Skagit County On The Move by Skagit Publishing

2017 SPECIAL REPORT Skagit County

On the Move

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2017 SPECIAL REPORT: Skagit County On the Move

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2017 SPECIAL REPORT: Skagit County On the Move

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CONTENTS Skagit County On the Move.................................................................................................... 4 Decisions in unusual market hinge on past, present, predictions............................................ 5 Hot market follows slow recovery............................................................................................ 8 In this market, it’s all about the timing.................................................................................. 10 Builders find they can’t build fast enough to meet buyer demand......................................... 14 Rising mortgage rates worry buyers, but not enough to slow market pace............................. 18 Army reservist buys home while deployed in Afghanistan...................................................... 19 Seattle price pressure moves north...................................................................................... 21 Investment pays off for local couple after retirement............................................................. 22 Skagit County Brokers’ Top 5 Advice List............................................................................... 23 A good first impression can make a difference..................................................................... 23 Summer is a good time to sell.............................................................................................. 24 Rentals in short supply everywhere, contributing to sales gridlock......................................... 25 How a construction company started and grew during the Great Recession.......................... 26 When could the real estate market start correcting?............................................................. 28 The dream that almost got away........................................................................................... 29 Accessibility key issue for seniors......................................................................................... 30

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EDITOR: Colette Weeks WRITERS: Colette Weeks, Aaron Weinberg PHOTOGRAPHERS: Scott Terrell, Jake Tull PRODUCTION: Jody Hendrix ADVERTISING DIRECTOR: Duby Petit 2017 SPECIAL REPORT: Skagit County On the Move

REAL ESTATE: Skagit County On the Move

roperty moves fast in a hot real estate market, but what happens when there aren’t many homes to sell? Gridlock, frustration and inflation, according to the Northwest Multiple Listing Service, which reported in June that inventory remains tight, and prices continue to rise. That’s the case right now. Builders can’t get new homes built fast enough. Sellers are holding off on listing their homes. Buyers are grabbing them up quickly, resulting in bidding wars, particularly among “lower”-priced homes. Potential buyers waiting for the market to cool have another important element to consider — rising interest rates. The same supply-and-demand situation that has made Seattle the No. 1 real estate market in the country has made an impact to the north, all the way to Skagit County. The question everyone wants to know, but no one can answer with clarity, is what happens next. Is this area, the state or even the nation, again in a real estate bubble — that precarious position where the market expands so much that it bursts? Expert opinions are mixed and never as accurate as hindsight. Some markets aren’t experiencing anything like the type of growth occurring in the Puget Sound. But there are things the average buyer and seller here should know as they head into this heated market. We aim to address some of that in this publication — not as a guide for what a buyer or seller should do, but as an explanatory snapshot in time — and what some people in the know are saying. Real estate has always been a bit of a gamble, but people have to live somewhere. They’re going to either rent or own. The best you can do is stay informed.

2017 SPECIAL REPORT: Skagit County On the Move

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New homes at Woodside are selling fast in this Mount Vernon development.

Decisions in unusual market hinge on past, present, predictions B

uy? Sell? Build? Those are significant questions these days. A lot of fence-sitters have been waiting and watching, hoping the answers might suddenly appear, but the pressure is on because prices are rising, and so are interest rates. There’s a glimmer inside the cloudy crystal ball, but what else is lurking in there? That’s where the experts come in — not that they have all the answers. But they do have some insight. James Young is research director at the Runstad Center for Real Estate Studies in Seattle, which is currently the hottest market in the nation. “The greater Puget Sound region is just booming,” he said, and it’s goskagit.com

spilling out far and wide. This region has been here before — in 2006 and 2007, before the bubble burst and the economy crashed. But things aren’t quite the same, and Young doesn’t think the Puget Sound area is in a bubble right now. There’s still tremendous employment demand. “The only way you can tell if you’re in a bubble is if demand stops,” he said. “It’s hard to say that we’re in a bubble as long as demand for employee talent is the way it is.” What’s more, lenders are being more responsible with their loans, said Zillow Senior Economist Skylar Olsen. “We don’t think a fall is coming because credit is not as loose as it

was before the collapse,” Olsen said. “People buying homes can afford them.” Employment and business growth is what’s pushing the market in Seattle right now, Young said. He points to Costco, Nordstrom and Amazon as a few of the businesses driving it. The area also enjoys a diversified economy, which helps protect it during periodic dips. “The one thing that you didn’t have when the music stopped in 2007 is a lot of employment growth — growth in wages,” Young said. The current market is geared toward what the Fed is going to do with interest rates, which have seen historic lows. They’re still low, running this

See Decisions, page 6 2017 SPECIAL REPORT: Skagit County On the Move

there for five, 10 years, there’s no good or bad time to buy,” he said. The house will gain equity just by paying down the mortgage over time. It’s rare for a house to be under water after a decade, he said.

Decisions Continued from page 5

spring at a little more than 4 percent for a 30-year conventional mortgage. But there is uncertainty around what happens next, Olsen said. “The Fed wanted those interest rates to go up, but they are still stable and affordable,” he said. Add to that pressures on wages and general inflation, which pushes up the cost of materials. Demand for construction creates a worker New Creations builder shortage, which also pushes up prices, John Moehl Young said. “It’s always a problem in real estate where the demand can change And even if the economy hits a quickly, but the supply can’t,” he said. bump, “you still have a house, and it So Young doesn’t think there’s a still has value,” Young said. bubble, but even if there is, the real Investing is another proposition key is being able to wait it out. altogether. “If you’re buying a house to stay

“Even if it goes down again, I think long-term we’re going to be OK.”

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Real estate cycles go up and down, and Young suggests that it’s safer to gamble on stocks or something that can be traded quickly. James McCafferty is director at the Western Washington University Center for Economic and Business Research. He notes that while the economy and real estate both always experience cycles, the speed at which things are happening has changed dramatically, and cycles can come around faster. “The economy is actually good,” McCafferty said. “We’ve seen sevenplus years of economic growth. Unemployment is extremely low. When you look at companies’ profits, things are extremely high.” But recovery has been uneven and stronger in metro areas where about half of the nation’s population resides. As people pour into Seattle to work, they’re finding that they have to go farther out to live. Welcome to Skagit County. But when it comes to jobs and wages, counties like Skagit and Whatcom have seen a slower bounce-back. That has changed the demographics of who lives in those areas. Young people are moving to the cities to find work, and more retirees are moving here. Still, all builders know that these cycles repeat themselves. The question is how deep an economic downturn could go. “Even if it goes down again, I think long-term we’re going to be OK,” said New Creations builder John Moehl.

