Our waterfront update for July 2009 contains this graph showing selling price to original list price as a percentage versus days on the market for the 68 waterfront sales in Kitsap County this year. It shows the cost in time for homeowners who list for too high a price. It also shows that except for homes priced attractively that sell quickly, very few homes sell for near their original asking price, and the final price gets lower the longer they sit on the market. (Click image below to see larger version.)
While the nation’s housing problems remain much the same as before, the economic momentum has shifted enough so that housing problems no longer dominate the news cycle. Sometimes we now hear good news about housing. There have been some reports that home construction surged in June and at least some sources hint we have reached a bottom in single family housing starts. The Businomics Blog recently put those reports in context.
Each month we 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. 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 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 2003, 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 some buyers cannot afford to purchase. Our numbers for 2009 are estimates using the latest monthly data for median prices and interest rates (2008 has been updated with average annual values), and an estimated median family income for 2008 and 2009. With interest rates rising from 5.41% last month to 5.44% in July for a typical 30 year fixed rate conforming loan and the median price rising slightly in June to $245,000, affordability is still very good but has slipped somewhat. Keeping in mind how median prices can be deceptive, you should be aware that the bulk of sales are concentrated below $400,000, with considerably fewer than normal in the higher price ranges. The affordability index fell to 1.23 in June from 1.25 in May. First time buyer affordability also fell to 1.07 from 1.10 last month. Affordability has been eroding for the past 5 months after peaking earlier in the year. Below is a graph of the year-to-year changes in affordability and a second graph showing month-to-month affordability progress over the past year.
| Year |
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
| Annual Average interest rate |
5.83 |
5.84 |
5.87 |
6.41 |
6.34 |
5.80 |
5.42 |
| Median Income |
$53,160 |
$53,923 |
$54,582 |
$58,304 |
$60,719 |
$65,000 |
$65,000 |
| Median Price |
$184000 |
$206900 |
$250000 |
$275000 |
$290343 |
$265000 |
$245,000 |
| Monthly payment |
$867 |
$975 |
$1182.43 |
$1378 |
$1443 |
$1244 |
$1103 |
| Affordable payment |
$1,108 |
$1,123 |
$1,137 |
$1,215 |
$1,265 |
$1,354 |
$1,354 |
| Affordability Index |
1.28 |
1.15 |
0.96 |
0.88 |
0.88 |
1.09 |
1.23 |
| 1st time buyer payment |
$693 |
$780 |
$946 |
$1102 |
$1155 |
$995 |
$882 |
| 1st time buyer affordable payment |
$775 |
$786 |
$796 |
$850 |
$885 |
$948 |
$948 |
| 1st time buyer affordability index |
1.12 |
1.01 |
0.84 |
0.77 |
0.77 |
.953 |
1.07
|
Here are the current statistics for Pending - Inspection and Active Listings (comparing the number in mid July to the number in mid June). 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. This category also excludes short sales awaiting bank approval, a category that has pumped up the pending sales numbers with contracts that could take months to be rejected or approved. Some of the pending inspection sales will fall apart because buyer and seller will not be able to agree on the home inspection repairs.
| Area |
Pending Inspection 07/15 |
Pending Inspection 06/15 |
Active Listings 07/15 |
Active Listings 06/15 |
| S. Kitsap W. of HWY 3 |
7 |
5 |
155 |
160 |
| S. Kitsap E. of HWY 3 |
8 |
4 |
155 |
166 |
| Port Orchard |
7 |
10 |
122 |
109 |
| Retsil/Manchester |
4 |
7 |
105 |
107 |
| Seabeck/Holly |
3 |
7 |
85 |
92 |
| Chico |
2/td> |
0 |
23 |
22 |
| Silverdale |
8 |
10 |
80 |
81 |
| W. Bremerton |
9 |
11 |
178 |
167 |
| E. Bremerton |
9 |
10 |
121 |
118 |
| E. Central Kitsap |
6 |
6 |
144 |
135 |
| Hansville |
2 |
3 |
50 |
52 |
| Kingston |
2 |
3 |
66 |
64 |
| Port Gamble |
1 |
1 |
15 |
11 |
| Lofall |
1 |
1 |
29 |
27 |
| Finn Hill |
2 |
3 |
67 |
56 |
| Poulsbo |
6 |
5 |
113 |
128 |
| Suquamish |
3 |
2 |
32 |
25 |
| Indianola |
1 |
1 |
29 |
28 |
| Bainbridge |
5 |
5 |
254 |
264 |
| Totals |
86 |
94 |
1823 |
1812 |
The number of Pending Inspection deals the first two weeks of July fell 9% from the same period in June, but July’s activity is 16% higher than it was in July 2008, so the level of sales is still pretty good and holds out the hope that the number of closed sales this year may yet turn out to be better than last year - though year to date closed sales still lag behind. The number of active listings (1823) in our residential inventory fell less than 1% from June. In a typical year it would have risen sharply by now. The ratio of sales to number of active listings fell from 5.2% to 4.7%. About 85% of the sales were under $400,000 (87% as last month and 67% were under $300,000 (73% last month). There was one pending sale above $1 million.
Here is a graph of the mid month Pending Inspection data (note the graph uses the 3 month moving average to better show the trends).
July's APR is 5.444% on a 30-Year and 5.078% on a 15-Year, both Conforming. June's rates were 5.697% on a 30-Year and 5.204% on a 15-Year, both Conforming. If you qualify for FHA or VA loans (or the newly popular USDA loans), these programs have are attractive for low downpayment buyers, although we noted that APR for 30 yr fixed FHA is 6.245 - quite a spread compared to conventional. Limits for FHA and conventional conforming loans just went up with the stimulus bill signed yesterday. FHA maximum is $475,000, and the conventional conforming limit has returned to $475,000. Lending programs for jumbo loans reportedly getting better, with the larger banks starting to come back to this market. A typical 30 year fixed jumbo APR (with total costs of the loan, not just the rate factored in) is 6.399% on one major bank web site - same as last month). Local credit unions and savings and loans may be able to beat this rate for some jumbo loans. To check the daily rate you can contact your lender or preview web sites such as this one - http://bankrate.com.
