‘COVID land rush’ overwhelms local real estate market
The Methow Valley is becoming a “zoom town.” The term, coined earlier this year, describes a housing market that is suddenly booming as more people work remotely.
The pandemic-inspired phenomenon has local real estate brokers feeling like deer in the headlights as stressed-out buyers, fleeing urban areas for a more tranquil place, fight over the valley’s scarce supply of homes and land for sale.
And it raises questions about how the influx of newcomers might impact the valley’s unique sense of community, and whether people who currently live and work here will be priced out of the market.
“It’s the COVID land rush,” said Bob Monetta, broker/owner of Windermere Real Estate in Twisp. “The urban clientele are driving the market.”
The ability of people to work remotely — now a requirement for many people due to the coronavirus pandemic — is a “game-changer,” said Dave Thomsen, senior managing broker with Coldwell Banker Winthrop Realty.
“It’s a significant trend that’s not going away. It’s a pivotal change. You no longer have to bribe your employer to let you work remotely, your company wants you to work remotely. Now people can have a professional job and get paid city wages and live in paradise … and by the way, the cost of living in paradise is 60% less than in the city,” Thomsen said.
“Many of my buyers have been looking for property in the Methow Valley for one, two, 10 years — all with the dream of figuring out how to move here,” said Anne Eckmann, broker/owner of Blue Sky Real Estate in Winthrop.
“When COVID hit and businesses were required to work offsite, the game was on as to who could make the move fast enough to buy while there were still some houses for sale. Many buyers who had been considering buying over the past 10 years all decided to pull the trigger at the same time,” Eckmann said.
During the early weeks of the pandemic, when business and travel was mostly shut down around the state, real estate activity in the Methow Valley slowed dramatically. But that all changed by late spring, when people began traveling more freely.
“Post-shutdown has been total madness. Like a frenzy,” said Brian Colin, broker/owner with Mountain to River Realty in Winthrop.
The result has been a study in supply and demand, creating the most competitive and stressful markets brokers have seen in the Methow Valley.
The number of houses for sale in the valley has been around 30-35 all summer. That compares to about 100 houses on the market during the summer three years ago, and several hundred 15 years ago, Eckmann said.
“The diminished housing inventory had greater demand than we’ve ever seen. We’ve had more multiple offer situations on homes than I’ve ever seen in 30-plus years, and homes are often selling within a week or two of being listed if they are priced well,” Eckmann said.
“It’s gotten to the point where, for the first time I know of, we are seeing offers requiring no contingencies and completely cash if they’re going to compete,” Colin said.
As a result of the bidding wars on houses, winning offers are often well above listing price. “I’ve had clients who have put in offers on six places and not won one,” Colin said. In one instance a client offered $520,000 for a property listed in the mid-$400,000s, and didn’t get it, he said.
“It’s been heartbreaking. There’s a fear-of-missing-out feeling in the market … and more buyer remorse,” Colin said.
“In order for buyers to be successful in … today’s Methow Valley real estate climate,” Eckmann said, “buyers and brokers have to use some pretty competitive strategies … like offering $5,000 to $50,000 over list price, waiving some typical contingencies, paying more than the house will likely appraise for, and agreeing to pay the difference in cash between the lower appraised value and the sales price. This is different from what we used to see with a negotiation process here in the valley.”
“It’s been a very stressful market, with multiple people bidding on houses and land. It’s a reflection of a city-type market coming here,” Thomsen said. “People who come in from elsewhere are used to competitive markets. They’re discouraged when they can’t get something but they’re not surprised by the process. I think we [local brokers] are shocked. We are the ones who are asking, ‘What does this mean?’”
Soaring home prices
One thing it means is a dramatic increase in median home prices in the Methow Valley. The median home price in September this year was $440,000, compared to $329,000 in September last year and $312,000 in 2018, based on statistics Eckmann compiled from the Northwest Multiple Listing Service. In mid-September, there were 34 homes available for sale in the Methow Valley — 10 of them priced under $350,000 and eight priced over $1 million, Eckmann said.
During the past two years, the greatest number of homes sold were in the $250,000 price range. This year the highest volume of sales is in the $350,000 price bracket, Eckmann said.
“Super low interest rates also influence the rise in the median sales prices, because lower interest rates offer buyers more buying power,” she said.
This year is not expected to produce the highest volume of sales, due to the limited inventory, but it will be a high dollar volume, brokers say.
Not surprisingly, one of the essential requirements for buyers is access to high-speed internet. That means some parts of the valley, which lack reliable high-speed broadband and are unlikely to get it any time soon, are not options for people planning to work remotely.
