I live on Hood Canal near its northern end, and distribute a quarterly postcard summarizing the waterfront and water view properties available or sold in my extended neighborhood over the previous quarter.  In this post, I'm taking the analysis one step further, reviewing the 2010 performance statistics of the market for waterfront property in the same neighborhood. Specifically, on the east side of the canal the analysis covers the waterfront neighborhoods between the Hood Canal Bridge and the Bangor Base. On the west side of the canal, it covers the neighborhoods along the canal between the village of Port Ludlow and South Point.

In order to understand the performance of 2010 we need to look at some history first. In the subject area of Kitsap County, unit sales of waterfront property peaked in 2006 at 53 units, then dropped by over 50 percent to 21 units in 2007. By 2009 waterfront home unit sales were down to 11 units, 79.2 percent below the peak in 2006. Then in 2010 the sales jumped by 63.6 percent to 18 units, not a high number by historical standards, but a clear improvement.

The price picture for the subject area was more surprising. The average selling price, following a trend opposite that of the sales volume, continued to increase overall from 2006 through 2009, with the 2009 average price coming in at 70.2 percent above the 2006 level. But that changed in 2010, the average selling price falling by 18.6 percent compared to 2009.

From a seller's perspective, 2010's rise in unit sales indicates market improvement, but the price reductions mean market deterioration. However, taken together the sales volume and price trends make more sense. Many waterfront sellers initially tried to wait it out, keeping their prices high through 2008 and 2009. A few owners were successful in selling, most often because they were selling prime properties that offered a fair value.  That kept the average selling price high. But many more were not successful because the asking price did not meet buyers' expectations or abilities to borrow funds in the new lending environment. The sales volume dropped as a result. By 2010, more sellers began to grow tired of waiting and lowered their prices more. The sales volume increased at the new price levels and the average selling price fell.

 

The average selling price statistics in Jefferson County are more confusing. Unlike in Kitsap County, the average price plummeted after 2007, with the average selling price in 2009 still 31.2 percent below the 2006 level. Then in 2010, the average price jumped by 67.7 percent over 2009 levels.  Did the value of a Hood Canal waterfront home just jump by over 60 percent? The short answer is, no it didn't. What did happen was a change in the mix of the caliber of properties that sold. During the period from late 2007 to late 2009, sales of higher end waterfront homes virtually stopped, and the overwhelming majority of the waterfront homes that sold were lower end homes. That made the average selling price drop significantly. Then in 2010, as in Kitsap County, many sellers grew tired of waiting for the prices to come back up and began to price more in line with buyers' expectations. As a result, several upper-end waterfront properties sold, and the average price rose sharply.