Rise in Real Estate Prices Slows — and That’s Good News!

The future of real estate prices in Bainbridge Island is always a matter of keen interest to area homeowners. So it’s important when the latest national numbers in the Case-Shiller Index show that the rate of rise in real estate prices has begun to slow.

Bainbridge Island homeowners should be pleased!

“WHAT?” you may well be thinking. If the rise in national or Bainbridge Island real estate prices is slowing down, why in the world would that please homeowners? The answer is only a little bit convoluted.

The fact is, the recent remarkable leaps in real estate prices had some knowledgeable observers shaking their heads. The Business Insider even headlined, “These Home Price Gains are Not Normal, Sustainable, Or Believable.” Business Insider was reacting to the previous three straight months’ real estate price appreciation “above 10%.” They speculated that a large number of foreclosures now being recycled at more normal price levels had created an artificially high growth rate.

That’s why slowing down a little would mean a more normal market — and more reliable growth statistics. Other conditions make that story easy to accept:

While interest rates have risen slightly, at today’s rates, borrowing is still notably inexpensive. The increase in investor participation (they tend to pay in cash) also reflects the more conservative lending environment.

By the end of the financial crisis, construction in many parts of the country had fallen sharply, leading to a tight housing inventory. The shorter supply caused additional pressure on real estate prices.

Another factor: rising rents. Whenever the economy performs well, rentals reflect it, in turn stimulating Bainbridge Island real estate prices. The economy may not be as robust as we’d wish, but its positive direction plus the stock market’s rebound have combined to support value growth.

What to expect from real estate prices in Bainbridge Island this fall? Going forward, I would expect to see a continuation of gains at the slightly slower rates we are beginning to register. If that’s the case, anyone looking to re-enter the residential market should find that now is the time to start looking…and offering. Call me to discuss your own outlook!