Kitsap Real Estate Market Report - June 2007
A national real estate report from Barron’s last weekend (Why a Housing Recovery is Far Off, by Ian Shepardson - subscription required) predicts that the bottom of the current housing slump is a year or more off, and that the sales rate (he uses sales per 1000 people) must fall by another 10 - 25% to catch up with historic norms. He presents a graph showing the close correlation between the inverse of real mortgage rate (mortgage interest rate minus the rate of market appreciation) and the sales rate. Despite interest rates remaining comparatively low by standards of the past decade, this real mortgage rate has skyrocketed as appreciation has leveled off (or even fallen in some markets). Current market conditions show that the rate of sales must fall further (10-25%) to catch up with the current real mortgage rate. Discretionary buyers are backing away from real estate now that it presents itself as a depreciating asset. Buyers who have to move because of changing jobs or life circumstances are still in the market, but they are well aware of the huge excess supply of homes and resultant price competition. There is no reason to expect a home price rebound soon.
Fortunately the strong job growth in the Seattle area has continued to fuel a stronger housing market than in most other parts of the country - not that you should ignore the implications of the article referenced above. June was a busy month at Prowse and Company. Most of our listings that sold had previously reduced price or had come on the market at the best price among comparable properties. We have also had a number of waterfront sales. The Kitsap County listing inventory has continued to rise (6%), and inventory turnover remained little changed - it will now take 6.8 months to deplete the current inventory. The rise in inventory is expected to put downward pressure on prices.
Residential Highlights
Kitsap County residential inventory in June (2339 listings) was up 6% from May. Inventory has risen 63% since the start of 2007. The June inventory was 43% higher than last year. Inventory levels in Kitsap County have not been this high since 1997. The number of year to date pending sales was down 8% compared to a year ago - down from minus 5% last month. Countering the downward trend, Poulsbo YTD pending sales are up 45% compared to a year ago. Of 67 current pending sales in Poulsbo, 50 are new construction, and most of these are presales that never appeared as active listings. Bainbridge Island year to date pending sales are up 16% from a year ago (they were up 14% last month). The number of YTD closed sales is minus 14% compared to a year ago - falling from minus 10% last month. Poulsbo YTD closed sales are up 14% from a year ago. 14% of this year’s closed sales are new construction - mostly at Poulsbo Place II. Confounding the seeming hot market appearance in Poulsbo is that the days on the market for closed sales are 140 days - the longest wait to sell in Kitsap County. Poulsbo’s active listing inventory is actually lower this year than last - despite the huge inventory gains elsewhere. Bainbridge Island closed sales were up 7% from a year ago.
Prices are rising…
The YTD median sales price of $292,000 rose 1% in June after rising 1.4% in May. This is up 8.6% from a year ago. It’s still 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 $354,950, up 1.4% over the last 5 months. This is about 2.9% higher than a year ago - a gap that continues to narrow. The inventory turnover (total homes on the market divided by number sold last month) is 6.8 months, down from 7.2 months in May. A year ago this number was 3.5 months, and that was already reflecting a market slowdown from its 2005 levels. Today a seller has a 15% chance of selling his/her home in a given month, and that percentage is even lower if you come from a community with new construction, since new construction sales tend to displace residential resales. 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. Areas where sales were depressed the most last year (Bainbridge, Poulsbo) appear to have benefited most in this year’s market. Here is a snapshot:
Bainbridge Island +16% (+14% last month)
Poulsbo +45% (+58% last month) - 50 of 67 pending are new construction
Bremerton -26% (-19% last month)
Kingston -18% (+7% last month)
Silverdale +1% (+6% last month)
Port Orchard 0% (+8% last month)
Olalla -23% (-29% last month)
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