June

Month Northwest Multiple Listing Service

2017 SPECIAL REPORT: Skagit County On the Move

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Cooper, a French Bulldog, will be moving into a new home at Twin Brooks in Mount Vernon with his owners.

Hot market follows slow recovery I

t took a decade, but home prices in Skagit County recovered from the Great Recession this year and passed the high they had reached before the economy went south. The median price in Skagit County had dropped by just over $100,000 in a few short years, and it’s been a slow climb back. But as of June, the median price had surpassed its peak before the big fall, reaching $325,000, according to NWMLS. Skagit County was second in the Puget Sound region in median price increase in the first quarter compared

to 2016, according to a May release from the Washington Center for Real Estate Research (University of Washington). Prices have risen 14 percent year over year, according to the release. Closed sales for this area also are steadily climbing. Wages, however, have not kept pace. The county isn’t alone. Standard & Poor’s CoreLogic Case-Shiller national home price index rose 5.8 percent in February — more than double annual wage growth. But here, the price of housing is climbing

even faster. Most would agree it’s been a long decade — a slow and painful recovery. But real estate is hot now. And in a predictable supply versus demand scenario, prices are rising partly because there aren’t enough houses for sale. It’s clearly a sellers’ market. So why is the supply so low? According to regional economists and local brokers and builders, there are many reasons, including: That wage issue. Even if they

See Hot Market, page 9 8

2017 SPECIAL REPORT: Skagit County On the Move

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Skagit County - June Median Price

Hot Market

350,000

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325,000

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make a profit, sellers worry about finding an affordable replacement home as housing prices grow faster than income; Homeowners who bought homes at historically low interest rates realize that after they sell, whatever they buy next will be at a higher rate; Uncertainty about the national political situation and its effects on the economy makes people nervous about making major changes. Homes that do hit the market get snapped up fast. Builders can’t make new houses fast enough. In Skagit County, in particular, builders don’t have enough land for which to build due to zoning laws. In the Northwest, new listings in April dropped nearly 8 percent from the same time last year. Home inventories are also measured in “months of supply,” meaning the number of months it would normally take to sell homes currently on the market. Six months is typical in a healthy market. But the supply in Skagit County dropped to two months in June, and even lower in some areas. “We are having bidding wars on reasonably priced homes,” said Sara Fish of Preview Properties Skagit. “There’s just not much inventory.” Blake Boatman, owner of Re/ Max Gateway in Anacortes, said he doesn’t remember a time with tighter inventory. Just before the housing bubble really burst 10 years ago, inventory dipped to as little as 4.6 months in Skagit County. In 2008, inventory soared to over two years.

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It’s been under four months in parts of the county since early 2015. “If you’re a seller, that’s great news,” Boatman said. Guy Davidson, owner of John L. Scott in Anacortes, noted that Skagit County is influenced by the Seattle market, which is currently the hottest market in the nation. It has less than a month of inventory at about three weeks, according to NWMLS. Statistics bear that out. The highest median price remains King County at $560,000, a year-on-year increase of 15.5 percent, and Snohomish County grew 14.4 percent. Both low inventory and proximity to Seattle are likely behind the rapid price growth here, according to the Center for Real Estate Research. Wilma Louia, owner and manager broker of RE/MAX Territory NW in Burlington, said that likely won’t change soon. “I don’t have a crystal ball ... but

experts are telling us we still have a couple years of this,” Louia said. The downside is that the median price in the area is already beyond affordable for a large part of the working population, said BYK Construction owner Paul Woodmansee. He said new homes can’t be built affordably due property, permitting and other costs. A median price means half of sales were higher and half were lower. While buyers may find a house listed under the median, many are getting offers higher than the list amount. “We are getting into multiple offer situations,” said Lana Thompson, managing broker at Coldwell Banker Bain in Anacortes. As a result of the rising prices, wealthy retirees and those moving north from Snohomish and King counties will continue to be one of

See Hot Market, page 13 2017 SPECIAL REPORT: Skagit County On the Move

Sheila and Coll Donoghue just bought a new home at Twin Brooks in Mount Vernon.

In this market, it’s all about the timing T he old real estate mantra of “location, location, location” has experienced a rewrite, at least for a while. Right now, in Skagit County and much of the Northwest, it’s “timing, timing, timing.” For buyers, it’s about being prepared, watching listings like a hawk, being on-call for viewing opportunities and making snap decisions about an offer. For sellers, it’s about asking the right price and making sure there’s somewhere to go before putting the house up for sale. If you’re looking to move across town, plan ahead for your next move. Buying is a chal-

lenge, and rentals are scarce. Real estate agents in Skagit County have seen the tempo increase over the past couple of years, with things launching into top speeds this spring. Summer hasn’t seen much of a change. For the agents, it means staying diligent on behalf of their clients. Anacortes John L. Scott agent Allen Workman said he checks for new listings multiple times every day as he watches for something that might suit his clients. If he finds something, he encourages them to see the property as soon as possible, preferably the same day.

