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Residential (Un)Real Estate

Many real estate agents experienced in selling homes on the Eastside likely can describe all kinds of market cycles, from bubbles to busts. But few have seen anything quite like what’s being experienced today.

Jump To:
  1. Factoring in Factoria
  2. Selling Luxury
  3. Q&A: Michelle Cooper, Windermere Real Estate
  4. Q&A: Mike Garrett, Mike Garrett Associates
  5. Q&A: Freddy M. Delgadillo, Judah Realty

Real EstateA strong economy, brisk population growth, and meager housing stock have resulted in record-breaking home prices on the Eastside. According to the Northwest Multiple Listing Service (MLS), the median price of a single-family home on the Eastside rose nearly 17 percent, from $803,500 to $938,240, between December 2016 and December 2017, and more than doubled the price recorded in 2011 — $460,000 — which was the last time the median price was in decline.

Meanwhile, less than one month’s supply of homes is available for purchase. In other words, if no new homes were listed for sale, the existing number of homes would be bought up in fewer than 30 days (the National Association of Realtors considers six to seven months of inventory to be a balanced market). According to data compiled by Coldwell Banker Bain at the end of 2017, 1,320 single-family homes were listed for sale in King County, and only 37.5 percent of those homes were on the Eastside. On average, King County single-family homes sold within 25 days, and within 28 days on the Eastside.

If you are buying a home, you are competing against multiple prospective homebuyers, ranging from foreign investors to tech industry workers who have relocated to the area from Silicon Valley. According to King County officials, the Eastside added 145,900 residents between 1990 and 2010. More recent data from the U.S. Census show King County’s population grew by nearly 37,000 people between July 2015 and July 2016.

“The biggest challenge for most buyers is wrapping their heads around paying these numbers for these houses,” said Sam Chapin, a real estate advisor at Engel & Völkers on Mercer Island. “The second biggest challenge is being competitive when making an offer in a bidding war situation. It’s tough for a lot of folks to waive all contingencies and pay cash for homes that range from $900,000 (and up), but they are finding themselves faced with that choice. For sellers, the challenge is figuring out where to go. There is almost no reason to sell because it’s so tough to find something to buy.”

What is it like to buy and sell a home on the Eastside?

To answer that question, we turned to real estate agents in Bellevue, Bothell, and Redmond to get a sense of what they are experiencing on the ground. We also spoke with a development team who had to get creative when looking to build a new townhouse community that would pencil out. Also, we spoke to the real estate agents who sold the most expensive homes on the Eastside last year, and were surprised to learn they face their own set of challenges. Finally, we crunched the numbers and looked at trends and data that help illustrate the Eastside’s residential real estate market.

2017 Eastside Home Sales by City and Type


Bellevue

Average sold price: $1.3 Million

Number of homes closed: 1,427

Average days on market: 21

Current inventory in units (on the last day of 2017): 60

Inventory change over last year (on the last day of 2017): -4.8 Percent

Average price change over previous year: +20 percent


Mercer island

Average sold price: $1.884 Million

Number of homes closed: 351

Average days on market: 45

Current inventory in units (on the last day of 2017): 31

Inventory change over last year (on the last day of 2017): -27.5 Percent

Average price change over previous year: +14.7 Percent


Bothell

Average sold price: $647,000

Number of homes closed: 1,874

Average days on market: 21

Current inventory in units (on the last day of 2017): 89

Inventory change over last year (on the last day of 2017): -1.1 Percent

Average price change over previous year: +18.3 Percent


Duvall/Carnation

Average sold price: $628,000

Number of homes closed: 2,276

Average days on market: 32

Current inventory in units (on the last day of 2017): 115

Inventory change over last year (on the last day of 2017): -9.4 Percent

Average price change over previous year: +17.6 Percent


Kirkland

Average sold price: $983,000

Number of homes closed: 3,147

Average days on market: 18

Current inventory in units (on the last day of 2017): 152

Inventory change over last year (on the last day of 2017): +10.1 Percent

Average price change over previous year: +13.8 Percent


Issaquah/Sammamish

Average sold price: $977,000

Number of homes closed: 1,889

Average days on market: 26

Current inventory in units (on the last day of 2017): 83

Inventory change over last year (on the last day of 2017): -20.2 Percent

Average price change over previous year: +13.2 Percent


Data Source: Coldwell Banker Bain 2017 annual report

Factoring in Factoria

Out of necessity, one developer gets creative when building Eastside homes.

