Market Update - 6.10.22

PACE OF VACANT LAND PENDING SALES DROPS
High costs of construction and rising interest rates give buyers pause

The pace of vacant land pending sales took a noticeable downturn in April and May.   The market reported a strong rate of 21 pending sales in March but then the pace dropped to 18 pending sales in April and 12 in May.

As the graph below indicates, a pending sales rate of 10 to 25 vacant land parcels per month has been the historic norm.  Only in 2020 and 2021 has the rate climbed above 30 per month. So, the levels of 12 and 18 pending sales aren’t abnormal, but do suggest the frenzy of 2020 and 2021 has come to an end.

This moderation in land purchases can be traced to the high costs of building as well as rising interest rates.  Buyers are uncomfortable with the prospect of paying high costs for both land and construction and then being stuck with a high interest rate for financing.

The longterm forecast for Lake Chelan real estate is steady and positive.  But for vacant land Sellers, the window is closing to enjoy the quick sales and high sale prices of 2020 and 2021.

RESIDENTIAL

On the residential home front, Buyers are still purchasing homes at a steady pace, but are unwilling to be as aggressive in their offer pricing.   Throughout 2021, the median sale price for homes as a percentage of original list price was at or above 100%.  Last year, buyers were willing to pay more than asking.

While this is still the case in certain micro-markets, the percentage dropped below 100% in the months of January and May.  This will be a trend line to continue to watch.

The pending sales data for residential homes indicates sustained sales activity even in the face of interest rates.  20 homes switched from active to pending status in May 2022.  This is lower than 2020 and 2021 (32 and 27 resp.), but on par with 2019 activity (22).

CONCLUSIONS

Buyers of land and homes have a glimmer of hope that the Lake Chelan market is cooling to a more normal pace. The flurry of 2020 and 2021 is coming to a close. Buyers will still need to having financing in place and be ready to move quickly for a home they like, but it is less likely they will need to offer more than asking to secure a property.

Sellers should expect a more measured response to their listings. Especially in the case of land, Sellers should prepare to have patience. And for homes, the basics of good home sales always apply: price the home right, present it with style, and promote it professionally. (Learn more)