2017 SPECIAL REPORT: Skagit County On the Move

He and other agents agree that buyers need to have their finances in order before they begin. Getting pre-approved is better than getting pre-qualified, and going through the underwriting process early is even better, said Amber Soria of Soria Real Estate in Burlington. “Your number one priority should be getting full underwritten approval,” she said. “That puts your file in front of an actual lender so they can solve any issues up front so when you get to the loan process, it’s as smooth as possible.” That matters when there’s more

See Timing, page 11 goskagit.com

Skagit County - Months of Supply / June

Timing

15 14.3

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Months of Inventory

12.2 than one offer on a house, which has happened with frequency in recent 10.8 months. 10.2 10 9.4 The winning bidder may or may not have the highest offer. It may be 8.4 the offer most likely to close quickly. 6.6 Another key for buyers is that they know enough about what they 5.7 5.4 5.2 really want and can truly afford that 3.8 they can make a fast decision they won’t regret later. 3.1 2.3 “Be ready to pull the trigger,” said 2 1 Blake Boatman, owner of Re/Max 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Gateway in Anacortes. And streamYear line the offer. The less complicated Northwest Multiple Listing Service it is, the more attractive it will be, he said. want the house, he said. It may or to predict what will lead a seller to A potential buyer might even may not have infl uence, but it’s hard want to write a letter as to why they See Timing page 12

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2017 SPECIAL REPORT: Skagit County On the Move

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work,” she said. Beyond price, she said sellers should make sure their homes are decluttered and that the landscaping Continued from page 11 makes a good first impression. Remove family photos from the choose one buyer over another, he walls and personal items that make said. it more difficult for a potential buyer Soria said buyers need to have the right mindset when entering such to imagine their own furniture in the home. a competitive market. Buyers in the “Even if the home is dated, if it’s area have reported making numerous offers on homes before sealing a deal. cleaned and decluttered, that’s what buyers are looking for,” Thompson “You have to be willing to be said. disappointed in this market,” she One tip Dominic Pettruzzelli of said. “Your head has got to be in the Keller Williams Western Realty in game.” As for sellers, they should under- Burlington tells his clients to help stand that while it’s a sellers’ market, make a home look more modern is to they should be realistic about pricing, make sure the walls are painted light blue or gray. said Lana Thompson, managing “You can get more value out of broker at Coldwell Banker Bain in your home that way,” Pettruzzelli Anacortes. said. “It looks more rich that way ... “Buyers are very well informed these days. They’ve done their home- Eggshell white can look cheap.”

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Finally, be ready to move. In some cases, sellers are able to sell and then rent back for a couple of months, but people often have to be prepared to move twice — once when they sell and then after they buy. “It’s a dance,” said Anacortes John L. Scott owner Guy Davidson. Beyond luck with timing, the key is having finances in order at the start and a plan for transitioning from seller to buyer. Sellers get most of their action within the first seven days a home is listed, Soria said, so it’s important to be ready to move. “It’s going to be gangbusters within the first couple days,” she said. “And we have a lot of more cash buyers now. That means you’ve got to be ready to get out of your house within 10 or 15 business days.”

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Hot Market Continued from page 9

the pillars of the area’s economic strength. “I think home prices are going to continue to stay strong, and there’s going to be a continued (housing) shortage,” Davidson said. But will it last? The rapid price hikes and growing competition among buyers to find a home has made some people nervous. After all, the bubble that burst after the highs of 2007 is still fresh on many minds, and some wallets have still not recovered. Many people left the real estate and construction industries as a result. That’s contributing to a current labor shortage in the construction field. But local real estate brokers, builders and regional economists say the situation today isn’t the same as a decade ago. Nate Scott of Windermere in Anacortes said the market pace feels a lot like 2006 and 2007, when appreciation was “happening so fast that you worry about a correction at some point.” The outlook is different this time, he said. Lenders are doing a better job of vetting buyers, and employment is strong. “If you look at a period of 20 years, appreciation isn’t crazy. It just feels like it because we’re in a swing,” Scott said. “We dropped quite a bit (after 2007), so the market had to make up some of that ground to get back to even.” Will there be some leveling out in home prices? All agree there will, though no one can be sure when. Scott said Windermere’s economists are saying to expect price ingoskagit.com

“I think home prices are going to continue to stay strong,

and there’s going to be a continued (housing) shortage.”

Guy Davidson, owner of John L. Scott in Anacortes

creases of 4 to 5 percent in 2017, with more growth possible in 2018. John Moehl, a builder and coowner of New Creations, rode through the storm of the past decade and said his current outlook is that nationally, there are signs of a slow-

A balanced real estate market has about six months of inventory.

down. But Washington’s been the best real estate market in the country, with no signs of change. “Western Washington’s just exploded,” he said. “... When Seattle slows, that’s when we notice. But Seattle has not slowed down.” Median price for closed sales in the Anacortes area was $425,000 in June.

Skagit County has less than two.

Median price for closed sales in Mount Vernon was $311,000 in June.

Skagit County was second in the Puget Sound region in median price increase with 14 percent to $298,900 in the first quarter.

Median price for closed sales in Burlington was $261,000 in June.

Statewide, the median price rose 12.1 percent to $324,300.

Median price for closed sales in Sedro-Woolley was $270,000 for June.

The highest median price remains King County at $577,300.

Source: Washington Center for Real Estate Research and Northwest MLS 2017 SPECIAL REPORT: Skagit County On the Move

Workers roof and frame a new home at Woodside on Monday in this new development in Mount Vernon.

Builders find they can’t build fast enough to meet buyer demand K

ristopher Yaun, owner of Keystone Building Services, dropped by one of his home-building sites on West 2nd on a May afternoon in Anacortes, where four houses in various states of development were under way. Workers were busy on all four — hammering, nailing, digging. One house was nearing completion, and two lots down, crews were digging a deep hole, which would soon be filled with concrete to prepare the foundation for another. Two of the houses were already committed to buyers. Yaun said he typically only builds 14

custom homes, but in this real estate market, he felt confident enough to invest in a couple of spec homes, as well. He has no worries these houses will sell. He’s more concerned about finding property for the next one. Meanwhile, his dance card is filling up for the year anyway. In fact, Keystone has work lined up through April 2018. That’s the story for builders all over Skagit County.

The Snohomish, King County migration Coll Donoghue and wife Sheila Donoghue organized boxes inside the garage of their new home July 18

2017 SPECIAL REPORT: Skagit County On the Move

in Mount Vernon. Their dog Cooper sat lazily in the shade, panting with his tongue drooping out. “We closed just last week,” Coll Donoghue said. “We’ve got some work to do.” The couple relocated from Snohomish County to retire here, moving into Landed Gentry Homes’ new active adult community called Twin Brookes off Division Street. It’s one of two neighborhoods Landed Gentry Homes, the largest builder in the county, is constructing off Division Street, with as many as 256 lots.