How industrious does a developer need to be to find land on the Eastside to build new homes?

Consider the Newport Terraces development site — once a thick, forested copse that split 129th Place Southeast, creating two unconnected ends, and situated south of T-Mobile headquarters, north of Coal Creek Parkway, and east of Factoria Mall and Interstate 405.

In January, construction was nearly complete on Newport Terraces’ 24 townhomes, which ranged from two bedrooms, two baths, and 1,893 square feet to three bedrooms, three baths, and 2,777 square feet, and were poised to sell for about $980,000 to just under $1.5 million each.

Real Estate

Windermere Real Estate brokers Melanie McCarthy, Randy Ginn, and Nico Lang.

“Originally, this was sort of a billy goat slope,” explained Randy Ginn, a Windermere Real Estate broker who worked with Kirkland developer Jim Tosti, president of Windward Real Estate Services, on finding land and developing the project. Ginn said this as he and his team — brokers Melanie McCarthy and Nico Lang — stood on the second floor of a model townhome still under construction, their voices echoing through unfinished rooms, hallways, and staircases. “It was a super-complicated piece of land to envision what to do with. Nobody wants to spend more money on a steep slope in a tough market.”

Real Estate

Scheduled for completion in March, Newport Terraces is a $30 million project that will bring 24 new townhomes to 2.5 acres of hillside overlooking Factoria. Photo courtesy Nico Lang.

Still, what other options existed? With moratoriums on new developments in Eastside areas such as Sammamish and Issaquah, and the price and availability of developable land becoming increasingly challenging, Ginn said Tosti needed to be creative.

“With the pressure on West Bellevue’s pricing, and subsequent pressure looking east toward Lake Sammamish, we decided this project would work,” explained Ginn, who noted that Windward Development Services purchased the property three years ago. “It’s a creative project in the sense that somebody took the gamble or had the vision — it’s a little bit of both — to say, ‘I can turn a treed hillside into 24 townhomes.’”

While other homes have been built on this hillside, Ginn said the $30 million, 2.5-acre Newport Terraces is the first new construction townhome project in Factoria that he could recall in the 30 years he’s sold real estate in the area.

It’s an odd location for townhomes, and uncharted territory for Newport Terraces developers and brokers. But Ginn, McCarthy, and Lang think the location — close to Interstate 405, Interstate 90, T-Mobile, Factoria Mall, Newport High School, Newcastle, and South Bellevue — will work to their advantage.

“All of us, every day, we kind of go back and forth,” said Ginn, as he referred to setting price points in the area. “Are we right? Are we wrong? Are we close? By March, we will know because we will be open. We will either have a ton of sales, or we won’t have a ton of sales.”

Selling Luxury

The Eastside residential real estate market is competitive, even in the upper echelons. How do you sell a $20 million estate?

Hint: Forget about open houses and ”for sale” signs.

The median price for a single-family home on the Eastside set a record in December when it reached nearly $1 million. But it wasn’t the only residential real estate record established on the Eastside.

In February, a homebuyer paid $26.75 million for a five-bedroom waterfront home situated on 2.5 acres in Medina.

Real Estate

Southhampton in Medina

Last September, another waterfront Medina mansion — branded Southampton for its shingled, Cape Cod-style architecture that evokes the famous enclave of East Coast millionaires — sold for just under $24 million. It was built on 1.8 acres in 2015, and boasted five bedrooms, seven baths, a swimming pool, and about 9,000 square feet of living space.

