Friday, January 19, 2007
The Market Is Holding Steady
Is the traditional winter lull almost over? Buyers should be prepared for the real estate hibernation to end very soon. Plus a Special Bonus Investors Corner – My advice on what to do and what NOT to do.
by Jim Valentine, Buyer Specialist at Prowse & Company
360-779-2888, 888-842-0117 (toll free),
The holidays are behind us. It’s a new year, and we’ve already seen buyers showing real interest in writing offers. Many other agents in the area tell me they are seeing the same thing.. Just today I was talking with an agent whom I’ve known for a long time and trust very much (we attended the Brokers training together). She said, “all of a sudden, as soon as New Years was over, my phone started ringing off the hook.” We have begun to see more Internet traffic and numerous calls on those listings that are priced aggressively.
Here are the current statistics for Subject To Inspection and Active Listings (comparing the number in mid January to the number in mid December 2006). You'll recall that Subject to Inspection represents the number of newly signed around deals in the first 2 weeks of the month.
| Area | STI 1/15 | STI 12/13 | Active Listings 1/15 | Active Listings 12/13 |
|---|---|---|---|---|
| S. Kitsap W. of HWY 3 | 2 | 3 | 153 | 149 |
| S. Kitsap E. of HWY 3 | 5 | 3 | 90 | 91 |
| Port Orchard | 14 | 5 | 150 | 160 |
| Retsil/Manchester | 1 | 5 | 79 | 83 |
| Seabeck/Holly | 3 | 4 | 69 | 74 |
| Chico | 2 | 2 | 24 | 22 |
| Silverdale | 5 | 4 | 87 | 86 |
| W. Bremerton | 14 | 9 | 157 | 169 |
| E. Bremerton | 6 | 8 | 68 | 82 |
| E. Central Kitsap | 7 | 9 | 70 | 86 |
| Hansville | 0 | 0 | 21 | 28 |
| Kingston | 2 | 1 | 55 | 58 |
| Port Gamble | 1 | 1 | 13 | 15 |
| Lofall | 0 | 4 | 12 | 17 |
| Finn Hill | 1 | 1 | 44 | 46 |
| Poulsbo | 0 | 2 | 79 | 84 |
| Suquamish | 2 | 3 | 23 | 29 |
| Indianola | 0 | 0 | 24 | 26 |
| Bainbridge | 9 | No data | 158 | No data |
| Totals | 74 | 62 | 1376 | 1305 |
Interest rates comparison
Last month the APR was 6.226% on a 30Year and 5.999% on a 15-Year loan, both Conforming. This month the APR is 6.353% on a 30-Year and 6.252% on a 15-Year, both Conforming. Rates are going up. To check daily rate you can contact your lender or preview web sites such as this one - http://www.wellsfargo.com/mortgage/rates.
*Bonus* Investors Corner - Thinking about investing – perhaps flipping or rentals? You're not alone. From personal experience I can tell you that it's a very fast paced part of the real estate industry. Here's a recent typical situation. A new listing comes on the market 4 days ago at $115,000. It's a doublewide manufactured home in foreclosure and an hour and fifteen minute drive from Poulsbo. After viewing the property I call the listing agent for more information and learn there are already two offers on the table. Moral of the story: Be prepared financially before you start looking and know that you may have to make some very quick, decisions if a bargain property comes on the market.
Solid advice to investors in Kitsap County's current market
- Don't hold out for a "special deal" or "something that slips through the cracks." With all the ‘investors' in today's market, ‘special deals' are usually found every morning at 9am when they auction off the foreclosures at the county courthouse. Unfortunately, most of us have to go to work and only the investor that makes a living off of investments can attend the courthouse auctions.
- Flipping in the market today seems almost impossible. Resale prices are too high to make a flip pencil out in most cases. With some success, a few investors have tried buying land, building a spec home and flipping it. But I've been watching one very nice 2000+ Sf newly constructed home in Silverdale on 2.4 acres sit for over 300 days. It started at $414,950 and is now down to $380,000 with no offers ever being accepted. It's really hard watching an investor owned property sit on the market month after month because you know they invested their time and money. When it came time to sell, they had to price the property above market value to recoup, essentially pricing themselves out of the market.
