Mercer Island Real Estate Update, Part 1

It’s time for a look at the health of the Mercer Island real estate market. Windermere said, “September 2009 Awesome for Mercer Island!“

But was it awesome? Homes were indeed selling this summer:

With the exception of two bigger sales, $4 million was about the top of the market– Mercer Island’s biggest and blingiest homes either weren’t selling or were selling for much less than normal.

Comparing 2009 (YTD) to 2008

More interesting is to look at what homes have been selling for. Here I’ve broken it down by month and neighborhood.

Some interesting findings:

• Prices down: Though it’s hard to see in the line chart, prices have declined from 2008 to 2009. On the Island as a whole, the average price per square foot dropped from $440 per square foot to $341.
• Especially in South Island: South Island houses saw the biggest decline, from $485 per quare foot to $323 per square foot.
• Lower offers: As you might expect with these drops, owners were getting less than they listed their houses for. Average sale-to-original-list price dropped from 91% Island-wide to 87%. This means that in 2008, when an owner put a house for sale, the ultimate price would be on average 91% of the list price (excluding any price drops), but in 2009 the ultimate price would be only 87% on average.
• Volume down: 262 homes sold in 2008 and 176 have sold year-to-date in 2009, with about two months to go.
• More condos: Already 41 condos have sold on the Island vs. 27 last year, probably due to the new developments in the business district.

Methodology & sources: I downloaded the last two years of home sale records from Redfin and did a bit of analysis with them with Tableau Software. Areas are somewhat arbitrarily designated as North Island (north of SE 40th St), Mid Island (north of SE 60th St), and South Island (south of SE 60th St). And by the way, I’m not affiliated with any real estate organization, just a homeowner.

In part 2 we’ll look at listings: homes currently for sale on the Island.

What Should Go in the New Retail Space on North Island?

The construction on North Island is finally finishing up, opening up some new retail space.

Which begs the question: what should go in there? My top ideas are

• An independent bakery and coffee shop
• A Trader Joe’s, though I suspect Mercer Island is too small for it
• A killer dessert place. Could be a new ice cream place now that Maggie Moo’s is gone, or cupcakes, or just desserts.
• A great Indian place.

What we have so far is a new bank:

Useful but not high on the exiting-meter.

Leave a comment– what stores do you want to see in North Island?

Bonus Link: MIHS Can Write

Mercer Island resident Hannah Wood has just been selected as one of two new Youth Writers-in-Residence at Seattle’s Hugo House. If you’re not familiar with it, Hugo House is a well-respected center supporting writing and the literary arts. It’s a big honor to be named a writer-in-residence. Congratulations Hannah!

Mercer Island Real Estate: So Cold

Ken Glass tipped me off to this report by ZipRealty that cites Mercer Island one of the coldest real estate marekts in the Seattle area. By that they mean that buyers receive the greatest discount to list price. Well, Mercer Island does have a higher median sale price and high-end homes hurt the most in a downturn so that’s not too surprising. In this downtown, difficulty getting jumbo loans compounds the problem.

Here’s the data, this time from Redfin:

There are over 200 houses on the market here and 234 houses and condos in total, so we’re near our seasonal high. Redfin’s graph shows that was consistent with (slightly higher than) last year’s peak:

Mercer Island might be a “cold” market, but there are still plenty of high-end houses on the market. Some have been on the market over 400 days, but this one came on only about 40 days ago. At 0.6 acres of waterfront with over 7,600 square feet, it’s a bargain if you’ve got a little over $5 million to spend.
(both homes & condos)

The Modern and the Inane

It’s time for more house porn. First, from the blog of House and Home Design, a modern lake house by Hutchison & Maul Architects.


I love how the perspective of the living room draws you to the horizon:

There are more pictures on the architect’s site.

And some ranting on not-so-beautiful McMansions by architect Jerry Gropp on Rain City Guide. He’s a man of few but scathing words: “Mercer Island and a lot of other nice places are being overrun by “Spec Builders” madly producing these oversize boxes with their wide white trim. Other tell-tale touches of their indifferent computer-driven drafting (don’t call it “design”) are the tapered posts with pasted on faux river rock.”

A study in contrasts.

West vs. East Seattle Homes for Sale

Keith and the Scooterist known as Orin faced off in the comments in What’s a Normal Home Price… Followers of Mercer Island history know that the MI’s first name was East Seattle, making this an epic battle of East versus West.

At issue: are there more listings in Mercer Island or West Seattle? A worthy investigation. I turned to the US Census and Redfin for data.

As it turns out, West Seattle has over twice as many homes per sale as a percentage of its total housing stock than Mercer Island. Kirkland’s next, and the rental-heavy areas of Capitol Hill, U District, and Wallingford are at the bottom. Orin the Scooterist is right about one thing: the median asking price for Mercer Island homes is higher than most in the Seattle area.

Why Sell in This Market?

Orin: I’d be willing to be that most of the houses for sale on Mercer Island are owned by people who can’t afford them.

