Like the rest of the state and the nation, real estate in Skagit and Island counties is a buyers’ market.

That’s because many properties’ prices have slipped to the levels seen six years ago, real estate experts say.

“I think we’re back to about 2003 prices,” said Candy Cooper, president of the North Puget Sound Association of Realtors. “If you list your home around that figure, you’ll sell it.”

She and other real estate agents say they know it’s not easy to do that, particularly for those who bought after 2003 and paid much more.

“We’ve been so inflated, it’s hard to just suck up and say OK,” Cooper said.

Although there are indicators nationally and locally that real estate prices may have hit bottom, the rebound probably won’t be fast. Other economic factors, including another wave of foreclosures and high unemployment, will likely help buyers, but not sellers, experts say.

“Obviously, the year 2009 has been an extraordinarily challenging year for the real estate industry,” said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University. “It was worse at the beginning of the year, and as the year evolved, we saw some signs of life.”

In Skagit and Island counties, median prices continued to drop compared to 2008.

The price drop, combined with such factors as the federal first-time buyer tax credit, low interest rates and increase in short sales and foreclosures, created a buyers’ market, real estate experts said.

Investors and first-time home buyers are taking advantage of those conditions. To some extent, a number of long-time owners of less-expensive homes were able to sell at a profit and upgrade, experts say.

“This is a perfect time for investors,” said Cooper, who also is the owner and the sole broker of Allied Realtors in Anacortes. “It’s a market like I’ve never seen as far as prices.”

Cooper had one buyer pull his money from the stock market this year to make cash purchases on three properties.

But even with low prices and good interest rates, sales aren’t as fast and furious as they were just two or three years ago.

“It’s just that whole uncertainty of the economy as a whole,” Cooper said.

Bottom line, potential buyers worry more about job security, she said.

Buyers have gotten better educated over the past year, especially younger couples, Cooper said. They want to be sure they can afford payments on one salary should one of them become unemployed.

Role of first-time buyers

Skagit’s $233,600 median home price for the third quarter of this year was down 8.4 percent from the same period last year, according to the Washington Center for Real Estate Research at Washington State University. During the same period, Island County’s median price of $268,500 was down 5 percent from last year.

“First-time homebuyers typically purchase lower-priced homes,” said Josh Scott, president-elect North Puget Sound Association of Realtors. “So with more first-time traffic, it stands to reason we’d see more movement in the lower-priced homes, thus driving the median price down.”

Those new buyers trying to get in before the tax credit deadline, which has been extended, drove the number of homes sales up in Skagit and Island counties this past month. Home sales in Skagit County were up 163 percent in November over that month in 2008, said Scott, who also is the managing broker at Windermere Skagit Valley.

Skagit’s market has been getting more active each month, he said.

“One of my agents, Elizabeth Miller, just popped her head into my office to tell me how busy it’s been this week,” Scott said in mid-December. “The phone won’t stop ringing, and buyers are coming out of the woodwork. (It’s) pretty encouraging news during what is usually one of the slowest weeks of the year.”

Some of those signs of life that Crellin, Scott and Cooper talk about are directly connected to actions by the federal government.

Of statewide home sales from January to September, 30 percent of buyers took advantage of the $8,000 federal income tax credit, Crellin said. A survey of real estate agents indicates that 60 percent of the transactions wouldn’t have occurred if the tax break hadn’t been offered, he said.

“That means we have a soft market,” Crellin said.

Crellin and other economic experts expect another wave of foreclosures and short-sales, which is a home being sold for less than the amount owed to avoid foreclosure.

That’s because more than half of the people who modified their adjustable-rate mortgages are now delinquent by at least 60 days, he said. A number of those delinquencies have been caused by unemployment, and many of those people are under water, meaning they owe more than their homes are worth, Crellin said.

“The biggest problem we’re facing is the unemployment numbers continue to increase,” Crellin said.

And the unemployment rate is predicted to not change until mid-2010, Crellin said.

Foreclosures also have and likely will make a difference in Skagit’s real estate market.

“While we did get more first-time homebuyers into homes, almost half the pending homes in Skagit County today are distressed, meaning the seller probably isn’t going to be a move-up buyer, or the home is already vacant if the seller is now a bank,” Scott said.

That means the sellers didn’t buy other homes, which would have helped the market, he said.