See Builders page 15 goskagit.com

Piles of soil at building sites at Woodside obscure homes already constructed Monday in this new development in Mount Vernon. for Skagit County’s plummeting inventory. As of June, the inventory was at two months. A balanced market should have six months. Continued from page 14 Landed Gentry Homes has several other developments throughThose homes, said owner Brian out the county, including a 30-home Gentry, are usually sold before they development called 48 North near are even completed. the Washington State Ferries landing “We are in an unprecedented in Anacortes. There will be some pretime,” he said. “There is very little sales as well as some built and then inventory.” The Donoghues entered a lottery sold, Gentry said. They are also eyeing a project system to get their home and luckily with about 32 lots near the Skagit the exact home they wanted. Golf & Country Club, awaiting About two-thirds of the home buyers for those two Landed Gentry county approval. Gentry said he’s constantly lookHomes neighborhoods are from Snohomish or King County as those two ing for individual lots because larger expensive, fast-moving markets push tracts are becoming more difficult to find. buyers further north, Gentry said. For now, though, new construction It’s a win-win for buyers like the is not likely to be in the category of Donoghues, who are usually selling much more expensive homes to move affordable. “Given what it takes to build new here. That migration from more heavily homes, it’s a very expensive process,” he said. populated cities is part of the cause

Builders

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Fees, demand drive up costs BYK Construction, the secondlargest builder in the county, is set to hit 60 homes this year, said owner Paul Woodmansee. That’s tied for their most in a year. “The demand is there,” Woodmansee said. “If the demand wasn’t there, you aren’t building that many.” Their biggest development is SummerSun Estates off Martin Road in Mount Vernon. They are halfway done building out that lot, which caps off at 89 homes. Woodmansee said most of his homes are between $325,000 to $500,000. Gentry said their homes in Mount Vernon are about the same. “You can’t find anything new below that,” Woodmansee said. One chief reason for a lack of new homes in the affordable $200,000 range in Mount Vernon are the city’s impact fee costs, builders say.

See Builders page 16

2017 SPECIAL REPORT: Skagit County On the Move

Even smaller companies are passing on jobs they had to rely on in the past. “We’re trying to fill with jobs Continued from page 15 that don’t take as much time and “Fees in the city of Mount Vernon energy right now while it’s so busy,” said John Moehl, co-owner of New are among the highest in the state,” Woodmansee said. “It’s definitely the Creations. He and brother Steve started the highest in the county.” company about 10 years ago with a Those impact fees — for things focus on custom homes and renovasuch as traffic impact, water meters and others — add about $30,000 to the cost of a home. “Before we get off the ground we are buying a piece of land for $60,000 to $120,000 and we also pay those mitigation fees before we start the project,” he said. “Then you are at $150,000 to even start a house.” State energy code requirements can also add $10,000 to $20,000 depending on the size of the house, he said. The energy code is designed to make new homes more efficient. Brian Gentry, So depending on the square footage owner Landed Gentry Homes of a house, builders must install more expensive utilities like a tankless hot water heater or a heat pump, Wood- tions. “Every year we think it can’t get mansee said. any busier, and it does,” John Moehl Brian Johnson, owner of Anacortes Construction Services (ACS), said. “We average two to three homes said prices keep rising even during a a year, but it’s just exploded in the last two years or so.” build. “That’s uncontrollable exScott Irving of Irving Construcpense,” he said. tion in Anacortes has concerns about Price instability and concern what the rising prices will do to the about the economy has kept some community as a whole. people from committing to homes For now, Irving said he tries to not yet built, he said. provide the best value he can. “I have met with several people “Hopefully the economy is going in the last three months who said if I had a house ready today, they would to be good to everybody — buyers and builders alike, and we can get buy it today. But they’re hesitant to some houses built and moved in the go into a six- to eight-month build next year or two. “ process,” Johnson said. Still, there’s plenty of work — A business remodel enough that many builders say they “It’s the busiest I’ve seen it,” said won’t take projects under $100,000 or Greg Kreider of Kreider Construcjobs like kitchen and bath remodels tion in Anacortes. that can take a lot of time. Kreider has seen the ups and

Builders

“Seeing new neighborhoods with hundreds of homes at a time is not going to happen.”

2017 SPECIAL REPORT: Skagit County On the Move

downs in the 25 years his company has been building here, but the latest upturn has not propelled him to go out and purchase property for spec homes. His company is sticking with the model that got them through the Great Recession — custom builds and renovations. “A great mentor called me in 2008 and said, ‘Things are changing, and you better adapt,’” Kreider said. As a result, his company made a decision to be debt-free. They did carry some property through the recession, but developed a business plan that doesn’t keep their money tied up. “What we do well is build and remodel homes,” he said. Woodmansee, too, said his business thrived when he and his brother founded it in 2008 as others faltered. Scott Irving has worked in Anacortes since 1989 and finished several developments, including Cedar Glen, The Meadows and The Orchards. With recent completion of The Orchards, he’s working on a much smaller, eight-lot subdivision called Northview in Anacortes. Irving said developable land in drying up. As a result, his company’s business model is changing, too. “We are starting to get into remodels quite a bit more,” he said. Rising land prices are an issue — what was $35,000 for a raw lot is now often well over $100,000. Add to that the limited labor pool, which was made shallow first by the long-lasting recession and is hampered now by extreme demand, and the cost to build grows. Gentry said builders will have to get creative if they want to find another large lot on which to develop. “Finding the right stuff is becoming a lot trickier,” he said. “Seeing

See Builders page 17 goskagit.com

New homes at Twin Brooks are under construction in this new development in Mount Vernon.

Builders

Continued from page 16 new neighborhoods with hundreds of homes at a time is not going to happen. I think you’ll see a lot more five- to 10-home lots.” He said the cities with the most room for growth are Mount Vernon and Sedro-Woolley.

