Wednesday, November 07, 2007
Kitsap Real Estate Market Report - October 2007
Within the past week the Federal Reserve has again lowered its Federal Funds Rate target by a quarter point - now at 4.5%. These moves to improve liquidity and shore up business confidence in our financial markets run counter to the Fed’s need to suppress inflation, which may occur as a result of the weakening US Dollar and the rising costs of imported goods and energy. Although financial markets may continue to provide the Fed with arguments to further cut the funds rate, it will be interesting to watch the debate among Fed policy makers about the advisability of doing so. The Mortgage Bankers Association last week predicted that the housing slump will last at least another year. Nationally the number of existing home sales is expected to decline 12% this year and another 10% next year.
Much of the unrest in financial markets has been the result of recent losses reported by major banks and brokerages, particularly Citibank and Merrill Lynch. While losses reported thus-far by these and other major banks do not yet exceed $30 to $40 billion, at least one analyst has reported that the total losses from the credit crunch may be in the range of $250 - 500 billion. There are currently over $1 Trillion in subprime mortgages in the US, about 20% of the total number of home loans. The Center for Responsible Lending has published a snapshot of subprime lending in the US. It shows that 14.4% of the subprime loans are in foreclosure and estimates that up to 2.2 million families will lose homes due to foreclosure over the next several years. It estimates that about 90% of the subprime loans made during the 2004-2006 period included a sharp increase in interest rates (typically at the two year point). Our experience is that many of these also came with a prepayment penalty that makes refinancing unaffordable for the first 3 or more years of the loan.
Looking now at Kitsap County, the listing inventory is falling as the holidays approach. Nationally this same trend is occurring in most areas. This drop in the total number of listings obscures the 16% increase in the number of new listings that came on the market last month compared to a year ago. Median sales prices fell $1000 compared to last month, but are still up 7% from a year ago. Here are some more details.
Residential Highlights
Kitsap County residential inventory in October (2314 listings) was down 4.3% from September. Inventory was 26% higher than a year ago. The number of year to date pending sales was down 12% compared to a year ago - same as last month. Countering the downward trend, Poulsbo YTD pending sales are up 39% compared to a year ago. Of 61 current pending sales in Poulsbo, 52 are new construction, and most of these are presales that never appeared as active listings. Bainbridge Island year to date pending sales are down 2% from a year ago (a reversal over the past several months after being up for most of the year). The number of YTD closed sales Countywide is minus 17% compared to a year ago - same as last month. Poulsbo YTD closed sales are up 12% from a year ago, down from 18% last month. Bainbridge Island closed sales were down 1% from a year ago, reversing the positive trend we have reported for most of the year.
Prices are falling…
The YTD median sales price of $295,000 in October was down less than a percent from September. It has basically been flat for 4 months now. This is up 7% from a year ago. It’s still most important for sellers to be striving to be most competitively priced among their competition.
Seller expectations…
The median list price for the year remained steady at $350,000. This is the same as last month and is less than 1% higher than a year ago. The spread between the median list price and median sales price is telling - when the market is good this spread becomes larger and as the market declines this difference becomes smaller. Two years ago (at the top of the market) the spread between median list and median closed sale price was $74,100. A year ago the spread was $74,500, This month the spread is $55,000. The inventory turnover (total homes on the market divided by number sold last month) is 9.3 months, about the same as September. This number has been steadily going up for the past several months. A year ago this number was 6 months, and that was already reflecting a market slowdown from its 2005 levels. Today a seller has a 11% chance of selling his/her home in a given month. Competitive pricing is essential, and almost every offer we see presented is negotiating on price.
The statistics for pending sales (compared to year-to-date sales last year) varied for different parts of the County. Here is a snapshot:
Bainbridge Island -2% (+3% last month)
Poulsbo +39% (+45% last month) - 52 of 61 pending are new construction
Bremerton -21% (-24% last month)
Kingston -9% (-7% last month)
Silverdale +3% (-2% last month)
Port Orchard -4% (-6% last month)
Olalla -23% (-23% last month)
Statistics not compiled or published by NWMLS
