Tuesday, October 28, 2008
Download the October 2008 Waterfront Update!
Download the July 2008 Waterfront Update.
This is your guide to our latest waterfront listings and market statistics about waterfront sales in Kitsap County.
Wednesday, October 22, 2008
Mid October Kitsap Real Estate Outlook
The volume of California home sales is rising, with some 50% of the sales being foreclosure properties. This is important because California has about 35% of the non conforming mortgages (loans securitized by banks instead of being sold to Fannie Mae and Freddie Mac). This is a sizable portion of the mortgages backing illiquid toxic securities that are at the heart of current bank liquidity problems. Mortgage interest rates jumped on news of the US Treasury taking a stake in banks to help improve liquidity in the banking system. Investors sold debt in government securities and in Fannie Mae and Freddie Mac to purchase higher yielding commercial bank debt once the government became an investor. This required that Fannie and Freddie offer significantly higher yields on their bonds to attract investors, driving up mortgage interest rates in the process. The stock market is on a roller coaster ride. The dollar has posted historic gains against the British Pound and the Euro. The various activities of central banks world wide have improved liquidity in the financial markets somewhat - one can only hope that the trend can continue.
Our gage of the current market fell in the first 2 weeks of October after promising pending sales were reported in September. This isn't surprising given all the financial market turmoil. We think that home prices will continue to fall until affordability is again in line with income. With up to 18% of the property sales in our market being distressed properties, you can see that there is downward pressure. In Kitsap County, home prices have not fallen that far. The trade off for this benefit is that homes have become much more difficult to sell. The graphs below highlight how the number of sales and chance of making a sale have fallen over the past several years. The 2008 estimate shows YTD sales vs listings. Think of it as telling you that 75% of the homes coming on the market will not sell.
We can look 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. Affordability improved at the end of last year when median sales prices fell significantly. 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 2002 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. Since the Fannie and Freddie bail out, interest rates have dropped. The affordability index dropped to 1.01 in September from 1.05 last month. First time buyer affordability dropped to .89 from .92 in June. There is a second graph showing month-to-month affordability progress this year. It's up and down, sort of like the tug-of-war between buyers and sellers, and now reflecting loss of affordability because long term interest rates are rising due to fears about inflation. The past several months have been relatively flat.
| Year | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 |
|---|---|---|---|---|---|---|---|
| Annual Average interest rate | 6.54 | 5.83 | 5.84 | 5.87 | 6.41 | 6.34 | 6.29 |
| Median Income | $52,701 | $53,160 | $53,923 | $54,582 | $58,304 | $60,719 | $65,000 |
| Median Price | $165900 | $184000 | $206900 | $250000 | $275000 | $290343 | $269975 |
| Monthly payment | $880 | $867 | $975 | $1182.43 | $1378 | $1443 | $1335 |
| Affordable payment | $1,098 | $1,108 | $1,123 | $1,137 | $1,215 | $1,265 | $1,354 |
| Affordability Index | 1.25 | 1.28 | 1.15 | 0.96 | 0.88 | 0.88 | 1.05 |
| 1st time buyer payment | $674 | $693 | $780 | $946 | $1102 | $1155 | $1068 |
| 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 | .888 |
Here are the current statistics for Pending - Inspection and Active Listings (comparing the number in mid October to the number in mid September). You'll recall that Pending Inspection status represents a newly signed around contract prior to the buyer and seller agreeing on the home inspection. Below we show the number of Pending Inspection contracts signed around in the first 2 weeks of the month. The number of Pending Inspection contracts is the best gauge for telling us in near real time how many sales are occurring. Some of these sales will fall apart as a result of the home inspection results.
| Area | Pending Inspection 10/15 | Pending Inspection 09/15 | Active Listings 10/15 | Active Listings 09/15 |
|---|---|---|---|---|
| S. Kitsap W. of HWY 3 | 6 | 4 | 213 | 230 |
| S. Kitsap E. of HWY 3 | 0 | 8 | 184 | 187 |
| Port Orchard | 8 | 14 | 129 | 149 |
| Retsil/Manchester | 1 | 2 | 144 | 159 |
| Seabeck/Holly | 3 | 6 | 109 | 118 |
| Chico | 0 | 1 | 33 | 36 |
| Silverdale | 5 | 5 | 121 | 135 |
| W. Bremerton | 4 | 9 | 246 | 255 |
| E. Bremerton | 2 | 7 | 134 | 133 |
| E. Central Kitsap | 6 | 6 | 183 | 184 |
| Hansville | 2 | 1 | 56 | 60 |
| Kingston | 1 | 5 | 94 | 99 |
| Port Gamble | 0 | 0 | 22 | 21 |
| Lofall | 2 | 2 | 38 | 44 |
| Finn Hill | 3 | 6 | 90 | 98 |
| Poulsbo | 3 | 6 | 155 | 173 |
| Suquamish | 0 | 3 | 38 | 37 |
| Indianola | 0 | 1 | 37 | 38 |
| Bainbridge | 3 | 6 | 260 | 275 |
| Totals | 49 | 92 | 2286 | 2431 |
The number of Pending Inspection deals in October fell by 48% from the first two weeks in September. This was not entirely unexpected given the recent activity in the stock market. The activity is 40% lower than it was in October 2007. The number of active listings (2286) in our residential inventory dropped about 6% from September and mirrors the seasonal decline we saw last year. The ratio of sales to number of active listings fell from 3.8% to 2.1%. About 86% of the sales were under $400,000 (up from 84% as last month) and 76% were under $300,000 (up from 70% last month). Properties at the low end of the market are moving much better than anything above $400k.
Here is a graph of the mid month Pending Inspection data for the past year:
October's APR is 6.48% on a 30-Year and 6.378% on a 15-Year, both Conforming. September's rates were 6.353% on a 30-Year and 6.252% on a 15-Year, both Conforming. As you can see, 30 year interest rates have risen since last month. The bigger story is that rates surged from below 6% just a couple weeks ago to the present levels as a result of the Treasury’s plan to invest in bank stocks. Investors sold government bonds, including the debt of Fannie Mae and Freddie Mac, to purchase higher yielding bank bonds now that the government has taken a stake. The sell off has caused mortgage rates to surge as much as half a percent. We are seeing Jumbo loans vary as much as 3% between different lenders - shows big banks just don’t want to make this loan. 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://bankrate.com/.
Monday, October 20, 2008
Download the October 2008 Prowse & Company Newsletter!
Download our October ‘08 Newsletter. This month we talk about distressed property sales in Washington, the inventory of unsold homes in Kitsap County, and we share the recipe for the ‘Wacky Cake” that Sheri Johnson made for Brenda and Rebecca on their birthdays!
Statistics not compiled or published by NWMLS
