Northwest
Luxury Living Anacortes, Skagit & Island Counties
Main Office: 4100 194th St. SW Ste. 135 Lynnwood, WA 98036 | Local Office: 809 7th St. Anacortes, WA 98221
Luxury Defined The term luxury is used so often in marketing it can be difficult to discern the attributes that truly are luxurious. What defines luxury to one person may actually be undesirable to another.
To define luxury in the real estate industry, we tend to separate properties priced in the top 10% of the hyper-local market, and then analyze those most expensive properties for features that convey quality, superior materials, exceptional location, and elegance
(formal or casual). There is a well known marketing idiom, “Luxury sets the price; price
does not set the luxury.” Luxury is determined by elements of singularity, desirability, craftsmanship, source of materials, and location of the property.
Some standards of luxury change over time and some remain constant. A Rolls Royce
has always signified luxury, but Mercedes Benz has lost prestige over the years as a
result of creating more affordable products that appeal to the masses. The same is true of real estate.
Luxury homes, by definition, do not appeal to the masses. This makes luxury real estate
singularly unique as each home is a one-of-a-kind. Like a Rolls Royce, architectural homes by talented architects tend to have timeless appeal. An older architectural home might have materials that do not meet today’s definition of a luxury finish, but
such a home would be valued above a spec home with the latest trends in materials. The luxury real estate market is driven by factors beyond simple supply and demand.
Outside factors create a real estate market impacted by buyers that consider foreign markets, tax reform, tariffs, and the stock market, when making purchase decisions.
We hope you enjoy this snapshot of the luxury real estate market in Northwest Washington.
Jean Groesbeck Global Luxury Director Coldwell Banker Bain
Comparison of Luxury Real Estate Sales By Units County King Pierce Snohomish Skagit Island Anacortes
# Sales # Sales # Sales Highest Sale >$1M >$3M >$5M 3984
187
39
$
26,750,000
116
1
0
$
3,000,000
211
2
0
$
3,250,000
26
1
0
$
3,150,000
41
1
0
$
4,375,000
16
1
0
$
3,150,000
January 1, 2018 - August 31, 2018
King County has experienced phenomenal growth in sales greater than $1 Million, a price point that is “affordable” for high paying tech jobs. The highest dollar sale so far this year through August was in Medina at a whopping $26,750,000. The second highest sale was $18 Million at Hunts Point, while the third highest was a Laurelhurst waterfront at $11 Million. Real Estate advertising might give a false impression of the Seattle-Bellevue market. There are 24 properties priced $11 Million or more currently on the market. This is over a 5 year supply, which makes it very much a buyer’s market for these uber-luxury homes (6 months is a balanced market).
Luxury Real Estate: Like all Real Estate, it is controlled by Supply and Demand The pricing of luxury products, like all products, is based on supply and demand. In the general luxury market outside of real estate, short supply is often artificially created in the same way that “Limited Edition” commands a higher price. In real estate, the supply of homes in a desirable location, waterfront and view properties are always in higher demand due to limited supply. Real estate is cyclical, typically in 10-year cycles. The recent surge in sales of luxury homes has surpassed the 2007 levels, and the sales statistics have some wondering if the luxury real estate market has peaked. Perhaps in some areas of the country, but probably not in Northwest Washington. SUPPLY ONLY SLIGHTLY IMPROVING The supply of new high-end single-family residences will continue to be limited in the Northwest. New construction in the metro areas are becoming focused on multi-family units as older homes are torn down replaced by duplexes, triplexes or even denser housing. Housing units are increasing, but construction of luxury single-family residences will be dictated by demand.
WANING DEMAND Luxury residences may have less inventory pressure than recently, as home prices became so high they are unsustainable. Since 2000, the population in King County has grown 26% putting pressure on all housing segments, but especially for higher-end homes. The average tech employee’s annual income is $113,610. If 2 members of the household work, their combined income supports a higher house payment especially with the current low interest rates, but not to the level of recent price escalations.
Another element of supply is that in 2000, there were approximately 35 million residents over 65 in the US. That number is up to 49.2 million. This number is an important statistic in that these older home owners are far less likely to move, and home buyers in this age group say that they are purchasing their “forever home”. These “age in place” homeowners create a lack of inventory turnover which impacts high-end real estate.
