NAR - Buyers are returning to the Market
It’s probably time we put a little positive spin on all of this hand wringing over the real estate market. In mid 2006 the National Association of Realtors (NAR) published a comprehensive report on the Seattle Real Estate market.
This report paints the strong economic outlook of the Greater Seattle area in great detail. Some of the more enlightening information in the report regards mortgage servicing costs versus income ratio. With the ratio of average home price to average income climbing from 2 to about 3 in the Seattle area since 2000, you would think that the percentage of income people spend on mortgage service would also have climbed significantly - but this ratio has remained remarkably close to the historical average of 20% - currently it is about 23% in the Seattle area, close to the national average of 22%. Lower loan fees and interest rates have kept the percentage of income used for mortgage payments down in spite of rising prices. Since the NAR report was published, interest rates have actually declined about half a percent, making this ratio even more favorable now than it was in mid summer.
David Lereah, NAR’s chief economist, said the housing market is showing signs of life and that sales may be leveling out. “Many potential home buyers who have been taking a wait-and-see attitude or taking their time and being methodical in the search process are being enticed by lower home prices,” he said. “Given a positive economic backdrop of lower interest rates and job creation, we expect sales activity to pick up early next year.”
Then NAR article also said that the current scenario presents a unique opportunity for buyers. “The supply of homes on the market is the highest we’ve seen in over 13 years, and mortgage interest rates are experiencing an unexpected decline,” said NAR President Thomas M. Stevens, senior vice president of NRT Inc. “The 30-year fixed rate is hovering around 6.3 percent, and sellers in most of the country are now showing a willingness to negotiate. While this changing market is a great time to buy, it’s become increasing important for parties on both sides of the real estate transaction process to have professional representation.”
The 30-year fixed-rate mortgage will probably average 6.5 percent in the fourth quarter but will trend up modestly in 2007. The one negative aspect of this effort to hold down the total cost of debt service is the trend towards adjustable rate mortgages, now at about 47% of all new loans. Buyers cannot count on home value appreciation in the near term to allow future refinancing to avoid the rising payment scheme of some adjustable rate mortgages.
The unemployment rate should average 4.8 percent in the fourth quarter. Inflation, as measured by the Consumer Price Index, is expected to be 3.4 percent for all of 2006, while growth in the U.S. gross domestic product is forecast at 3.3 percent. Inflation-adjusted disposable personal income is likely to grow 3.4 percent for 2006.
The strong economic picture in Seattle and in Kitsap County as well, coupled with a plentiful supply of homes on the market throughout Kitsap County, certainly reinforces the scenario that now is a good time to be a buyer.
Next entry: Location of Poulsbo's New City Hall
Previous entry: Kitsap Real Estate market update for September
