Friday, March 28, 2008
Kitsap Real Estate Local Markets in February 2008
The daily news has calmed somewhat since the fall of Bear Stearns. JP Morgan Chase has agreed to raise their bid for the failed investment bank to $10 per share. A recent report in the Wall St Journal revealed that thousands of new condominiums are about to come on the market even though current sales are weak and there is already a 10 month supply of inventory. These excesses are mostly in the Florida and elsewhere in the South, California, and Arizona. We have had a hint of the problem in Kitsap County with the auction sale planned on April 20th for The 400 condominium units in Bremerton. Bainbridge Island has about 117 condominium properties currently listed and had 7 sales in February - an inventory turnover rate of 17 months. New construction developers in Kitsap County have been offering generous bonus and financing programs to move their inventories, and one developer, Central Highlands, Inc at Poulsbo Place 2, has discussed a program of buyer price protection. Details of that program were listed but not yet posted on their web site.
Home resales rose nationally for the first time in 7 months as February’s annualized rate of 5.03 million was up 2.9% from January. In Kitsap County the same story was true. February’s closed sales increased 12% from January. Nationally sales were down 24% from February 2007, while in Kitsap County sales were down 19% from a year ago. The median closed sale price was down 8.2% nationally from a year ago, while in Kitsap County February closed sale prices were down 14%. This drop in sales price coupled with 30 year fixed mortgage rates now back below 6% (after spiking up almost half a percent last month) has caused a large improvement in affordability. Homes for qualified conventional buyers in Kitsap are back to early 2004 levels of affordability. Prices will need to fall further for the affordability to improve to historically more stable levels.
Some articles have reported that a major factor in falling prices has been the resale of foreclosed properties. There is no easy way to assemble these statistics for our area, but using typical keywords and seller names, we found about 100 listed properties in some stage of short sale, foreclosure, or bank owned resale - about 3.5% of our market. We found about 5% of the closed sales were from this group of distressed sales.
We have published this article monthly for most of the past year to explore some of the significant variations in the Kitsap Real Estate market. February’s inventory of homes for sale rose by 5% from January. Median year to date closed sale prices fell 5% in February compared to January and were down 6% percent compared to a year ago. We try to breakout the new construction sales from the resale market in Poulsbo to give a more accurate presentation of conditions there. Below are graphs of the month-to-month market fluctuations of total listings, number of closed sales, and median sales price for each areas. The descriptive comments for each area below cite the more consistent year-to-date numbers.
Total listings on the market by month for various Kitsap communities
Number of Closed Sales each month for various Kitsap communities
Variations in Median Price Month by Month for Closed Sales in various Kitsap communities
Bainbridge Island Real Estate
Residential homes on Bainbridge Island were selling for a median price of about $617,000 at the end of February, a drop of 7% from a year ago. The February median price for closed sales was 9.5% higher than last month’s median price of $563,500. Kitsap County median prices have fallen 6% over the past year. The YTD number of Bainbridge closed sales is down 52% from a year ago, and the YTD number of pending sales is down 60%. No doubt the Bainbridge market is suffering from the current lending environment, which prices 30 year fixed rate jumbo loans higher than conforming 30 year fixed rate loans. The number of closed sales is down 19% Countywide from a year ago. The number of active listings on Bainbridge (236) is up 37% from a year ago. The Bainbridge listing inventory has also risen 9% since January. The inventory turnover (total homes on the market divided by number sold last month) is 11.8 months. Bainbridge Island is a strong buyers market.
Bremerton Real Estate
Statistics we refer to are for that part of Bremerton encompassing the downtown core and west to Kitsap Lake. The market for other parts of Bremerton and its suburbs should have approximately similar trends. Homes in Bremerton were selling for a YTD median price of about $180,000 at the end of February, about 13% lower than a year ago. The February median price for closed sales was about the same as the median for last month. Kitsap County median prices have fallen 6% over the past year. The YTD number of closed sales is down 7% from a year ago (compared to a Countywide drop of 19%), and the YTD number of pending sales is down 37% from last year. The number of active listings (242) is up 49% from a year ago. The listing inventory has 8.5% since January. The inventory turnover (total homes on the market divided by number sold last month) is 5.8 months. Much better than average!
North Kitsap Real Estate
Using the example of Kingston - the largest housing market in North Kitsap - homes were selling for a median price of about $355,000 at the end of February, down about 3% from a year ago and down about 9.6% from last month. Kingston prices fluctuate more than some of the other markets because of the lower listing and sales volume. Kitsap County median prices have fallen 6% over the past year. The YTD number of closed sales is down 40% from a year ago, and the YTD number of pending sales is down 38%. The number of closed sales is down 19% Countywide from a year ago. The number of active listings in Kingston (84) is up 33% from a year ago and up 11 percent since last month. The inventory turnover (total homes on the market divided by number sold last month) is 28 months - only 3 sales closed in Kingston last month.