In August, Bellalago — four bedrooms, eight baths, and 11,520 square feet of living space situated on 2.5 acres of waterfront Bellevue property — sold for $21 million.

Also in August, a four-bedroom, 6.75-bath Yarrow Point waterfront estate with 8,300 square feet of living space sold for $14.2 million.

How do you sell a home for $20 million or more? You don’t plant a ”for sale” sign in your front yard, host open houses on the weekend, or list your home on Zillow and wait for the offers to come in.

Eastside firms such as Avenue Properties, Berkshire Hathaway, Coldwell Banker Bain, Engel & Völkers, Windermere Real Estate, and others are experienced at selling high-priced luxury real estate.

It’s a whole different arena, but familiar turf for Avenue Properties’ Team Foster — the mother-daughter team of Tere Foster and Moya Skillman — the listing broker for three of the five most expensive homes sold last year on the Eastside, including the Southampton and Bellalago homes.

For Foster — who started her career in real estate 31 years ago, and recalled being stunned back then when a waterfront home in Medina sold for $4 million — and Skillman, it’s all about client discretion, confidentiality, and trust.

Bravo TV’s series Million Dollar Listing might feed a biologically craven and tabloid-laced interest within ourselves to gawk at and admire luxury real estate, but that Hollywood over-dramatization does not depict how the most expensive homes are sold on the Eastside.

“We definitely have a more understated wealthy community here,” explained Skillman. “When you are an agent at this level, you have to operate with complete confidentiality.”

Real Estate

Bellalago in Medina, photo courtesy: Team Foster and Avenue Properties

Foster added, “Maybe it makes for good television, but we don’t operate that way. Those TV shows make me crazy. That’s not how it works.”

In some instances, homes at this price level may not be listed at all. Instead, a campaign of quiet and off-market sales is launched when a luxury home is available for purchase, and a homeowner will contact an agency, such as Team Foster, to say: I’m interested in selling, but I don’t want to be on the market. Do you know anyone who might be interested in buying?

Often, Team Foster will because they are already familiar with the properties out there, who the buyers are, who they are working with, and can connect those dots.

For last year’s $24 million sale, Team Foster spent several months preparing to put the home on the market: meeting the homeowner to learn more about the history of the property, such as design decisions and building materials used during construction; working for an extended period with a photographer and videographer to create a marketing plan; and finally hosting a launch party that invited a select group of real estate agents to tour the home, and think about clients who might be prospective buyers.

“Maybe it makes for good television, but we don’t operate that way. Those TV shows make me crazy. That’s not how it works.”

In the end, a serious buyer emerged, visited the home several times —in daylight, at nighttime, and in good weather and bad — to get a more rounded sense of the property and its environs, and negotiated a purchase offer. According to Skillman, Team Foster spent about six months preparing the home for sale, but it was on the market for about one month before it sold.

“Most properties in that category would take about two years to sell,” added Skillman. “But this house was a fit for quite a few buyers in the market. The home is in an area everyone wants to be in, and it’s a very rare piece. The stars just kind of aligned on that one.”

Are there commonalities between selling one home for $20 million, and another home for one quarter of the price?

“Regardless of price point, every home is special, of course, and many of the stages are the same,” said Skillman. “You get an offer, you negotiate with the other party, and you reach an agreement. But with these higher-end homes, some of them are on the level with a commercial building. They use a commercial contractor, they have commercial systems, their HV/AC system and technology are what you would see in a major office building. It’s just a very complex property.”

Both types of homebuyers require significant financial investments, but luxury homebuyers almost always pay in cash.

A lack of inventory is a challenge for both buying tiers, too, but for different reasons. The prize for luxury home-buyers is property along Lake Washington. For many reasons, the available amount of these properties is finite.

Often, waterfront property will remain with the family for many decades and several generations. Team Foster has sold homes listed for the first time in 40 years. In the 31 years Foster has sold property, she’s sold the same Hunts Point parcel only twice in her career.