Affordability Anacortes has the highest median price of homes in the county at $504,000 for active listings, according to Multiple Listing Service for June. Business is good largely because new people are moving there, said Nels Strandberg, owner of Strandgoskagit.com

berg Construction. Most are baby boomers with money to spend. “Anacortes has gone from being a little sleepy retirement community because it was a good deal to being a place where they want to be when they could be anywhere in the world,” he said. His company has about 80 lots set for building, with a focus on custom homes. Prices range from $650,000 to $1.8 million for his new homes. Areas he’s now developing include Rock Ridge and Leeward. For many people coming from some other states, those prices still seem like a good deal, Strandberg said. Mount Vernon’s median price for

active listings is at $380,000 for June, according to MLS. His company’s Mount Vernon homes start around $325,000. Gentry’s homes range from $320,000 on the low end to about $600,000 in Mount Vernon. In Anacortes, the company is building water view homes in the $650,000 to $850,000 range. Homes in Burlington might be a little more expensive, with a median price of $500,000 for active listings in June, according to NWMLS. Those prices may seem high for those living here, but they are a bargain for many moving from Seattle, Gentry said. “They really appreciate that lowkey nature of affordability,” he said.

2017 SPECIAL REPORT: Skagit County On the Move

Rising mortgage rates worry buyers, but not enough to slow market pace

bout half of potential homebuyers consider rising interest rates to be one of their top concerns, according to a recent survey from Zillow Group Mortgages. This is the first time in several years interest rates have been a major worry. The recent mortgage rate increases have been a direct result of the U.S. presidential election and federal rate hikes in December 2016 and March 2017. But interest rates aren’t what worry Skagit County brokers most.

“I can say with absolutely certainty that people will buy houses and get mortgages even when interest rates are high,” said Blake Boatman, owner/broker with Re/Max Gateway in Anacortes. “The first house I sold was in 1989, and I got those folks an FHA loan for 12 percent. The market was hotter than a pistol.” Families grow and shrink, he said, and interest rates are just part of the equation. In a market where prices are climbing, those rates do affect how much house people can afford.

2017 SPECIAL REPORT: Skagit County On the Move

Because additional federal rate increases are expected in the near term, interest rates have the potential to have a serious impact on overall affordability, especially since prices are still rising fast. “Affordability is still low in our area because of interest races,” said Dominic Pettruzzelli, broker at Keller Williams Western Realty i n Burlington. “People have to keep that in mind in deciding what they can afford.”

See Rates page 20 goskagit.com

Army Reservist and former Marine Jeff Haugland, 26, sits in front of the house he purchased while he was deployed at a German base in Afghanistan.

Army reservist buys home while deployed in Afghanistan MOUNT VERNON — When Jeff Haugland learned his offer on a twostory Mount Vernon home had been accepted, he didn’t know exactly how to celebrate. The 26-year-old army reservist and former Marine was deployed at a German base in Afghanistan, and those he worked with didn’t speak much English. “Home ownership is a hard thing to explain to them,” Haugland said. goskagit.com

“The language barrier is huge.” Nevertheless, Haugland was excited to learn in October that he’d have a house to come home to when his deployment ended in November. Buying a home while deployed is an interesting process, Haugland said. He never even had a chance to see the house in person before buying it. Instead, he relied on his real estate agent to send him realistic photos and videos. Online photos from

the seller don’t always do a home justice, as they are often doctored up, Haugland said. “I’d look online and the pictures would look bright and great,” Haugland said. “Then (my agent) would send me a video, and it would show what the house really looked like.” That enabled Haugland to know what he was getting.

See Reservist page 20

2017 SPECIAL REPORT: Skagit County On the Move

Rates

Continued from page 18

Mortgage rates rise and fall daily, but have been on an upward trend compared to a year ago.

The Zillow Group survey was conRates hovered in relatively ducted among respondents currently stable territory through the searching for or buying a home. spring, with 30-year fixed Their top concern was their ability conventional loans at 4 to 4.5 to find an affordable home considerpercent, and 15-year fixed ing the low inventory (65 percent of closer to 3.5 percent. respondents), followed by worries Market Watch reported over interest rates (53 percent). that the national average In spite of these worries, most dropped below 4 percent for a potential homebuyers don’t expect conventional 30-year fixed rate any immediate changes to their plans. in mid-May. More than four out of five buyers (83 But the drop was temporary percent) intending to make a purchase within the next three years plan as rates started climbing again as the market heated up with to stick to their plans even if rising the summer and the Federal rates increase their monthly payment Reserve raised its rates. Early by $100. July saw rates rising again, and Nearly half (49 percent) would there may be another Fed hike continue with their plans even if the on the horizon. rising rates add an additional $200 to Sean Becketti, mortgage buyer their monthly payment. Still, rising Freddie Mac’s chief economist, rates will have an impact. A quarter said the higher mortgage of respondents stated they would rates reflect higher global consider looking for a smaller home interest rates, according to The or a home in a cheaper community if Associated Press. monthly payments were to increase The Fed is likely to lift rates by $100. That number rises to 38 peragain as the U.S. economy cent if monthly payments increased remains strong. by $200. Still, it’s important to remember By June, loan rates were that historically, interest rates have generally about a half a been much higher. percentage point higher than the same time in 2016. “Credit is still cheap today, relative to historic rates, so acquiring a The good news for buyers is home loan in 2017 still makes sense,” that rates are still at historic said Eugene Gamble, an internalows — for now. tionally renowned real estate and financial investor based in London. Rate hikes this year may motivate “With confidence in further economprospective buyers and sellers to ic growth, a strong U.S. dollar, and get off the fence before rates creep the influx of money flowing into the further north. country, 2017 should be considered Report by CTW Features and a very favorable year for getting a Skagit Publishing staff home loan or refinancing.” 20

2017 SPECIAL REPORT: Skagit County On the Move

Reservist Continued from page 19

He said it wasn’t always easy communicating with his agent and his mother, who helped him look at homes. The time zone difference and internet problems meant he had to sometimes wake at 1 a.m. Haugland used a Veterans Affairs zero down-payment program, something that Burlington’s Brown-McMillen Real Estate co-owner Ron Wortham said is a valuable tool to veterans and active service members across the county. “For some, that’s their only resources, actually,” Wortham said. “Even their monthly mortgage rate will be lower than the normal buyer.” Haugland said he had enough money saved while on duty to be able to make a down payment but was glad he could avoid it. “It’s definitely nice to not have to put all my money into the house,” he said. Haugland plans to stay put for a while as he finishes studying accounting a Skagit Valley College. He’ll transfer to Western Washington University later. He said he might not redeploy for another two years. “But you never know,” he said. “Everyday, the news is saying something.”

