Mid November Kitsap Real Estate Outlook
Thanksgiving is almost upon us. Real estate sales activity is winding down for the year in the usual fashion, except that this year the sales activity dropped off a couple months ago, so the quiet this November seems just like more of the same. Nationally, the latest news tells of mortgage default problems now spreading to Freddie Mac and Fannie Mae, both of whom have reported large losses (Fannie $1.4 billion, Freddie $2.0 billion) for the most recent quarter. The stock prices of both institutions have fallen 25% or more. Fannie and Freddie are public shareholder owned companies with a government charter to repurchase conventional mortgages to replenish the supply of lendable money in local markets like ours. Since conventional mortgages are not government backed, Fannie and Freddie are limited in mortgages they can repurchase by a strict set of underwriting standards devised to ensure that they repurchase loans made to reliable borrowers. Fannie and Freddie’s primary method for making money is by charging a guarantee fee on loans that they have securitized into mortgage-backed security bonds. Investors, or purchasers of MBSs, are willing to let them keep this fee in exchange for assuming the credit risk, that is, Fannie and Freddie’s guarantee that the principal and interest on the underlying loan will be paid regardless of whether the borrower actually repays. These institutions are among the largest businesses in the world. They are highly leveraged operations - for instance according to the Wall St Journal, Fannie Mae has a core capital base of about $40 billion supporting a $2.8 Trillion book of business. Any significant uptick in the percentage of conforming loan defaults will continue to roil the stock prices of these companies. There is wide public perception that the government guarantees their loans, though this is not the case. The fear is that a major default in one of these institutions would quickly become the taxpayer’s problem to bail out. With all this in mind, we look at the sales activity and listing inventory in Kitsap County at mid November.
Here are the current statistics for Subject To Inspection (STI) and Active Listings (comparing the number in mid November to the number in mid October). 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 11/15 | STI 10/15 | Active Listings 11/15 | Active Listings 10/15 |
|---|---|---|---|---|
| S. Kitsap W. of HWY 3 | 12 | 6 | 163 | 183 |
| S. Kitsap E. of HWY 3 | 2 | 6 | 151 | 158 |
| Port Orchard | 4 | 6 | 177 | 177 |
| Retsil/Manchester | 1 | 6 | 125 | 132 |
| Seabeck/Holly | 5 | 4 | 132 | 136 |
| Chico | 1 | 1 | 33 | 36 |
| Silverdale | 9 | 7 | 124 | 127 |
| W. Bremerton | 11 | 10 | 259 | 249 |
| E. Bremerton | 7 | 7 | 112 | 119 |
| E. Central Kitsap | 4 | 6 | 169 | 164 |
| Hansville | 0 | 1 | 48 | 49 |
| Kingston | 1 | 4 | 86 | 99 |
| Port Gamble | 3 | 1 | 28 | 33 |
| Lofall | 0 | 5 | 32 | 34 |
| Finn Hill | 2 | 3 | 75 | 77 |
| Poulsbo | 1 | 3 | 129 | 135 |
| Suquamish | 0 | 1 | 44 | 47 |
| Indianola | 2 | 0 | 38 | 42 |
| Bainbridge | 7 | 5 | 210 | 227 |
| Totals | 72 | 82 | 2135 | 2224 |
‘STI’ deals in November increased by 17% compared to the first two weeks in October, which were very slow. The number of active listings in our residential inventory decreased by 4%, showing that sellers are pulling their properties off the market in some cases rather than relisting. The ratio of sales to number of active listings rose from 3% to 3.7% - still well below the typical activity earlier in the year. Bainbridge Island continues to be slow after falling by 58% two months ago month. Sales are up significantly in South Kitsap West of Hwy 3. Bremerton and Silverdale sales activity continues to be better than most other parts of the County.
Property sales are very competitive. Buyers are very selective and only the best valued homes are being chosen. If you receive an offer to purchase your home, it deserves serious consideration, since the next offer may not come along very soon.
November’s APR is 6.353% on a 30-Year and 5.999% on a 15-Year, both Conforming. October’s APR was 6.606% on a 30-Year and 6.252% on a 15-Year, both Conforming. Both rates have fallen in the last month. Investors in the stock market have been purchasing mass quantities of Treasury securities as a safe alternative to stocks and mutual funds. This flight to safety has lowered the interest rates on both short and long term bonds. Home loans, which are typically tied to the 10 year bond rates, have been falling as a result. If you qualify for FHA or VA loans, these programs have become much more attractive for low downpayment buyers. 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.
At Thanksgiving we put all the troubles and bright spots of our real estate market aside. As they say, "Prosperity depends more on wanting what you have than having what you want." May you have a Happy Thanksgiving!
Next entry: Download the November 2007 Prowse and Company Newsletter
Previous entry: Download the November Prowse and Company Waterfront Update