If homeowners can acquire their neighbor’s property, they will, thereby expanding their waterfront footprint, and further limiting the amount of available waterfront property for a long time.

Real Estate

Moya Skillman and her mother, Tere Foster, comprise Team Foster at Avenue Properties. Last year, Team Foster sold the Eastside’s most expensive home.

“Here’s a great way to think about it,” said Foster. “Everybody knows Bill Gates lives in Medina, and he probably has close to 10 acres of property that he’s been able to assemble over time. Jeff Bezos owns a good 10 acres of Medina waterfront, as well. That’s 20 acres of Medina waterfront gone, out of inventory, and not coming on the market. When you go around the lake and you look at who owns some of these pieces, there’s no reason they would ever sell them. Where would they go?”

One recent weekend, Foster and Skillman took a prospective buyer on a tour of Eastside waterfront luxury homes. “There was a total of five houses we could show them — on or off the market,” said Foster. “Buyers get disenchanted. They don’t understand why, if they have all this money, they can’t write a big check and have 20 things to choose from.”

All of this points to another record-breaking Eastside home sale at some point. That record-breaking $23.4 million Southampton home Team Foster sold last year? Skillman believes Team Foster could have sold five of them in this cash-rich, inventory-pinched market.

Is there a limit to how much Eastside luxury homes could fetch?

Consider Foster’s example of the Medina waterfront residence owned by the famous Microsoft co-founder. He spent seven years and $63 million to build the 66,000-square-foot home (nicknamed Xanadu 2.0).

“It could sell,” said Foster. “We do have home sales in the United States (that) are $175 million now. I think his home is certainly in that range. It’s not one of those properties that you would do some kind of math based on the market. If it ever became available, which I doubt, someone would buy it because they could say they bought Bill Gates’ house.”

Most Expensive Homes Sold On the Eastside in 2017


#1

location: Southampton, Medina

Specs: 5 bed, 7 bath, 1.8 acres

Price: $23.375m


#2

Location: Bellalago, Bellevue

Specs: 4 bed, 8 bath, 2.6 Acres

Price: $21m


#3

Location: Yarrow Point

Specs: 5 bed, 6.75 Bath, 1.25 Acres

Price: $14.252M


#4

Location: Medina

Specs: 4 bed, 4.75 Bath, .35 Acres

Price: $8.948M


#5

Location: mercer island

Specs: 5 bed, 4.25 Bath, .5 Acres

Price: $8.2M


Data Source: Team Foster and King County assessor

Q&A: Michelle Cooper, Windermere Real Estate

Michelle Cooper
Windermere Real Estate
mybothellhomes.com

Real Estate

Michelle D. Cooper Photo

425 BUSINESS: The median price of a single-family home on the Eastside reached record highs at the end of last year. How do you account for this?

MICHELLE COOPER: It remains a matter of supply and demand. Low inventory is causing buyers to pay a premium for a home they have been waiting for to come on the market. Inventory levels will most likely remain low this year, and buyers seem keenly aware of their dilemma. We will probably see a continuation of rising housing prices until there is some inventory relief.

425 BUSINESS: Are we experiencing a real estate bubble?

COOPER: I do not believe we are in bubble territory yet. A strong economy, low interest rates, and a tremendous demand for housing will continue to fuel this real estate market until something changes.

425 BUSINESS: Tech industry workers and foreign investors are often cited as driving the Eastside’s surging residential real estate market. Is that an accurate assessment? Are there other factors out there that are driving the demand?

COOPER: I think it is an accurate assessment, in part. We have seen a large influx of cash in our housing transactions from foreign investors, and the tech industry is undeniably a moving force in our area. However, there are other factors. New construction has not kept pace with demand for a variety of reasons. Baby boomers are holding their property longer as they approach retirement, adding to the shortage of inventory. And millennials appear to be distancing themselves from the housing downturn and are now entering the market as first-time homebuyers. All of these scenarios have created the perfect storm for the real estate market we see today.