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Seattle price pressure moves north S

kyrocketing prices in King County are prompting househunters to head north, experts agree. The median price for a singlefamily King County home in the spring was $625,000 and was still rising by early summer. That’s pushing prices up in Skagit County. Agents and builders report they’re getting many customers from King County and beyond. “About two-thirds of our buyers are folks moving from Snohomish and King County,” said Landed Gentry Owner Brian Gentry. “They are selling their homes and enjoying brand new ones in Skagit County and have extra money left over for retirement. It’s been a real good win for those folks.” Will it continue? Brokers don’t see much changing soon. “I think this market, at least through 2018, is going to keep going,” said Lana Thompson, managing broker at Coldwell Banker Bain in Anacortes. Guy Davidson of John L. Scott in Anacortes thinks prices will moderate, but said he’s generally positive about the long-term prospects. Dominic Pettruzzelli, former president of the North Puget Sound Association of Realtors, said many see Skagit County as one of the last, most affordable areas in the Pacific Northwest. “If you are willing to commute, it’s an extremely good place to buy,” Pettruzzelli said. Skagit County is also sandwiched between two more expensive markets in Snohomish and Whatcom counties, with median prices that are $110,000 and $15,000 goskagit.com

“About 2/3 of our buyers are folks moving from Snohomish and King County.” Brian Gentry, owner Landed Gentry Homes

higher than Skagit County’s, respectively. In Gig Harbor, Re/Max principal managing broker Dick Beeson predicts a tight market all year. “The end game for the rest of 2017 is clear: More scarcity, more angst by buyers, more reluctance to sell among sellers because they can’t find their next home,” Beeson told Northwest MLS.

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Jack Hartt and his wife bought a home in Mount Vernon in 2011 for his son to live in. When they recently sold it, it gave them enough equity to purchase this house in Sedro-Woolley.

Investment pays off for local couple after retirement SEDRO-WOOLLEY — Six years ago, Jack Hartt was looking to buy a house for his son to rent. Hartt and his wife settled on a three-bedroom rambler in Mount Vernon for $122,000. “At the time, real estate was at the absolute bottom,” Hartt said. “I mean, prices literally started going 22

up the next month.” That well-timed investment paid off in April when the Hartts sold the home for nearly double the price. That enabled them to buy a retirement home in Sedro-Woolley. “I was floored,” Hartt said. “We put it on the market, and by the next day we had three offers over asking price.”

2017 SPECIAL REPORT: Skagit County On the Move

That’s been the norm for sellers in Skagit County, as high demand and low supply has driven up prices. “Things don’t look like they are going to change soon, either,” said Amber Soria, president of the North Puget Sound Association of Realtors.

See Investment page 23 goskagit.com

Investment Continued from page 22

There’s currently less than two months of supply of homes on the market, well below that of a balanced market of six months’ supply, Soria said. Closed sales have outpaced new listings for over a year, according to Northwest Multiple Listing Service. Hartt didn’t think the Mount Vernon home would have been such a great investment when he first bought it. “We basically just bought it for our son to use,” he said. “We knew we would have to eventually buy a house for ourselves because I’m retiring.” The Hartts have lived at a stateowned house on Pass Lake for his job as Deception Pass State Park manager. The Sedro-Woolley house is the first home they’ve owned and lived in. Living in the Pass Lake house for free gave them more flexibility than the average seller, enabling them to move right into their new home after selling. Most home owners sell their house first, then rent for months before finally buying another home. The new home fit their budget well, Hartt said, as Sedro-Woolley is more affordable than Mount Vernon, Burlington and Anacortes. The new home came furnished, something the Hartts appreciated. Hartt and his wife also enjoy the spacious floorplan and backyard, perfect for their large family gettogethers. “We have six kids, so we have large gatherings,” he said.

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SKAGIT COUNTY BROKERS’ TOP 5 ADVICE LIST BUYERS 1. Get finances in order first. 2. Be ready to view properties quickly. 3. Be ready to make your best offer early. 4. Keep your offer as simple as possible. 5. Be ready to make a fast decision. SELLERS 1. Know where you’re going before you list. 2. Declutter; hide personal items. 3. Price realistically. 4. Prepare to move. 5. If you’re buying a home next, get finances in order.

A good first impression can make a difference

eal estate brokers will advise sellers to save themselves some time and possibly money in the pre-closing period by getting any necessary repairs done before listing a house. For a house in pretty good shape, here is a list of things that will help your home make a good first impression without taking too much time or breaking the bank before the “For Sale” sign goes up.

Inside • • • • • • •

Clean and neat (including closets) Free of photos and personal items No evidence of pets Open blinds for natural light Neutral tones Furnished to show a room’s purpose, but space for buyer’s imagination Smells good, but not like perfume

Outside • • • • • • •

Nicely landscaped yard House numbers easy to see House, driveway and deck pressure-washed An inviting entrance; a new “Welcome” mat Fresh stain on aging decks Fresh paint on front door and trim Clean windows 2017 SPECIAL REPORT: Skagit County On the Move

Summer Sun Estates in Mount Vernon is one of the larger new developments under construction.

Summer is a good time to sell S

ummer tends to usher in a rush of new listings as the weather warms and the sun shines its flattering light on homes, according to local real estate agents. The numbers for listings this year support that idea, with 442 active listings in Skagit County for June compared to 362 in May and 327 in April, according to Northwest Multiple Listing Service. There are several reasons for the summertime uptick in home listings. The biggest reason is that it’s easier to move when kids are out of school, said Assistant Manager at Preview Properties Skagit Sara Fish. 24

“I think absolutely the drive is the schools and people not wanting to pull their children out of the district during the school year,” Fish said. “I think that has the highest bearing.” As one would expect, the pleasant weather also plays a role, said RE/ MAX Territory NW Ow ner Wilma Louia. “People come out of their cocoons when the weather changes,” Louia said. “Depending on the weather, listings can start heating up in spring all the way through fall.” Homes also simply look better in the summer, especially if surrounded by rich, blooming foliage, Fish said.