Some home-sellers in each area probably are under water. But my point in the last post was that many people sell because life events demand it, whether a relocation, retirement, or more family joining the household. Those people are stuck selling in a bad market and don’t deserve to be mocked, just like those who sold in 2004-2007 aren’t virtuous as a result of their timing.

And as Keith says, the lack of jumbo financing makes it hard for higher-priced listings (i.e. Mercer Island homes) to move.

What About Value?

Do Mercer Island homes deliver enough value to justify their higher prices? The answer is specific to every family, but commute time and schools weigh heavily for many here. And plenty of people on Mercer Island seem happy with their bargain.

Sources

1. Census data: Census Quickfacts and Seattle.gov
2. # of listings and average list price: Redfin
3. Visualization created with Tableau Software

What’s a Normal Home Price on Mercer Island?

Three things recently brought this question to mind.

1. I noticed a proliferation of high-end real estate porn: 10 homes for sale on Mercer Island at more than $5 million. Some have been listed for a while:

4737 Forest Ave SE, $7.75 million, has been on the market 320 days.

Some are newer:

9022 N Mercer Way just came on the market 12 days ago. It’s only $5.5 million.

2. The Seattle Times writes about “How One Couple Got an Affordable Mercer Island Home.” The title implies that “Mercer Island” and “affordable” are terms with opposite meanings.

3. I came across the account of a scooterist (?) who recently circumnavigated the Island. He says: Mercer Island is a place for rich folks…Mercer Island’s landscape features McMansions with killer views. Paul Allen lives here. This was not always the case, however. There used to be quite a few modest homes, but during the Gilded Age just ended, everything on Mercer Island became a potential teardown.

I have to admit, I used to think Mercer Island was all waterfront mansions selling for $5 million or more. But the Island does have a plenty of moderate homes.

The scooterist also takes a dig at all the homes for sale on West Mercer Way. Easy to do in the middle of a financial crisis– but unfair to dig at the owners. When homes aren’t selling normally, people’s lives are still changing. They change jobs, retire, have another baby, and need to move. So inventory builds.

High Price, But What About Value?

We looked in the city about a year and a half ago, and found better value here. By value I’m talking about lot size, home size, and home quality. People with kids get even better value from the great school system. Commute times are short to most everywhere, which is a quality of life issue. The character of the Island doesn’t feel mega-rich.

Redfin says the median price of houses (not condos) sold on the Island in the past year is just over $1 million ($1,010,000). I’ve done quantitative posts in the past, but this time I’m asking a different question. Is Mercer Island a place for rich people? How does home value here stack up to homes elsewhere? We bought here a year ago, so I answered with my feet. What do you think?

Yeah, We Rock.

Ken Glass tipped me off that HGTV had named Mercer Island one of it’s Top 10 “Dreamy” Neighborhoods. Aw, shucks. No, say it again, HGTV.

The Top 10 Dreamboats are an interesting group. What do we have in common with the other 9?

• Sonoma, CA: “Architecture ranges from Mediterranean to Victorian to Craftsman, and houses come in all sizes, from stunning estates to modest bungalows.” Yup.
• Atherton, CA has its share of tech millionaires, just like the MI.
• Buckhead, Atlanta: “The district also boasts the best dining and nightlife in the region, with more than 300 restaurants, bars and nightclubs.” Ok, so we don’t have so much in common with Buckhead. But if we did, I’d move.
• Lower Downtown, Denver: “Perfect for urbanites who love the mountains.” Hey LoDoDen, we’re an hour from Alpental and one and a half from Crystal. But Vail, Breckenridge and A-Basin do count for something.
• Gold Coast, Chicago: “The neighborhood offers world-class shopping, dining and entertainment” (not so much) “as well convenient proximity to the lake and business district.” (yup).
• Coral Gables, Florida: See Buckhead.

iMercerIsland reports that we’ve also been named #20 of Forbes’ 20 Most Educated Small Towns. It’s like being named one of 10 Homecoming Kings and Queens, or being in a boy band, or… something… Gosh, it’s just so exciting. Mercer Island rocks.

Dreamy. Photo: Collin Waldron.

Mercer Island Real Estate Update, Recession 2009 Edition

Well, the worst housing market of 30 or so years has turned into the worst job market since the early 80’s and an overall miserable economic climate. How has our local market held up over the last twelve months?

Mercer Island Home Prices Over 12 Months

Charts include single family homes only, not condos. Thanks to Tableau Desktop’s drag-and drop data visualization, with data from Redfin.

The average price per square foot of North and South Island homes actually went up, and Mid Island went down. There’s too much variability to take away anything concrete from this, except that prices haven’t fallen off a cliff.

South Island Still More Expensive– No Surprise There

Now let’s look at the last 12 months of sales in aggregate.

The average price of homes in South Island is about $1.6 million, and almost $500 per square foot. Note that in South Island there’s a lot of expensive waterfront driving up prices. Homes on North Island tend to be smaller than homes on the rest of the Island, and a little cheaper.