Poulsbo Real Estate
Statistics we refer to are for that part of Poulsbo encompassing the downtown core, from the head of Liberty Bay southeast to Ne-Si-Ka Bay, including parts north to Sawdust Hill Rd. The market for other parts of Poulsbo and its suburbs should have approximately similar trends. Homes in Poulsbo were selling for a median price of about $343,513 at the end of February, down about 4% from a year ago. Kitsap County median prices have fallen 6% over the past year. The number of closed sales YTD has risen 23% compared to last year, and the number of YTD pending sales has increased 26%. This compares to a drop of 19% since a year ago for Kitsap County as a whole. A large portion of the currently pending sales is from presales at one moderately priced new construction development - homes that never appeared as active listings. The Poulsbo listing inventory (158) has risen by 52% compared to a year ago and is 8% higher than it was at the end of January. The inventory turnover (total homes on the market divided by number sold last month) is 7.5 months. Calculating inventory turnover in this manner is artificially low since a number of the new construction homes closing did not show as active listings. Of 43 current pending sales, 34 are new construction. Using only the 81 non-new construction active listings in Poulsbo and the 10 non new construction sales closed last month, the inventory turnover would be 8.1 months.
Silverdale Real Estate
Homes in Silverdale were selling for a median price of about $387,500 at the end of February, up about 29% from a year ago. This rise in prices is not across the board, but instead reflects an increased number of sales in higher price ranges. Kitsap County median prices have fallen 6% over the past year. The number of YTD closed sales was down 33% from a year ago, compared to a drop in closed sales of 19% for the County as a whole. The number of pending sales YTD is down 32% from a year ago. The number of active listings in Silverdale (118) is 19% higher than a year ago, and it’s also 17% higher than it was at the end of January. The inventory turnover (total homes on the market divided by number sold last month) is 9.8 months.
Tuesday, March 25, 2008
Download the March 2008 Waterfront Update
Download the March 2008 Waterfront Update. This is your guide to our latest waterfront listings and market statistics about waterfront sales in Kitsap County.
Monday, March 17, 2008
Mid March Kitsap Real Estate Outlook
On Sunday JP Morgan Chase agreed to acquire Bear Stearns (for $2 per share - down from about $70 per share last week), the shocking and rapid demise of one of the 5 largest investment banks. In addition to being the product of subprime mortgage defaults and extensive collateralized debt obligations, this failure was also somehow a product of the leveraging schemes used by hedge funds and other investors. The role of leverage in the failure of this bank and its threat to other banks and funds has not been well explained, and perhaps underlies much of the uncertainty in financial markets. Sunday’s Washington Post had a simple description of the problem, which may well continue to dog the recovery in banking and financial institutions. Inability to find the cheap short term cash loans that facilitate much of an investment bank’s business is another factor. Yet another factor was that hedge funds and other investors began closing their accounts at Bear Stearns and moving funds elsewhere - sort of a bank run by big investors.
As reported by the Wall St Journal, the Federal Reserve and Chairman Ben Bernanke have acted quickly to create “a new lending tool to help its network of primary dealers - securities firms that interact with the Fed but don’t fall under its direct banking supervision.” It also lowered the overnight lending rate between banks by 1/4 point and extended the duration for these loans from 30 to 90 days. These moves continue the Fed’s unprecedented efforts to short circuit the feedback of problems at one institution from propagating and amplifying throughout the financial system.
Separately, efforts continue to alleviate foreclosure pressures on homeowners. Rep Barney Frank has released a draft plan for $300 billion in “short refi’s” (that is to use FHA guaranteed loans to help owner refi with the bank taking less than the original loan amount in repayment). A detailed review of the bill on the blog Calculated Risk indicates that this bill balances incentives and protections against abuse. It’s unclear at this point the impact such a program might have on the number of foreclosures over the next couple years.
Benjamin Bernanke himself presented an extensive program to improve mortgage lending and foster sustainable home ownership. He addresses the causes of the current crisis, falling home equity, weak underwriting standards, resetting of ARMs to higher rates, etc. He reveals that 45% of the foreclosures are on prime or near prime, government backed mortgages. He outlines the Fed’s efforts thus far to correct problems in subprime lending practices, advertising, and incentives. If enacted, these regulatory changes would require all lenders to comply with the Fed’s guidelines, not just the banks that it regulates. There is quite a bit of meat in the article - more than we can adequately cover here.
