Mercer Island Home Prices Rise for First Time in Five Years

The year 2012 marked a "change of course" for Mercer Island home prices with year-over year gains in both the median and average sales price for the first time in five years, according to Windermere Mercer Island's annual report on local home sales.

According to the report, 2012 Mercer Island Year in Review", sales activity has continued at a brisk pace with 297 single-family homes sales compared to 260 in 2011 and 220 in 2010. Record-low inventory shares the headlines though with Mercer Island homes for sale at the lowest level in the past 15 years (as far back as we have been keeping record). The success of the 2013 real estate market, said the report, "will pivot on the available inventory of homes for sale to meet the demand of serious buyers in the market."

Of the year’s home sales, 106 were above $1,000,000, while only 24 were below $500,000. With only 16 out of 297 residential sales, bank-owned and short sales made up only 5% of the sales in 2012. The lowest sale was $280,000 and the highest sale was $21,625,000.

Buyers also bought up virtually all of the condominium and town homes on the market on Mercer Island, though prices remained relatively flat. Sales for that type of home reached their highest level since 2006 with 45 sold in 2012, while making up a shrinking share of the market — just 13 percent of all homes sold, compared to nearly 20 percent of the market in 2009. But when a Mercer Island condo or town home could be found, buyers were finding relative bargains with an average sales price of $301,186 — more than $50,000 less than last year. The median price rose slightly to $243,350, a mere $850 more than last year.

Distressed sales were much more moderate in 2012 finishing the year at 16% as compared to 50% in 2011. Sales prices continue to remain impacted by the previous distressed sales but all indications are that they will rise in 2013.

Private waterfront homes continued to change hands at a brisk pace with 29 sales in 2012 ranging from $1,132,000 to $21,625,000. The average cost per waterfront foot on the Island increased 14% to $39,274 and the average cost per home square foot increased 13% to $780.

Julie Barrows Owner/Designated Broker of Windermere Mercer Island said the combination of recovering prices and record low interest rates were positive signs in the real estate market for both buyers and sellers. She pointed to statistics that show the monthly interest expense of owning a home is on par with that of 1998. According to Barrows, the median priced $458,125 home in 1998 at 6.94% interest costs about the same per month as an $856,000 median priced home today at 3.66% interest.

"This is pretty remarkable when you consider that wages have risen considerably since 1998," Barrow said. "Interest rates are still phenomenally low," and will stay low so long as the economy continues a gradual recovery.

"If inflation edges up we'll definitely see an adjustment in rates," she said. "(The Federal Reserve) is not going to fail to respond to market conditions."

Mercer Island Real Estate Five Year Averages

(Ed. Note: The information in this article is taken directly from the "2012 Mercer Island Year in Review" report issued by Windermere Mercer Island.)