slow but “I have some optimism the market will return in the not too distant future.”
McCarry said he’s seeing some commodity prices easing and he believes interest rates will soften.
McAleer said he’s unsure which direction property values will go in Sequim with such low housing inventory.
“Like most places in the U.S. over the past decade, new construction in Sequim has been woefully short of meeting the actual demand,” he wrote.
“Normally, low supply equates to higher prices but we’ve already seen an 11 percent correction since [the second quarter of 2022]. That was of course a result of the higher rates but frankly after a 10-year run up, we were due for a correction.”
He predicts that the higher interest rates will balance Sequim’s low inventory and home values this year.
“We strongly believe Sequim will outperform the vast majority of other real estate markets when you consider the relative value, limited inventory and our superior quality of life,” McAleer said.