The past several months we have been looking at affordability as a means of seeing how close our market is to returning to its pre bubble conditions. The Washington Center for Real Estate Research provides local affordability calculations that we can use to check on housing affordability using current median prices and interest rates. For the past 2 months we reported that affordability had improved significantly in recent months. We assume that a buyer making the median family income puts 20% down on the median priced home and obtains a 30 year fixed rate mortgage. We assume that a first time buyer making 70% of the median income puts 20% down and on a house priced at 80% of the median and obtains a 30 year fixed rate mortgage. We assume that both buyers can afford to spend a maximum of 25% of their monthly income on the principal plus interest of the loan. Using the annual averages of median price, median income, and average annual 30 year fixed interest rate since 2001 we plot an affordability index equal to the maximum affordable payment divided by the actual payment. When the index is greater than 1, the loan is affordable to the typical buyer. When it is less than 1 then some buyers cannot afford to purchase. Our numbers for 2008 are estimates using the latest monthly data for median prices and interest rates, and an estimated median family income for 2008. The affordability index rose to 1.16 in March from 1.02 last month. First time buyer affordability rose to 1.02 from .89 in February. Things are headed the right direction.
| Year | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 |
|---|---|---|---|---|---|---|---|
| Annual Average interest rate | 6.54 | 5.83 | 5.84 | 5.87 | 6.41 | 6.34 | 5.75 |
| Median Income | $52,701 | $53,160 | $53,923 | $54,582 | $58304 | $60719 | $65000 |
| Median Price | $165900 | $184000 | $206900 | $250000 | $275000 | $290343 | $250000 |
| Monthly payment | $880 | $867 | $975 | $1182.43 | $1378 | $1443 | $1167 |
| Affordable payment | $1,098 | $1,108 | $1,123 | $1,137 | $1,215 | $1,265 | $1354 |
| Affordability Index | 1.25 | 1.28 | 1.15 | 0.96 | 0.88 | 0.88 | 1.16 |
| 1st time buyer payment | $674 | $693 | $780 | $946 | $1102 | $1155 | $934 |
| 1st time buyer affordable payment | $769 | $775 | $786 | $796 | $850 | $885 | $948 |
| 1st time buyer affordability index | 1.14 | 1.12 | 1.01 | 0.84 | 0.77 | 0.77 | 1.02 |
Here are the current statistics for Subject To Inspection (STI) and Active Listings (comparing the number in mid March to the number in mid February). You'll recall that STI represents a newly signed around contract prior to the buyer and seller agreeing on the home inspection. Below we show the number of STI contracts signed around in the first 2 weeks of the month. The number of STI contracts is the best gauge for telling us in near real time how many sales are occurring. Some of these sales will fall apart before they become pending sales.
| Area | STI 03/15 | STI 02/15 | Active Listings 03/15 | Active Listings 02/15 |
|---|---|---|---|---|
| S. Kitsap W. of HWY 3 | 8 | 7 | 182 | 160 |
| S. Kitsap E. of HWY 3 | 10 | 6 | 150 | 152 |
| Port Orchard | 11 | 8 | 176 | 173 |
| Retsil/Manchester | 4 | 3 | 138 | 130 |
| Seabeck/Holly | 5 | 3 | 105 | 96 |
| Chico | 1 | 0 | 32 | 31 |
| Silverdale | 7 | 6 | 116 | 111 |
| W. Bremerton | 2 | 9 | 224 | 218 |
| E. Bremerton | 7 | 9 | 101 | 94 |
| E. Central Kitsap | 6 | 6 | 151 | 149 |
| Hansville | 1 | 2 | 57 | 53 |
| Kingston | 1 | 1 | 80 | 78 |
| Port Gamble | 3 | 0 | 28 | 25 |
| Lofall | 2 | 4 | 31 | 33 |
| Finn Hill | 6 | 0 | 78 | 77 |
| Poulsbo | 1 | 5 | 150 | 139 |
| Suquamish | 0 | 1 | 43 | 43 |
| Indianola | 0 | 2 | 43 | 36 |
| Bainbridge | 8 | 4 | 245 | 218 |
| Totals | 86 | 76 | 2130 | 2016 |
STI deals in March increased by 13% compared to the first two weeks in February. The activity is down 31% compared with March 2007. The number of active listings in our residential inventory increased by 6%. The inventory fell in some areas and increased in others. The ratio of sales to number of active listings rose from 3.8% to 4%. About 76% of the sales were under $400,000 and 59% were under $300,000.
Here is a graph of the mid month sti data for the past year:
As we said above, interest rates rose as investors moved away from treasuries and mortgage backed securities. March’s APR is 5,973% on a 30-Year and 5.494% on a 15-Year, both Conforming. February’s rates were 6.48% on a 30-Year and 6.126% on a 15-Year, both Conforming. Interest rates have fallen about half a point since last month. If you qualify for FHA or VA loans, these programs have become much more attractive for low downpayment buyers. Limits for FHA and conventional conforming loans have risen recently to $475,000. Check with your lender to see if you qualify. To check the daily rate you can contact your lender or preview web sites such as this one - http://www.wellsfargo.com/mortgage/rates.
Statistics not compiled or published by NWMLS
