California Land Rush to San Juan Islands

FRIDAY HARBOR, Wash. —  Dorothy Berkoff walked with a pack of neighborhood dogs onto wind-swept Eagle Point on San Juan Island and shook her head.

“I don’t like it,” she said. “We didn’t think about the fact that someone owns this land. Lots of people have utilized this as public for years. I guess we shouldn’t have taken it for granted.”

The tip of Eagle Point, 7 acres of rock outcroppings and grassy knolls without a tree in sight, now exhibits survey markers for a 4,000-square-foot house, and there’s a new road cutting through trails made by generations of visitors.

Houses sprouting up where no one ever thought a house would stand is nothing new in this area, where growth has been a constant for the last 10 years. But something new is happening in the San Juan Islands, located between Anacortes, Wash., and Vancouver Island, Canada, and served by ferries and float planes.

Property values have increased an estimated 12% to 15% over the last year--an increase driven mostly by wealthy Californians fleeing congestion and pollution who have discovered that land prices in the islands are a bargain compared to California.

Many are building second homes or permanent estates on waterfront property--such as that on Eagle Point--that long has been for sale, but that found no takers in the past because of the high price.

There always have been a few wealthy people settling part time or full time in the islands, but suddenly the number of large houses with Hollywood-style amenities is commonplace, and the local coffee shops buzz with talk of such un-island-like luxuries as lap pools, riding rings and exotic architectural designs.

Eagle Point is just one example of the consequences of a building boom that some predict will turn San Juan County into what one official called a “golden ghetto” where only the rich can afford to live.

“We are seeing plans for entire estates, complexes with stables, barns, putting greens, tennis courts, guest houses--and with Californians come docks,” said San Juan County planner Pat Powell.

“It’s two-partner workers in their 40s who are burned out on the hustle and bustle of life in California and come here to build their second homes,” said building department director Dennis Neal. “They aren’t all from California, but this boom is California-driven.”

(The Seattle Times’ real estate editor, Tom Kelly, wrote in a recent column about a call from a longtime friend, Newport Beach attorney Don Slaughter, lamenting Southland congestion and asking about property in the San Juans.

“It took us nine hours to get to Mammoth Mountain for a weekend of skiing and eight hours to get back,” Slaughter told him. “Just trying to get anywhere is ridiculous. I live a mile from John Wayne Airport. It’s just as easy for me to come up there than to put up with this.”)

A sampling from building plans filed with the county planning department:

--A $321,000 multilevel house on the west side of San Juan Island built in three “pods” connected by ramps. The house includes an elevator.

--A replica of a small turreted castle and studio planned for a 3-acre island, to be served by a water pipeline from another island or a desalination plant.

--A $500,000-house with a stone facade made of cobblestones that originally came from England as ballast on ships landing in San Francisco. The owner had the stones shipped from San Francisco.

--A 14,000-square-foot, $600,000-complex with swimming pool, riding arena and living quarters with an indoor waterfall planned for the center of San Juan Island.

--A 3,600-square-foot, 200-foot-long dock permit request for a 10-acre piece of waterfront.

San Juan County’s last burst of growth was in the 1970s, when land was bought, subdivided and sold in a frenzied attempt to beat impending zoning restrictions.

In this latest boom, buyers are not speculating but are buying for what Friday Harbor realtor Bill Giesy calls “psychic return.”

“The islands have been discovered by people from all over the country,” Giesy said. “More and more, this is being seen as one of the last great places.”

Giesy refers to San Juan Island as the new “Gold Coast,” discovered by a few wealthy out-of-state residents who spread the word and are being followed by friends and family. Others say the building boom is happening on Orcas Island just as much as San Juan, and building permits and land sales over $200,000 are about even on the two islands.

The out-of-state buyers are paying prices that surprise those in the San Juan County auditor’s office, where appraisers pride themselves on assessing property close to market value.

“Nine out of 10 of those who pay over the assessed value are from out of state,” said deputy assessor Dick Mulvey. He pointed to one recent sale of a lot with 1,325 feet of waterfront on Orcas for $1.6 million, and said wryly, “That was only a million over assessed value.”

Sees Rising Values

“A lot of people are asking more than the market will bear in the islands and are getting it from those with no good feel for the market here,” assessor Paul Dossett added.

That has not affected prices overall yet, but Dossett said that eventually, with more out-of-state buyers coming daily, the market value of all island property will rise.

The new property owners are buying up three or four waterfront lots and building in the middle. In fact, Giesy said, it is easier to sell a three-lot block of waterfront than a single lot.

Southland realtor Peggy Butler understands Southern Californians’ migration to the San Juan Islands. “People are going up there because of the price,” said Butler, a real estate agent with Grubb & Ellis in Dana Point.

Waterfront houses in Southern California cost about $1.2 million to $5 million; a condominium with a view goes for $400,000 to $700,000, she said, and a house with a view sells for about $600,000. A very small house costs about $235,000.

In the San Juans, houses average $80,000 to $150,000; waterfront is $800 to $1,000 a front foot. A 5-acre piece sells for from $5,000 to $10,000 an acre depending on view, exposure and other variables; larger pieces are from $3,000 to $5,000 an acre.

Sales such as the 15 Orcas Island waterfront parcels that sold to a single California buyer for $1.7 million recently, the $780,000 paid by a Laguna Beach resident for another Orcas waterfront block and the $460,000 purchase of a San Juan Island house prompted Dossett to say:

“It does seem to be a trend of large purchases starting. It’s just that it’s so early and happening so fast we don’t have a handle on it.”

Some residents fear the influx of wealthy residents will change the island for the worse.

‘Younger, Working Group’

“We could become a service economy--a place where only the rich can afford to live--and service workers will have to be ferried in,” said Dick Grout, county planning director.

“In the ‘70s there were wealthy people here, but there was also a younger, working group that was willing to be underemployed just to live here. When the price of property is driven up, it will be passed along to the consumer, and most service jobs don’t pay enough to enable people to live here.”

Realtor Giesy said local working people are doing well because of the boom. There are more computer firms, for example, he said, and there still are houses that can be bought for less than $70,000. “We are a long way from pricing people out of the market,” he says.

However, as the boom grows, so does the need for housing for low-income workers. Year-round rentals are hard to find, partially because summer-vacation rentals are so lucrative that landlords don’t want to tie up their houses with long leases.

And Giesy found a plus side to the trend toward big houses on the islands. He pointed to a 15,000-square-foot house overlooking Friday Harbor and said there could have been condominiums on the site.

“People are buying bigger pieces and doing less with them,” he said. “In the long run that bodes well for the islands because it means less density and fewer services needed.”