The buying frenzy of luxury homes has cooled. Investors and speculators from China are no longer able to move their money out of China into the United States. Inventory in the greater Seattle-Bellevue area is building, but it is still a seller’s market for high demand locations when a property is priced right. Seattle recently experienced the first month in years in which there were more people looking to move outside of Seattle than into the city. Rents came down for the first time in years as well. This could be a market correction or a leveling out, and which of these scenarios is true probably depends on the market niche of the product; the type of home or location. If the market is at its peak for a real estate product, we will not know until the prices come down. Careful analysis of current market conditions as well as competition is essential for determining the correct market price whether purchasing or selling a home.
In King County in the year 2000, there was one home for sale for every 230 people. In 2018, there is one for every 1060. This short supply has caused bidding wars, price escalations (up to 40% over list price in the last three years) and ultimately a migration north to the more affordable Snohomish, Skagit and other outlying counties. Overall, inventory is increasing and appreciation is currently stalling.
The New Luxury Home Buyer Who Are The Luxury Home Buyers in Skagit & Island Counties?
Buyers of luxury homes in Skagit and Island Counties are seldom “move-up� buyers as are buyers in urban markets. In our market, past luxury buyers have been typically purchasing a vacation home, second home, or a future retirement home. 2018 saw a dramatic shift in buyer demographics to a younger buyer who either has the ability to work from home, telecommute, owns a home based business, or will be retiring soon and will commute for a year or two until they retire. These buyers desire what is reflected in the national trends of what is popular with luxury buyers. They prefer homes that are not huge, in fact, larger homes (over 4,000 square feet) are often more challenging to sell. The homes need to have exceptional quality, kitchens with open floor plans, and special attributes such as outdoor living areas, spectacular garages, exercise rooms, art studios, meditation rooms, quiet spaces as well as entertainment areas. The location, the view and the lot must be amazing.
Skagit & Island Counties Luxury Market Snapshot
January 1, 2018 - August 31, 2018 Compared to Prior Year
Snohomish County is experiencing a rapid increase in population that is not well supported by the current infrastructure. Heavy traffic, high taxes, and a sudden sharp reduction in the quality of life has caused an influx of Snohomish residents into beautiful Skagit County. The number of telecommuters in Skagit County is estimated to have increased from 3% ten years ago to almost 10% in 2018. Buyers moving from Snohomish County to Skagit and Island Counties can afford higher value homes because of the value of the home they are selling. This has contributed to higher prices in our Counties. January through August of 2016, there were only 12 homes over $1 million sold in Skagit County. In 2017, that number increased to 14 and increased to 26 in the first 8 months of 2018. This spike in the sale of homes over $1 million is also reflected in Island County where the $1 million sales for the first 8 months of this year were 41 vs 23 in 2017 and 22 in 2016 As we enter 2019, it is more likely we will see a stall in appreciation of real estate. We will not see the crash that happened in the last decade as that was a result of the meltdown of the mortgage industry. Luckily, safeguards are in place to prevent that occurrence. The bar will continue to move up for the definition of luxury, and that definition will continue to vary by not only demographics, but buyer to buyer. The constants in the future of luxury will continue to include location, architecture, functionality, and the perceptions of buyer on the lifestyle the home will provide in addition to the potential appreciation of the property.
Our Luxury Sales Team National trends vary greatly from our local trends, but they are likely predictors of the future local luxury buyer. If you are thinking of remodeling or selling your home, please contact us now so that we can help you get the most from your real estate investment. If you are considering a purchase, let us help guide you through the process to achieve your dream. Your definition of luxury might be the fulfillment of a lifelong dream, a magnet for friends or grandchildren, or a home that makes your life easier so that you can travel and pursue hobbies. We would be honored to help you find the home for the lifestyle you visualize. We know the past, current, and most likely future trends for the luxury real estate market in our area.
Team Groesbeck
Taby Perron
Jean Groesbeck
Eileen Hebert
Summer Heaton Follow us on social media
If you are currently working with a broker, this is not intended to solicit your business