The number of records tells a story, though. When we did this analysis last March, there had been 305 home sales in the last year. But in the last twelve months, only 237 homes were sold. Listings that were getting low or no offers may have been pulled from the market.

Price Per Square Foot Around the Island

Just for fun, let’s map the last 12 months of home sales. No surprise- a lot of waterfront is strong orange or neutral, meaning it’s sale price per square foot was relatively high.

For this map, I excluded 6815 West Mercer Way because it skewed the results, at more than $4,000 per square foot. I don’t know why that one was so expensive- any thoughts?

On The Market For 4 Months

Now to listings: homes are sitting on market for an average of 131 days- about four months.  Redfin’s market stats show that 176 homes are for sale in Mercer Island, a slight increase from 145 last September when we last checked. The number of homes on market is seasonal– over 200 were for sale last summer, and we can expect this to go up again this summer.

In Sum

Home sale prices have stayed remarkably stong, but there may be a lot of failed listings we don’t see in the sale numbers. And it’s not a great time to be a seller: homes are on sale for 4 months, and I’ve seen many that have been on the market for much longer. And in a sad turn of events, there are now two foreclosures on Mercer Island, where before there were none. So don’t sell unless you have to, and be realistic about price and time on market if you do.

Ralph Andersen on Mercer Island

We’ve talked Miller-Hull and Steinbruek, now let’s talk about another great Northwestern architect: Ralph Andersen. There are four of Ralph’s homes for sale on the Island– we can use the listing photos to look inside.

Island Crest Way

A small Ralph Andersen home built in 1983. It’s not much to look at on the outside but it’s got a gorgeous interior with great views.

Ralph Andersen loved those big windows. So do I.

Nice open floorplan. Sweet views.

And it’s the least expensive of these homes, at $945k.

Island Point

This home still has the Ralph Andersen bones, but when the agent says it’s been “updated for today’s lifestyle” it’s true. It seems to have lost a bit of character in the remodel, but you can still see classic Andersen touches: the vaulted ceiling, tall windows in the door, and generous windows. And it’s pricey- $2.6 million.

Remodeled, but the door and hanging lamp give it away.

81st Ave

Classic Ralph Andersen exterior. He really knew how to make a house work with its surroundings. Bad photos on this one, so we can’t see much inside, but we can see it’s going for $1.95 million. For that money, I’d take better pictures.

I can almost hear the birds and the window washers singing.

Mid-Island

This 1964 mid-Island home by Ralph Andersen sold last year.

Angles, large entryway, garden. Classic Andersen.

Windows & cedar.

Lindley Rd

This one, a 1963 Ralph Andersen on a large lot, is all Northwest.

Geometric, but not harsh.

Not updated too much. It’s like a Ralph Andersen textbook.

Spacious entryways with arches and stone.

High vaulted cielings, open spaces, & cedar.

Dramatic staircase. And that lantern again!

We’re lucky to have some great design on the Island. The McMansions are attacking, but they haven’t won yet.

Mercer Island Property Tax: Schools, City, & Ferry

The Mercer Island property tax rate is of $7.16 per $1,000, or about 0.7% of property value. For a $500,000 house, that’s about $3,600 per year.

Our property tax is really 9 different kinds of property tax, with schools taxes the largest amount and city and county taxes following. In 2008, it breaks down like this:

Mercer Island’s rate is in the low range of King County property tax rates, in line with communities like Bellevue and Yarrow Point, according to the tax assessor. This is because cities with more expensive homes can get plenty of revenue with lower rates.

Tax Rates Down, Tax Bills Going Up

The good news is that Mercer Island’s rate has decreased over the last four years, from $8.6 per $1,000 of assessed value in 2005 to the current $7.16. Of course, house values in the Seattle area have increased 36% since January of 2005, according to the Case-Schiller index. This means your property tax bill has probably increased since 2005.

Breaking the different school rates into their major parts: school, city, county, library, and grab-bag (port, ferry, EMS, flood), we see that each type of property tax rate came down in 2007, except for the grab bag.

Handy comparison chart thanks to Tableau Software.

EMS saw a rate increase of about 50%. It’s hard to argue with EMS– I want ambulances to be as fast and well-trained as possible. Flood and ferry property tax rates are new in 2008, together contributing about $0.155 in tax per $1,000 of assessed value. For a $500,000 house, that’s $78 per year in additional taxes.

A ferry tax? There hasn’t been a ferry on Mercer Island since the Dawn, but maybe if I-90 gets tolled we can lobby for the Washington State Ferry system to get us a new one.

Mercer Island data is from the Mercer Island City Council.

UPDATE: KOMO News published this story about Puget Sound mayors reacting to the financial crisis, saying:
“The problem is simple, even on Mercer Island. Money from property taxes won’t keep pace with inflation. The total property tax can only increase one percent a year. Inflation is running at five times that.”