Weird Years For Whidbey Real Estate – September 2022

Here we go, again – or still. It is time for my irregular report on real estate and affordability trends on Whidbey Island. (Disclosure: I’m a broker at Dalton Realty, Inc. The previous report was presented and posted in May 2022. The weirdness mentioned then continues now, but with an overture of people expecting a slowdown. Look hard enough and you can find it, which means either you’ve caught a trend early, mistaken a blip for a trend, maybe a bit of both, or be seeing something news. At a glance, prices are up, as they have been. Slowdowns are more obvious on the mainland, but data from islands looks different. Is it a lag, or has remote work and Rural Distancing changed island life? I’ll provide my opinion, but you get to decide for you.

Whidbey Island, like other Puget Sound islands, has lower inventory than the mainland. Simply, there are fewer houses on islands, and communities can’t annex more land. Resources like water, and septic and sewers are limited. Limited supply props up prices. A slight increase in mainland residents wanting to relocate or at least become weekenders means a much bigger increase in demand. That’s true regardless of the current situation.

So, prices are up. The accelerated growth isn’t sustainable; but Whidbey remains one of the least expensive of the ferry-serviced islands in the Puget Sound. If the other islands reach a price plateau, Whidbey prices still have room to grow if they are going to catch up. That is a big If.

The most obvious marker of a potential slowdown is in the time it takes for a house to sell. That has increased from ~1 to ~2 weeks. That is also measured in how many months it would take to sell all of the properties that are on the market. That’s risen from ~1 month to ~2 months. That is still a seller’s market. It isn’t as strong, and it may encourage some sellers to drop prices; but above ~3 months to more like ~6 months is considered a balanced market. We’re not there, yet.

A reality check is to look at any slowdowns and compare them to pre-pandemic levels. If the median house price dropped ~20% ( a typical investment mark for a bear market) the prices would still be ~20% above where they were in January 2020. Ironically, in 2019 there was concern that the house prices on the island may have hit the peak in a bubble – before they went up over 40%. An optimistic seller could suggest that the prices are heading towards a new level similar to places like San Juan Island. An optimistic seller could suggest that the prices have much further to fall, something that could take years. As prognostications go, they’re both probably wrong while being right about some aspect of it.

Affordability, and subsequently sustainability, is being hurt, however because wages are not rising as quickly. Workers are having difficulty affording to work on the island. Employers are having difficulty finding enough workers. Many business owners are ready to quit from aging, or overwork, or too little income, or supply interruptions; which may explain a large number of business closures. Unfortunately, while that can be an opportunity for new owners, buying the facility or even paying the rent and utilities can be so expensive that few can afford to take over the business. Someone wealthy enough to afford buying the business and its assets is probably wealthy enough to not have to work. Sustainability is an issue for any place, but becoming unsustainable is not a singular event. Except in disasters, the unsustainability of a place happens one business at a time, one relocating employee at a time.

In the meantime, Whidbey remains an attractive place to new residents. Natural beauty, proximity to The Big City, and high-speed internet access makes it appealing to consider island life, in general, and Whidbey specifically for fans and employees in the area.

There are many economic forces affecting Whidbey Island. Some are local things we can influence. Some are global yet consequential. The only constant is change. One thing that probably won’t change is the fact that we’ll continue to live during Weird Years For Whidbey Real Estate.

The following is the narrative associated with the slides. (See below for a direct link to the presentation slides.) The narrative and the slides can pair well with the video.

