Mercer Island real estate steady, but distressed properties appear

This waterfront estate at Proctor Landing was one of the last large estates on the Island to be sold recently, but closed at well under its first listed price. - Chad Coleman/Staff Photo
This waterfront estate at Proctor Landing was one of the last large estates on the Island to be sold recently, but closed at well under its first listed price.
— image credit: Chad Coleman/Staff Photo

Mercer Island seems to buck the norm when it comes to the real estate market.

Despite a down month in home sales in King County as a whole compared to last year, sales of homes on Mercer Island for October remained even. October 2010 statistics indicated 25 closed residential sales here; one more than October 2009. Pending residential sales are dead even — 25 in October each year; and there are seven fewer homes on the market this year than in October of 2009. This is compared to King County overall with 1,309 closed sales in October 2010, down by almost 26 percent from 2009.

Gary Poulos, broker of Re/Max Preference, said demand for the Island is steady due to the ideal location between Seattle and Bellevue, the quality schools and the lifestyle. Poulos said the average price on the Island can get easily skewed by a large waterfront sale, but as a whole, movement on the Island is consistent.

Re/Max associate Ina Bahner said the Mercer Island market has seen changes. There are now single family homes listed in the $400,000 to $500,000 range that didn’t exist before the market downturn. A look at these listings confirms that most are older homes, but they appear to have been remodeled or at least given a few updated features — and they’re selling, Bahner said.

The Island is not immune from short sales. Andy Langsford with TEC Real Estate is involved in a third short sale in The Carleton, a condominium development in the Town Center. Taking back-up offers is standard procedure for short sales, he said, because they take so long to close; buyers might back out, tiring of the wait. He said it is their policy to drop the price every couple of weeks when marketing a short sale property. But even with winter setting in, he said business is holding steady.

Langsford said that out of 407 active, pending and sold properties on Mercer Island, there were 150 regular sales, 32 short sales and 12 bank-owned properties, which, he said, “is a good sign for the Mercer Island real estate market.”

However, real estate consultant and analyst Todd Mitchell said the Mercer Island real estate market is expected to have an increasing share of distressed property sales. He said that even in higher-end markets in the Seattle area, there are more and more sellers underwater and behind on their mortgages, and defaults are expected to rise.

Prices have already been reduced at 7800 Plaza condominiums in downtown Mercer Island, but they are proving to be a success story. The 24-unit boutique project is 50 percent sold out, 40 percent occupied, and under new management. The penthouse units are are all sold, said marketing agent Melissa McMurray, but interest hasn’t waned on the concrete and steel project.

Some units were designed to be handicap accessible, and all have two reserved parking spaces. McMurray said there are three retail spaces available on the ground floor as well. Prices range from $479,000 to $749,000 — down from $1.1 million on the upper end under the previous management.

Seven condominiums on Mercer Island sold in October compared to three last year in the same month. The median price dropped from $400,000 to $252,000, a 37 percent drop, a big difference from the 7.67 percent drop in median price on condos in all of King County.

One interesting new concept on Mercer Island is the three remaining (out of four) live/work spaces at 77 Central, which are apartments with retail space at ground level. The green-built building utilizes natural, recycled or reclaimed material throughout. The live/work units all have direct access to the outside from the ground floor work space, with separate inside access to living quarters above. These units are ideal for perhaps an artist’s studio, massage therapist, counselor or even day care. Rent is $3,600 per month, which equates to about $25 per square foot.

“There’s no limit to what you can do with the space,” said leasing agent Jan Machinsky.

Commercial real estate, hit hard over the past two years, is showing some signs of stability, said leasing agent Brent Jackson of Pacific Real Estate Partners, Inc. He said it’s tenants shifting around, downsizing or moving, not new demand that is driving the market. One building that Jackson is representing, the Globe Building, on the east end of the Island, was sitting on a 24 percent vacancy until recently.

“Now, with a couple of deals pending, they’ll be at 10 percent,” Jackson said. He added that landlords have become increasingly flexible and willing to drop rents.

Poulos expects the first quarter of 2011 to be very good overall, stating that he is seeing “a good base for a good run” with all of the phone calls he has had coming in, along with potential home buyers “rummaging” around right now.

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