2017 SPECIAL REPORT: Skagit County On the Move

It’s also more motivating to want to move when it’s not pouring rain outside. “It’s not so bad in the summer when you want to move all your furniture,” Fish said. “Also, typically the sunshine provokes happiness. It’s human nature.” Though summer is a prime time to list a home, Louia said she sells homes year round. And in this market, where demand is greatly outpacing supply, anytime is a good one to sell. “I think a lot of it is psychological,” Louia said. “I’ve sold plenty of homes in December.” goskagit.com

Rentals in short supply everywhere, contributing to sales gridlock R ent prices are climbing, and inventory keeps dipping close to zero for homes to rent in Skagit County. The shortage mirrors the low inventory of homes for sale, and it’s creating problems, particularly for people looking for affordable housing. “I use the word ‘crises’ for rental housing,” said Ron Wortham, co-owner of Brown-McMillen Real Estate. “People are begging for rentals.” Added Lynn Lang, owner of Dream Catcher Property Management, “I’ve been renting homes for 25 years, and I’ve never seen it like this.” People call the office daily, Lang said. She manages about 35 properties in Anacortes, Oak Harbor and Coupeville and often has nothing empty. BYK Construction just broke ground on a 48-unit apartment complex in Sedro-Woolley and people are already calling to reserve spots, said owner Paul Woodmansee. “It’s desperate, really desperate,” he said. “We tell them we’ll get back to them when it’s done in November.” The state Department of Commerce cites several factors for such high rent rates, including low vacancy statewide, a construction industry

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“I’m wondering how did they even know we pressed ‘publish,’” Wortham said. “People want the places sight unseen and start filling out applications saying they’d pay more.” Very few tenants are moving voluntarily, Curtin said. With no real open rental homes, people are staying in the hobbled by the recession that’s unsame ones for longer instead of movable to meet demand and land use ing. Yet, some owners have decided issues. to sell while the market is hot, which The availability of rental homes is means their tenants have to go. at an all-time low, and that’s pushThat means higher rates for those ing up prices, said Peggy Curtin with that remain. Some landlords are Anacortes Property Management. raising rates without improving their At any given time, she has only units, Johnson said. And pet-friendly a couple homes available for rent homes are even harder to come by, among the more than 250 she manCurtis said. ages. Part of the depletion in rental Leonard Johnson, owner of Amerproperties in the area is a huge surge ican Dream Real Estate Services, said of new Navy personnel at Naval Air the median price of rentals right now Station Whidbey, Lang said. is about $1,500. As more Navy families move into “The rental market is stronger the area, they are looking for housthan I’ve ever seen it,” he said. ing off base, typically in Anacortes Prices are coming in $300 to $400 or Oak Harbor. But with high prices higher than what they were just a year there, families are moving as far away or so ago, Lang said. The downside is from the base as Sedro-Woolley, said that many people can’t afford a place Wortham. to live, she said. That isn’t likely to change anytime When a new rental is posted soon. online, people start calling almost im“I don’t see any real improvement mediately, Wortham said. in the near future,” Lang said. 2017 SPECIAL REPORT: Skagit County On the Move

How a construction company started and grew during the Great Recession

BYK Construction owners Paul and Tim Woodmansee started their business in 2008 when they built an entire house together. Now the brothers have ramped up construction to 60 houses in a year. MOUNT VERNON — After having roof trusses delivered to their first home build nine years ago, BYK Construction owners Tim and Paul Woodmansee looked at each other and asked, “Now what do we do?” The brothers, though familiar with construction, had never built a home. “We jumped in with two feet,” Tim Woodmansee said. “It was just 26

us.” The brothers turned that learning experience into the county’s second largest construction company, next to Landed Gentry Homes. BYK Construction started 60 homes last year and will start 60 again this year. Even more improbable, they started and built their business during the Great Recession as the hous-

2017 SPECIAL REPORT: Skagit County On the Move

ing market crashed. “A lot of the larger builders were fighting to make it,” Paul Woodmansee said. “Some went belly-up and left.” The brothers got started working for their father’s development company until the real estate market tanked around 2008.

See Company page 27 goskagit.com

Company

“It was a lot of hard work, a little bit of luck and keeping good relationships with everyone out there.”

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REAL ESTATE John L. Scott Guy Davidson 3201 Commercial Ave. Anacortes, WA 98221 360.293.2161 Davidson.guy@gmail.com Allen Workman John L. Scott 3201 Commercial Ave. Anacortes, WA 98221 360.770.4989 allenw@johnlscott.com Doug Geffe RE/MAX Gateway 914 15th St. Anacortes, WA 98221 360.770.1436 douggeffe@nwhomes.net

FINANCE Washington Federal Becki Bell 1501 Riverside Drive Mount Vernon, WA 98273 360.424.4440 becki.bell@wafd.com

2017 SPECIAL REPORT: Skagit County On the Move

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owners still needed to build homes.” Work grew steadily from there. In 2013, they signed a deal to build 10 homes. They hired three Continued from page 26 long-term employees. Their big breakthrough came in With little work to go around, 2015 after buying a large plat off Paul and Tim Woodmansee decided College Way in M ount Vernon. They to make work for themselves. They started 12 homes that year, then 60 bought a plat off La Venture Road in 2016. in Mount Vernon, subdivided it and They are again tracking toward 60 began building a 1,440-square foot this year. BYK Construction has 13 home on one of the lots. employees now. They knew “It was a lot how to do all the of hard work, a development work, little bit of luck but had little home and keeping good building experirelationships ence other than with everyone knowing how to out there,” Paul manage a job site. Woodmansee said. “We didn’t “When (the housreally know how ing market) turned to build a house,” around, we were Paul Woodmansee one of the few said. “We knew Paul Woodmansee working through how to manage a that period.” house and what it Now Paul and should look like Tim Woodmansee are back to managbut we didn’t know what to do.” ing home builds. But the experience Alone, the two of them built the they gained during their startup years house every day for six months. has been invaluable, they said. All the painting. All the flooring. “We have the base knowledge All the siding. now to walk through a house and “Each step of the way we had to figure out how to do it and why,” Tim see what and why things are done a Woodmansee said. “We learned best certain way,” Paul Woodmansee said. practices. That train of thought taught “We hold it all to a high quality standard. We have that experience and us the ins and outs of almost every we’ve made that mistake.” trade.” That first home they built has The home sold quickly for since sold twice. The original owners $235,000. The brothers made friends in the even came back to BYK Construcconstruction industry along the way. tion offering their praise and repeat Those connections proved important business. “They loved the house and it was as their venture grew. so well thought out the they wanted “We had a few friends that saw that we were one of just a few people us to build their dream home,” Paul Woodmansee said. building anything at the time,” Paul Woodmansee said. “A lot of property

