A client asked me some very good questions about the Sequim real estate market and whether they should buy a home now in Sequim even though they are not retiring for 10 to 15 years, or whether they should buy a lot now and build in 10 to 15 years. Here is my perspective.
The Future of the Sequim Real Estate Market
My experience tells me that the real estate market will begin to appreciate after we get through this recession, and my best guess is that the market will show us six months of steady recovery by the spring of 2014, barring any new wars or Lehman Brothers crises. After that we will once again see slow but steady appreciation in the Sequim area. My forecast is that we will be back up to 2005 prices by 2018, and after that there will be slow appreciation. If I’m right, in 10 to 15 years (2023 to 2028) home values will double from what is now a bottom. A $300,000 home today will be selling for $600,000. I think this is very realistic.
The cost of building homes will increase too. So that’s a major factor for you if you do buy a lot and build in 10 or 15 years. You will have gotten a lot at a good price if you buy it now, but you will have had the carrying costs (property taxes, homeowner assoc. dues if any) for all these years, and you’ll be building at the higher prices 10 or 15 years from now.
You can buy a lot and not install a septic system and a well until you need it, but those costs will go up, and in the future there may be new laws restricting your ability to install a septic or to drill a well. Water rights are getting more restricted everywhere. It would be a shame to buy a lot now and then not be able to drill a well or install a septic 10 or 15 years from now, which could happen. Then you would have a lot that is unbuildable.
Another option is to buy a home now at these low prices. Granted you would have the carrying costs of owning a home here but a tenant pays for all or most of those costs while you are taking advantage of the opportunity to buy low and hold for appreciation. Right now 73% of all foreclosures in the U.S. are being purchased by investors. Why? Because they know that if they buy a $95,000 foreclosure now, do some cosmetic work to fix it up, and then hold it for 10 years, they will double or triple their return. It is very realistic to buy a $95,000 foreclosure now and sell it in 10 years for $190,000. The Sequim real estate market doesn’t have the foreclosure opportunities of Vegas or Phoenix, but your focus is not to buy a foreclosure for your retirement but a nice home you would love to live in for the rest of your life.
The Sequim Real Estate Market and Renting
Renting a home doesn’t give you the freedom to stay in it for two weeks every year when you visit Sequim, but that’s a trade off. If you can afford not to rent it, then you can stay in it anytime you want. It might be financially wiser to buy a home now, keep it rented, and when you come every year, stay in a B&B. As far as managing a rental, you don’t have to do that. That would be a stressful and time consuming task, especially living out of the Sequim area. I would recommend hiring one of the two local property management companies to handle the rental. They typically charge 10% of the monthly rent, but they advertise, screen tenants, and watch over it for you so you don’t have to worry about it.
That’s my perspective on the Sequim real estate market for the next decade or so.
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