By Mike De Felice
Special to Kitsap Daily News
PORT ORCHARD – Given there are relatively few homes on the market and prices are surging higher, trying to purchase the perfect home at the right price in Kitsap County these days is a lot like winning the Powerball lottery.
“It’s challenging but not impossible,” says Doug Miller, a veteran Realtor and owner of South Kitsap Properties in Port Orchard.
The number of homes on the market today in Kitsap County is down roughly 30% from last year. Meanwhile, the price tag on the average home sold in the county rose to $588,000 this year, sharply higher from $447,000 prior to the pandemic, the 47-year-old real estate broker said.
While it’s a seller’s market right now, it is still a good time to buy, Miller insists.
“I feel bad for buyers that have been in the market these last few years,” he said. “The prices are appreciating so quickly, and certainly out-appreciating where pay raises are at, regardless of your profession. Housing is becoming less affordable.
“Now, that said, I still think that people who buy homes now are in a good position. Not just for resale but that the cost of borrowing money is so inexpensive — interest rates are 3% and under — that it has provided a number of families an opportunity to buy a house and see significant savings on interest payments.”
He said a homebuyer who has mustered the courage to enter the current competitive market and ended up signing closing papers is going to realize, at least for the foreseeable future, a likely increase in their investment.
A Kitsap County home has increased in value an average of 14% since last year, Miller said. In South Kitsap, a typical home appreciated 20% in value. “You won’t find a single investment, other than maybe cryptocurrency, that has met that kind of traditional return. That is incredible.”
Such strong returns on investment are apparently not a new phenomenon.
The value of a typical home in the county has virtually doubled in value in the last 10 years, Miller said. Whether such increases will continue is anyone’s guess, but Miller said industry experts predict property values will continue to appreciate for another two to three years.
Still, it’s wise for prospective home buyers to understand there are times following periods of soaring home valuations in which prices can drop – or the bubble bursts – leaving some homebuyers realizing they overpaid for their residence. The most recent example of that happened between 2008 and 2011 when home values in the county dipped 11%, he said.
Know what to expect
While it may be daunting to wade into the competitive homebuying arena, for those willing to run the gauntlet, it is important to understand what to expect. Setting realistic expectations upfront can help avoid getting frustrated later.
“It’s helpful for the buyer to understand that there is a possibility that they may get outbid on homes and have to keep looking,” Miller said.
“We always joke with our buyers [that] there is plenty of fish in the sea, and I’d say it’s the same thing with houses too. While certainly there hasn’t been as many homes on the market, there are more homes hitting the market every day and every week.”
Just be aware that bidding wars are commonplace.
“The majority of homes are selling at or over the asking prices,” he said, adding this practice has been a mainstay over the past three years.
To formulate a competitive bid, a real estate agent will examine sale prices of comparable properties in the area and review trends in the marketplace, Miller said. It’s also possible for a buyer to put in an escalation clause in which, say, the bid for a home is $500,000 but the offer can go up to $550,000. The higher bid is triggered only if another offer comes in over the asking price, Miller explained.
He said preparation is important in the real estate game.
Getting a preapproved loan, preferably with a local lender, will avoid needless delay during the bidding process, he said. Coming to the table with a larger down payment is also a plus.
Down payments have doubled in the current market, Miller said. These days, down payments of between $20,000 and $50,000 are fairly common in a typical purchase, he said.
Many buyers are able to come up with higher down payments because they were able to save money during the pandemic when traveling and entertainment expenses were put on hold.
Another reality of today’s market is, while the inventory of available homes is low, the few homes put on sale are selling faster. Buyers are unable to take a lot of time to ponder whether a home is worth bidding on.
The length of time a home is on the market is significantly shorter. “You pretty much need to make an offer really quickly. It is fast-paced,” he said.
“In Kitsap County, the days on the market [for a home] is basically two weeks. That is 40% less than it was last year.”
And because the county is such a draw for homebuyers, the time properties remain on the market has steadily decreased since 2012. Given the speed that homes are snatched up, some folks have even waived pre-offer inspections to boost their chances of success, though Miller recommends buyers always get an independent inspection when possible.
Alternatives do exist
Since the pandemic, the real estate market comes with a slew of challenges, and some buyers have had to change up their strategies to buy their forever home now.
“The alternative for a number of buyers may be to find a rental. A lot of times we have told buyers, ‘Hey, if you can, finding a short-term rental wouldn’t be a bad idea because that gives you more time to find a home that’s a good fit.’”
Another modified approach some buyers take is to expand their search.
“We are finding that as housing becomes less affordable, or more scarce in areas, buyers are having to go a little further out to find something available that meets their budget.
“People that are maybe looking in Silverdale are now looking in Seabeck or towards Kingston or Suquamish. People looking in Port Orchard and Olalla may all of sudden be looking at Belfair or Allyn or Key Peninsula.”
One approach that Miller discourages is the idea of purchasing a lot to build a home on.
“That is extremely difficult for a few reasons. The most desirable lots already have homes on them. People looking for land generally have to go further out to find it.”
And even if a good lot is found, there could be significant obstacles to its use related to wetland or erosion zones that complicate permitting.
In addition, he notes, “It will be a challenge to find a builder. Because of so much new construction, finding a contractor and subcontractors available and willing to take on single-family homebuilding is hard because they all are doing large developments now.”
Why so hot here?
Kitsap County is considered a hot real estate market. That’s due in part to the pandemic, which had made many businesses realize that employees don’t always need to come into the office, Miller said.
“That more people now have the ability to work from home has driven a significant number of buyers to Kitsap County.”
Also, buyers get more bang for the buck in the Kitsap Peninsula and the life it offers is attractive to families, he added.
“Buyers want to come to an area where they get more house and land for the money. They can have views here they could never afford in Bellevue, Seattle or Tacoma — at much more affordable price point in Kitsap County.”