- Another flip that became common recently was new condo and plat construction. This can be tricky.. Usually the builder's lender and/or CC&R's will prevent more than 20% investor owned units. A word to the wise: if anyone tells you to buy an investment property as a second home, think twice. If you buy a home as an investment but don't plan on living in it, and you purchase this new home with a second home loan, you've just committed loan fraud, a federal offense. One condo complex in our County was telling investors who missed the 20% cutoff just to buy their units as second homes. I would recommend against putting yourself in this situation.
How should someone invest in today's market? Too often I talk with investors who expect an immediate return on their investment but haven't worked out the details to see if their expectation is valid. You need to think long term. Will the property cash flow now? Can you project where you'll be 5 years down the road?
Let's look at a simple example: You have $20,000 to put down on a $200,000 home. Since you have 10% down you'll have to pay mortgage insurance (PMI). Investor owned properties also have higher insurance and lending rates. Again these are rough numbers.
| Purchase Price = | $200,000 |
|---|---|
| Down Payment = | $20,000 |
| Principal = | $180,000 |
| Interest Rate = | 6.5% for 30 years |
| P&I Payment = | $1,137.72 |
| Est. Property Tax = | $1,500 |
| Est. Insurance = | $300 |
| LTV Ratio = | 90% |
| PMI Rate = | 0.78% |
| Monthly Payment Breakdown | |
| P&I = | $1,137.72 |
| Property Tax = | $125 |
| Insurance = | $25 |
| PMI = | $117 |
| Monthly Payment = | $1,404.72 |
Can you rent at $200,000 home in Kitsap County for $1,500 right now - probably not. Can you rent it for $1,000 and carry $400 a month? Or $1,200 and carry $200? What's the vacancy rate in any particular area? Can you carry $1,400 a month while the home is vacant? Are you going to hire a property management company? If so, that will cost 10% of each month's rent? Are there homeowner's dues? And so forth…
These are the hard questions long-term investors need to ask themselves before they invest. I find investors often overlook the rental market when they begin their research, but in reality, every investor should know the rental market better than the real estate market. Those who pay attention, do some homework, and learn will be ahead of the pack.
Monday, January 08, 2007
Kitsap Real Estate Market Activity in December
Median list and sale prices have stabilized. Inventory fell significantly again in December as sellers allowed their listings to expire or canceled their listings, but this was more the regular seasonal decline than a further indication of weakness in the market.
Residential Highlights
Kitsap County residential inventory in December (1435 listings) was down 15% from November. After seeing inventory rise all year, it dropped 4% in October, 9% last month and now another 15%. Although the inventory drops in October and November were reflective of buyers unable to sell and therefore withdrawing from the market, the decline in December was mostly a seasonal effect (there was a similar decrease last year). We expect the number of listings to increase again in January. The December inventory was 45% higher than last year, about the same as last month. After rising quickly for several months, the Bainbridge Island residential inventory has stabilized at about the same level as the rest of the County. The number of year to date pending sales was down 13% compared to a year ago - same as last month. Bainbridge Island pending sales are down 21% from a year ago. The number of YTD closed sales is down by 12% compared to a year ago - same as last month. Bainbridge Island closed sales are down 21% from a year ago. Last month’s Kitsap County closed sales were 21% lower than a year ago, down from only a 7% decline last month.
Prices are stabilizing...
The median sales price of $275,000 was up 10% from a year ago and steady for the 4th straight month. Since January it has risen 7%.
Seller expectations...
The median list price for the year remained steady at $349,900, an 8% rise since the start of the year compared to a 7% rise in median closed sales price. The inventory turnover (total homes on the market divided by number sold last month) is 5.2 months, down from 6 months last month. A year ago this number was 2.9 months. Today a seller has a 19% chance of selling his/her home in a given month. Competitive pricing is essential, and most offers we see presented are negotiating on price.
Statistics not compiled or published by NWMLS