Price, condition, location

When it comes to the economics of buying and selling a home, real estate experts repeat often heard factors — supply and demand, location and price.

In Skagit and Island counties, homes priced at $300,000 and below moved fastest this year, and only slightly slower than 2008.

Skagit homes in that price range spent an average of 14 days longer on the market in the first 11 months of this year, compared to the same period in 2008, Cooper said. From January through November, agents sold 6,089 homes, just five homes fewer than the number sold in the same time period last year, she said.

“What drags the statistics down is when you get above the $300,000 range,” Cooper said. “The majority of our sales are below $300,000.”

Both Cooper and Scott say that Congress’ extension of the federal tax credit will benefit Skagit and Island counties. It’s likely agents will see a spike in sales this spring, Scott said.

With the falling prices, buyers might find they can own a home in a location they only dreamed of before the recession, Cooper said.

“Three years ago in Anacortes, you could not find a house for less than $300,000, and now we really have a lot of them that are $300,000 and below,” Cooper said.

On the lower end of the market, Cooper said buyers whose budgets could only afford prices in Concrete or Sedro-Woolley, can now afford a home Mount Vernon or Burlington. The same is true in Island County.

On the lower end of the price range, there can be competition between buyers.

“It’s all about pricing and location,” Cooper said. “In Mount Vernon and Burlington and Island County, when something comes on the market in the $130,000 to $160,000 range, it gets immediate attention, and you could get in a multiple-offer situation. There are a lot of buyers in that market.”

There are also more homes priced in the $250,000 to $300,000 range, Cooper said.

The market for homes priced over $500,000 has cooled off in Skagit County, and the extension of the tax credit is unlikely to help that market, Scott said.

“Loan programs have tightened,” he said. “Jumbo loans are practically nonexistent in Skagit County, and the tax credit’s influence on these homes has probably been minimal. …The truth is $8,000 isn’t all that much money when you compare it to a $600,000 purchase price.”

It’s the same problem statewide, Crellin said.

“The very expensive homes are sitting on the market,” Crellin said.

What to know for 2010

Next year’s real estate market could be similar to this year’s, real estate experts say.

“I personally don’t see the same recovery ... until 2012. That’s what I’m hearing on the street,” Cooper said.

Despite word that the recession is technically over, growth will likely be slow because of high unemployment rates, Cooper said.

Scott added that the Federal Reserve, which adjusts interest rates, will also affect the real estate market.

“As jobs increase and the economy starts to show signs of life, you can bet the Fed will increase interest rates to drive off inflation, and the low APRs we see today will be gone.” Scott said. “Couple that with fewer home starts and shrinking inventory, and we should start to see a more balanced market.”

Potential buyers need to be aware that loans are scarce for anyone with a credit rating, called a FICO score, below 720, Cooper said.

She also recommended against applying for additional credit cards or purchasing big-ticket items on credit even if they are paid off at the end of the month for at least three months before applying for a home loan. Large purchases can immediately adjust a FICO score down, she said.

Banks also look at the number of credit cards a person has, even with a zero balance, Cooper said.

“If I had a buyer that comes in to office say they want to buy for less than $180,000, I’d make sure they are pre-qualified,” Cooper said.

Cooper also tells buyers to look at the home they would purchase in terms of what they might get out of it over the next seven to 10 years, not the short-term.

Several banks and nonprofit groups offer state-approved first-time home buyer classes. For a list, visit the state Housing Finance Commission at http://www.wshfc.org/buyers/education.htm.

For home sellers, location and pricing matter, but Cooper adds that a home’s condition will make it stand out.

“It’s so important right now to be in top quality,” Cooper said. “It doesn’t matter what price range it’s in, it just needs to be in top quality.”

For sellers facing a short sale, agents are better prepared than they’ve been in the past to help sellers navigate the long process to selling their home, Scott said.

“Listing a home for less than the seller owes on the loan has been a tough pill to swallow for us, and our frustrations can’t even begin to compare to those felt by the homeowner,” Scott said.

The good news is that homes are selling, particularly those priced below $250,000.

“The reality is, there are buyers out there with money, good credit and a sharp eye for the deal,” Scott said. “We’re able to get them into homes that are priced right and ready to go.”

* Marta Murvosh can be reached at 360-416-2149 or .

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