When could the real estate market start correcting? T

reach a point where they will start here aren’t any signs the real pulling back on their expectations estate market will cool off in Skagit County as prices continue to rise while inventory plummets. It’s left agents, buyers and sellers wondering when the market could shift toward something more balanced. “All I can do is look at stats and pay attention to what analysts are telling us,” said RE/MAX Territory NW Owner Wilma Louia, echoing sentiments of agents across the county. Zillow Senior Economist Skylar Olsen, based in Seattle, has a couple predictions on what could spur the market toward a healthier balance. Skylar Olsen, “I don’t really know for sure, either, but we certainly have thoughts Zillow Senior Economist about where things are going,” Olsen said. The first indicator things could change would be a decrease in home appreciation, which would drop median home prices, Olsen said. The median home price has risen 13 percent over the same period last year in Skagit County, she said. She said home appreciation in the region has grown to unsustainable levels as buyers aggressively bid on homes. “Homes are getting a lot of bids so when a buyer misses out, they bid higher the next time,” Olsen said. “That dynamic makes housing appreciation go up.” She said buyers will eventually

“Homes are getting a lot of bids so when a buyer misses out, they bid higher the next time. That dynamic makes housing appreciation go up.”

2017 SPECIAL REPORT: Skagit County On the Move

for what they want to buy. It’s likely already happening. “What goes up must come down,” Olsen said. “Maybe too many people are overreaching when they want to win a bid.” The second factor that could pump the brakes on home prices would be rising interest rates. So far, creeping rates haven’t slowed the market. “When those go up as the Fed says they will, that should put a cooler on home price growth,” Olsen said. “It makes mortgage payments more expensive, which puts a damper on the price expectations. That could slow things down and make it easier for buyers.” Rising interest rates could be a double-edged sword, though. As they rise, homeowners may be less willing to put a home on the market, keeping inventory low. “You have home owners thinking they are sitting pretty with a 3 percent interest rate,” Olsen said. “They would sit on their home even longer ... There’s not a real rosy outlook.” If you want clues on the future of Skagit County’s real estate market, look to King County, Olsen said. “King County is the trendsetter,” Olsen said.

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The dream that almost got away

Brian Rice and wife Rose Schanen sit with their two sons, Elliott, 8, and Avery, 5, on the front steps of the home they bought this year.

heir dream house almost got away before they even had a chance to bid on it. But with some persistence and a bit of luck, Rose Schanen and husband Brian Rice are living in their dream home in Anacortes now. It started last year, when they decided to sell their home on Camano Island. They had both grown up in Anacortes and knew they eventually wanted to return to raise their own family. They accepted an offer on their house before Christmas and saw their dream home in the Old Town neighborhood about the same time — as soon as they started looking. In fact, it was the first house they went to see. goskagit.com

But they were too late. Someone had put in an offer already, so they had to decide immediately whether to submit their own offer. “It was the first one we looked at, so we were nervous,” Schanen said. So they waited and continued looking. They made an offer on another house at Campbell Lake, but were outbid. By then, they had seen some homes but were still wondering what had happened with that first house that caught their attention. “I couldn’t stop thinking about it,” Schanen said. Their broker, Elizabeth Bishop of Re/Max Gateway, found out that the

sale had hit a rough patch, so they made a back-up offer. It worked. “Thank God we knew our lender, and we had all our ducks in a row. We weren’t worried about our deal falling through,” Schanen said. The deal went through in February, and they couldn’t be more pleased, she said. The couple said their dream home needs a little work, but the house’s structure is solid, and it has a good roof. Rice said it wouldn’t be the first time he’s worked on a house, and he hasn’t been disappointed. “Just needs a little love,” Schanen said.

2017 SPECIAL REPORT: Skagit County On the Move

Accessibility key issue for seniors

n a place where more of growing part of the population is at retirement age, the demand for seniorfriendly housing will only continue to grow. That is certainly the case in Skagit County, where “main-level living” is a popular feature to mention in real estate listings. For many potential homebuyers, such features are essential. Rhonda Duffy, CEO/founder of Duffy Realty in Atlanta, says demand for appropriate housing for an aging population will be unprecedented in coming years. “Americans today are not only going into their golden years in larger numbers, they are going into them healthier than their predecessors – so they will be in their 70s,

80s, and 90s longer and have an even greater need for senior housing,” Duffy says. Her solution? “Make more money, prepare to retire later, and be nicer to your kids,” Duffy says, only half-jokingly. To remain living comfortably and safely in your current home, forward-thinking and key upgrades may be required, “including ramps, handicap-accessible bathrooms, converting a dining or living room on the main floor to a master bedroom, converting an unused bonus room as a potential bedroom for an overnight caregiver, and easy-tomaintain landscaping,” Duffy said. “When these upgrades would cost more than the closing costs, loan fees and real estate agent commissions to

2017 SPECIAL REPORT: Skagit County On the Move

purchase a comparably priced home that already has these senior-capable features, it may be better to purchase than renovate.” At minimum, three essential modifications should include grab bars in the bathroom, zero-access entryways, lever door handles and rocker (not flip) light switches, says Florence Kawoczka, executive director for Habitat for Humanity of Bucks County in Chalfont, Pa., which provides home modifications for older adults. “These are fairly low-budget, easy fixes homeowners can do on their own or have done quickly by a local remodeler that will allow them to age in place and maintain their independence,” Kawoczka says. Report by CTW Features goskagit.com

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