425 BUSINESS: What are some of the biggest challenges facing homebuyers and sellers?

COOPER: The biggest challenge for buyers is trying to compete against multiple offers, and their ability to qualify for loan amounts driven by accelerating housing prices. For sellers, they will have a difficult time finding housing that fits their needs and at the price they are willing to pay. Low inventory levels will now be their nemesis.

Q&A: Mike Garrett, Mike Garrett Associates

Mike Garrett
Mike Garrett Associates,
mikegarrettassociates.com

Real Estate

Photo courtesy Mike Garrett

425 BUSINESS: The median price of a single-family home on the Eastside reached record highs at the end of last year. How do you account for this?

MIKE GARRETT: Real estate pricing on the Eastside has been driven primarily by a severe supply-and-demand imbalance. As long as there are buyers with the willingness and ability to meet current and future price increases, it’s difficult to imagine things changing in the near or midterm.

425 BUSINESS: Are we experiencing
a real estate bubble?

GARRETT: I disagree with the assessment that we are in a bubble. We have solid fundamentals driving the market. Strong employment growth projections will continue to drive demand, and well-paying jobs will support pricing.

425 BUSINESS: Tech industry workers and foreign investors are often cited as driving the Eastside’s surging residential real estate market. Is that an accurate assessment? Are there other factors out there that are driving the demand?

GARRETT: It is accurate that tech industry workers are a significant driving factor in the residential real estate market. Foreign investment has been a significant driver, and continues to be a factor. However, we’ve seen the percentage of home purchases by foreign investors decline over the course of the past couple of years. I see this as a positive trend for the Eastside housing values, as owner-occupant demand provides for a more stable market than one driven primarily by investment and speculation.

425 BUSINESS: What are some of the biggest challenges facing homebuyers and sellers?

GARRETT: Inventory is still the leading challenge for buyers. For sellers wanting to move up or down in the area, inventory also impacts their ability to relocate.

Q&A: Freddy M. Delgadillo, Judah Realty

Freddy M. Delgadillo
Judah Realty,
judahrealty.com

Real Estate

Headshot courtesy Freddy M. Delgadillo

425 BUSINESS: The median price of a single-family home on the Eastside reached record highs at the end of last year. How do you account for this?

FREDDY M. DELGADILLO: The Eastside has one of the most robust employment markets in the country, with a growing workforce talent and tech presence. These employees want to live on the Eastside due to schools, shopping, parks, and easy access to either State Route 520 or Interstate 90. We are a few years behind in new homes being built, and that’s putting an upward pressure on home values. The thirst for new construction is high, and we need two to three times the inventory to satisfy people’s home needs. There just isn’t enough land to build or possible sites to build on. I anticipate the median home value on the Eastside will pass just over $1 million within the next 12 months.

425 BUSINESS: Are we experiencing a real estate bubble?

DELGADILLO: We are not having a real estate bubble. The bubble we had in 2009 was, in part, (due to) bad loans and bad practices. That’s not the case this time around. There are many steps one must go through to obtain a loan, and the biggest favor is “skin in the game” — a larger down payment. People don’t just walk away from large down payments.

425 BUSINESS: What are some of the biggest challenges facing homebuyers and sellers?

DELGADILLO: For homebuyers, there are multiple offers in the $1 million to $1.5 million price range on the Eastside, and most of these homes sell for cash or large down payments. Even when homebuyers “win” the home and get their offer accepted, they still have to inherit the home’s deferred maintenance, or else the seller will sell it to someone else. Also, after buyers spend time and money finding a home, they’ll do an inspection, and that runs around $500 to $800. If the inspection is poor, they walk away and have to invest another $500 to $800 (to inspect another home).

For individuals selling homes in today’s market, (they find themselves) in the mix with all the other buyers. They are either looking to upgrade or downsize, and that’s a hurdle for them knowing that inventory is at an all-time low. Sellers are looking to cash out and get as much as they can for their home. But they are frustrated that they, too, have to pay the price that other sellers are asking.