  • Weird Years For Whidbey Real Estate – September 2022 = understatement
  • Affordability is part of the situation, and other trends are shifting things, too.
  • Is the market slowing? Prices are up! And there’s more to the story than that.
  • When someone says ‘the market’ is slowing they can mean many things.
  • The market is not about a house, and even computers can disagree about a simple house.
  • Yes. Prices are up, and if they’re slowing, it’s slight – for now.
  • Even the monthly variation in prices does not show a dramatic downturn – yet.
  • All properties (houses, land, et al.) are up on a yearly average:
    • South Whidbey $638,250 | +26.4%
    • Central Whidbey $484,000 | +15.2% (with a hint of a slowdown in the graph)
    • North Whidbey Is $462,500 | +12.8%
  • Houses
  • Houses only:
    • South Whidbey $685,000 | +12.3%
    • Central Whidbey $550,000 | +3.1% (There’s the slowdown, but still up.)
    • North Whidbey $489,500 | +12.4%
  • Houses Price per Square Foot don’t show the slowdown.
    • South Whidbey $386 | +12.9%
    • Central Whidbey $331 | +11.8%
    • North Whidbey $289 | +9.5%
  • Days On Market remains about a week, on an annual basis.
  • Days On Market has turned to about two weeks in the last few months, but that remains far below pre-pandemic levels. Somewhat of a slowdown.
  • Inventory is up! but has fallen far in the last decade.
  • Months of Supply is considered normal or balanced around 3 to 6 months. We’re at about ~1 based on the last year.
  • Months of Supply is up to ~2 based on recent months. Somewhat of a slowdown.
  • How much is the median price Sold versus the Original price? For a while it went above 1, but now it is back within 1% of that. Somewhat of a slowdown.
  • Within the last month or two, it is back below 1, but not by much. Somewhat of a slowdown.
  • South Whidbey
  • The prices at the upper end of the market, using waterfront as a proxy, has slowed somewhat in the last month or two; but not the rest of the market continues to climb – for now.
    • Only Waterfront $1,200,000 | +12.1%
    • Exclude Waterfront $660,000 | +16.8%
  • Waterfront and luxury properties make the headlines, but the majority of the properties for sale are more moderately priced (though still high.)
  • Central Whidbey
  • Similar story, but with fewer transactions it is easier for one sale to swing the data.
    • Only Waterfront $1,182,500 | +31.0%
    • Exclude Waterfront $528,750 | +4.7%
    • All Properties $550,000 | +3.1%
  • Inventories remain low, but are rising for non-waterfront properties. Of course, it is hard to make more waterfront.
  • North Whidbey
  • In the last few months a spike in waterfront prices added over $100,000 to the Median Sales Price, but the overall price didn’t change because North Whidbey is dominated by non-waterfront properties.
    • Only Waterfront $1,024,000 | +20.5%
    • Exclude Waterfront $485,000 | +13.6%
    • All Properties $489,500 | +12.4%
  • Waterfront properties are ~one-tenth of the inventory. The largest recent increase is in the rest of the market, but is still below pre-pandemic levels.
  • Land
  • Land prices continue to be a jumble, but have been rising in general in roughly that last five years. North and South Whidbey Median Land Prices have finally risen above their 2008-ish peak.
  • Inventories remain low. Like with waterfront, it is hard to make more land.
  • Median Days On Market are now less than a month, something that is uncommon.
  • Island Comparison
  • Maybe there’s a slowdown on Vashon and San Juan, but Bainbridge and Whidbey continue to climb – at least based on yearly data. Whidbey remains the least expensive.
  • Whidbey also remains the largest island market and shows the largest inventory increase.
  • City Comparison
  • Comparing Whidbey to Bellingham, Everett, and Seattle, Whidbey remains the least expensive based on yearly data.
  • Based on monthly data, those mainland cities are seeing Median Prices drop; but not Whidbey.
  • All seem to hint at increasing inventory, which should moderate prices; but inventory levels remain low, especially when compared to ten years ago.
  • Pacific Rim
  • No update to the data from previous presentations, but Whidbey Island remains surrounded by millions of people; so, a very small percentage of them being interested in a more rural lifestyle can mean high demand, which can keep prices higher.
  • Rural Distancing
  • Whidbey may seem expensive, but it is less expensive than Seattle and Seattle is less expensive than many places in the Pacific Rim economy. Business relocations?
  • Island Demographics And Economics
  • Salaries and home values (not the same as sales prices) are higher on the south end.
  • Whidbey is becoming less affordable, and that is more so on the south end.
  • Vacant homes limit housing. North Whidbey is at ~10%, close to the national norm. Central Whidbey is 24% vacant. South Whidbey has risen to 38% vacant, up from 27% vacant about a decade ago.
  • Population continues to grow.
  • North Whidbey’s median age (~31.3) is younger than the national median (38.2), and Central (58.6) and South (57.5) are about one generation older. This tends to influence income (work versus retirement), spending (setting up households versus less need for basics), and financing (borrowing versus cash).
  • Scenarios
  • The only constant is change.
  • The pandemic continues, and is affecting services, employment, businesses, supply chains, and rural distancing.
  • Military activities continue to shift through personnel deployments, noise studies, and technology changes like drones.
  • Tourism is back, but business interruptions offer fewer things for tourists to do.
  • Economy and sustainability shift as businesses close from the pandemic, the Great Resignation, Quiet Quitting, supply chains, and retirements. Do new owners have to be rich enough to buy old businesses that they don’t need to run a business? Who can step in? Chains?
  • Mother Nature still affects us daily.
  • Whidbey is attracting refugees from many parts of the world for many reasons.
  • Cultural changes are happening, but technology’s changes may be easier to see.
  • Whidbey Island is changing. The world outside the island is changing more.

Whidbey Real Estate – Weird Years – September 2022 (pdf, 62 slides)

Whidbey Real Estate – Weird Years – September 2022 (video, 1 hour 19 minutes)

Nods and bows to the folks at Freeland Library and the Sno-Isle Library system for hosting the conversation.

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