“It’s become one of the first things we ask — as soon as we hear ‘work from home,’ we ask ‘how fast does your internet need to be?’” Colin said. “Some buyers are frustrated by the fact that they can’t throw some money at it and fix it.”
Some buyers have spent considerable money to extend fiber lines, said Monetta. And Eckmann said there are “new satellite WiFi options that are offering internet to underserved areas.”
Reshaping the community?
The rush to move to the Methow Valley from Seattle (and places like California as well) is reflective of a nationwide trend. The pandemic has removed, at least temporarily, many of the perks that urban dwellers enjoy, like restaurants, theaters and nightlife. So they are seeking places with more space, tranquility and access to the outdoors.
Beach and mountain towns have always been attractive as vacation destinations, but with limited job opportunities, many people were unable to locate to these areas, said an article in Realtor magazine, published by the National Association of Realtors, in its September issue.
“However, as remote work grows in the pandemic, some Americans are realizing they can take their jobs with them to new places. This could potentially reshape some of these smaller towns,” the magazine said. “If virtual work holds the promise of a new wave of migration the way air conditioning allowed the Sun Belt to boom, a significant constraint is going to be how much these communities are willing and able to grow.”
That potential to reshape the community of the Methow Valley is very much on the minds of local brokers.
“Can you blame the new folks for abandoning the city?” asked Monetta. “I don’t, but it would be nice if there was a YouTube instructional video on how to integrate into a small community, while leaving behind the urban anxiety.”
“COVID was enough to make them re-evaluate their lives and realize, ‘Carpe diem, let’s do what we really want to do,’ And the ability to work from home has been the driving force behind that,” Colin said.
“I think a lot of the people coming in have a romanticized view of valley life,” he said. “Are they going to integrate and become cool new benefactors that are going to bring new ideas into the community? Are they going to come here and say, ‘This is the greatest place on earth, what can we do to facilitate that?’ It’s tough to say.”
“I think the patterns we’re seeing from COVID will only enhance the desirability of the Methow Valley,” Thomsen said. With children who are not attending school in person and the ability to work remotely, families are saying, “‘There’s no reason we can’t live here for half the year,’” he said.
“We’re seeing it happen before our eyes. It’s such an amazing transference. The Methow Valley is a very special place and one reason why is we have been isolated enough that it was a one-day thing to get here. You had to make a commitment. It creates a pioneer spirit, and then people become interconnected … you help your neighbor,” Thomsen said.
“The wonderful thing about the Methow Valley is not just the mountains and the scenery. It’s the community,” he said. “This has the potential to change the texture of our community. It has the potential to make it much richer.”
Pricing out locals
But the influx of people earning high wages, with lots of buying power, also has the potential to make living in the Methow Valley more challenging for people who already live and work here, Thomsen said. “The worry for all of us locals is, what does it do to our buying power here? What does it do to our children’s buying power?”
There are implications as well for employers in the valley, especially those in retail and tourism-related businesses that face a continual struggle to find enough workers.
“With little starter houses in Twisp going for $300,000 and no rentals … we’ve priced out our local population,” Colin said. “That’s going to exacerbate our lack of good quality workers.”
Just as there is no clear understanding of the course of the pandemic, the future of the home-buying spree in rural areas is not known. Some housing analysts believe it could be temporary, according to Realtor Magazine: “Home prices could climb over the next 12 to 24 months as pandemic buyers bid for limited housing supply, but those higher prices could eventually stifle demand.”
Another factor in limiting growth will be “how much these communities are willing and able to grow.” And the reopening of offices in traditional job hubs could make these moves temporary, the magazine said.
Some buyers may discover they don’t like the reality of living in a small town after they’ve tried it for a while, Colin said. “Are we going to see some of the people say, ‘I had no idea I can’t go shopping after 9 p.m., or that I’d be that far away from Costco’?”
Thomsen said the scarcity of land and houses in the valley may create its own limitations to the unprecedented migration. “Usually supply rises up to meet demand. But I’m not sure there will be enough houses next year. It’s not like we have several builders creating houses to sell next year,” he said.
“All the years I’ve been here, I’ve known at some point we’d run out of land because there is a finite amount, and a finite amount of lots and home sites, and a finite amount of water. We’re seeing available land vanish and lots that were once extremely affordable are quite expensive or unavailable,” Thomsen said.
“I think we’re not going to really know the effects of this for a while,” he said. “This is not just affecting the Methow Valley, this is affecting rural America.”