With the January median price for Kitsap real estate ($224,450) near it's lowest level in several years and the continued availability of low conventional loan rates, our affordability report this month looks very good. We expect the median home price will rise back to typical levels from last year as sales pick up this spring, but the big question is what will happen to mortgage rates when the Federal Reserve stops purchasing debt and mortgage backed securities from Fannie Mae and Freddie Mac. Supposedly rates have been driven down by this policy for the past year or more, and some parties see rates rising to near 6% by the end of this year. However, an analysis on the blog Calculated Risk disputes the magnitude of the rise, saying he expects .35 to .5% increase and citing an analysis by Amherst Securities that expects perhaps as little as .25% increase.

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. Note that unlike the discussion above these calculations only compare the affordability of standard conventional loans, not the different types of loan products that have been offered. 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 remaining nearly level at 5.12% in February for a typical 30 year fixed rate conforming loan and the median price falling in January to $224,450, affordability is improved and remains very good. The outlook for rates is that they will continue to rise in the coming year, with some experts predicting they'll reach 6% by the end of 2010. 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 improved to 1.39 in January from 1.29 in December, almost entirely due to the lower median price. First time buyer affordability improved to 1.21 from 1.13 last month. These are big improvements, but we probably cannot expect the median price to remain this weak going into spring. 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	2004	2005	2006	2007	2008	2009	2010
Annual Average interest rate	5.84	5.87	6.41	6.34	5.80	5.03	5.12
Median Income	$53,923	$54,582	$58,304	$60,719	$65,000	$65,000	$65,000
Median Price	$206900	$250000	$275000	$290343	$265000	$244499	$224450
Monthly payment	$975	$1182.43	$1378	$1443	$1244	$1054	$977
Affordable payment	$1,123	$1,137	$1,215	$1,265	$1,354	$1,354	$1,354
Affordability Index	1.15	0.96	0.88	0.88	1.09	1.28	1.39
1st time buyer payment	$780	$946	$1102	$1155	$995	$843	$782
1st time buyer affordable payment	$786	$796	$850	$885	$948	$948	$948
1st time buyer affordability index	1.01	0.84	0.77	0.77	.953	1.12	1.21

February's APR is 5.065% on a 30-Year and 4.573% on a 15-Year, both conforming. January's rates were 5.191% on a 30-Year and 4.573% on a 15-Year, both conforming. If you qualify for FHA, VA, or USDA loans , these programs have are attractive for low downpayment buyers. Limits for FHA and conventional conforming loans went up with the stimulus bill. The FHA maximum is $475,000, and the conventional conforming limit has returned to $475,000. Lending programs for jumbo loans have improved considerably, 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 5.643% on one major bank web site - lower than 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/ .

Since there are many different factors affecting our local market, we'll try to touch on a few different topics to give you the flavor of what is happening nationally as it affects Kitsap real estate, as well as our usual review of local markets.

Regarding prices in our local market (from Fortune):

"In normal times, people won't pay too much more to own a house than to lease it. After all, if you're paying rent instead of a mortgage and taxes, you still get to enjoy the same rec room, chef's kitchen, and casita for visiting grandparents. So the surest sign of a frenzy appears when owning becomes far more expensive than renting. That's precisely what happened during the last bubble."

On average, the Deutsche Bank analysis (see link to article above) of rents in 53 cities showed that in 1999 families were paying about 87% as much to rent as to own. By mid 2006 the cost to rent was only 60% of what it cost to own, and the cost to own was far higher in some bubble markets like Las Vegas. The good news is that in about a third of those cities (including Phoenix and parts of California) home prices have now fallen to where the cost to own exceeds the cost to rent by less than 10%. In another third, including Boston, San Jose, and Chicago, the difference has fallen farther -  to less than 6%. Unfortunately, the final third, including Seattle, still have prices 24% to 32% above the 1999 benchmark, and Deutsche Bank expects home prices to fall further in these areas.

In a separate independent analysis, John Burns Real Estate Consulting ranks the Bremerton Metropolitan Statistical Area (Kitsap County) as the 4th most overpriced area in the country in comparison with the 26 year history of housing affordability in our area. They compare current conditions in the area to historical conditions in our area - so they're saying that we are overpriced compared to historical affordability for our area. Seattle is 2nd most overpriced on the list. Their analysis compares local incomes, down payments, and house payments to derive an affordability index. The factors affecting the sale of any given property are always local, but organizations looking at the pressures on our overall market are saying that prices still need to fall to get back within the historical norms for our own community.

Regarding mortgage delinquencies (Housing Wire):

"Mortgage delinquencies of 60 or more days rose for the 12th straight quarter, hitting a record high 6.89% in Q409, according to market research by credit bureau TransUnion."

On the other hand, the number of mortgage delinquencies of 30 or more days have fallen. If you look at the graph in the link from Calculated Risk blog, you'll see that although the rate of new defaults may have started to decline, there are still a large number of distressed loans to be resolved through loan modification, short sale, or foreclosure.

Regarding the current progress in loan modifications (Bloomberg News):

"Modifications made permanent jumped 75 percent in January from December, while new trials rose about 9 percent, according to U.S. Treasury Department data released today. In total, 116,297 people in the Home Affordable Modification Program have been successfully steered into more manageable loans, with 830,438 more trying to navigate through the trial phase of the plan.

As the program nears the one-year anniversary of its unveiling, it is still short of the 3 million to 4 million at- risk homeowners Obama targeted. About 2.82 million U.S. homeowners still lost their properties to foreclosure last year and 4.5 million filings are expected in 2010, RealtyTrac Inc. said last month."

A recent article by real estate analyst Mark Hanson points out that there are no resources to implement a wide scale principal reduction program and that the median recipient of a permanent loan modification is being saddled with a 55% debt to income ratio and left with virtually no disposable income. He advocates the HAFA program (Home Affordable Foreclosure Alternatives) coming April 5th and a resumption of bank foreclosures as the only practical ways to de-leverage homeowners from unsustainable amounts of mortgage debt.

Regarding the rise in short sales vs sales of bank owned properties (REO) (Calculated Risk):

"Short sales approved by Fannie Mae and Freddie Mac, which own 57% of U.S. mortgages, nearly quadrupled in the first nine months of 2009 compared with the same period in 2008. At the nation's largest mortgage servicers, short sales soared 165% to 74,513 in the first nine months of 2009 from the year-earlier period.

Short sales are still few compared with foreclosures, but policymakers are looking at such sales to shrink the number of bank-owned homes on the market."

The Calculated Risk article quoted above also notes that the HAFA program will probably accelerate further the number of short sales completed.

Each month we publish a snapshot of several local markets to show variations in our larger Kitsap County real estate market. Kitsap County's residential inventory in January (1437 listings) is about 5% higher than December and down about 20% from a year ago. This is the first rise in the number of listings in some time, and may be evidence that we'll see a more typical seasonal listing curve, with then number of properties for sale rising into mid summer and falling off as the we get later into the year. We may at least see some of the shadow inventory become active again as foreclosures increase and sellers come back to test the market. The County has a listing inventory turnover rate of about 8.35 months, slower than December's 6.0 months.  Inventory turnover varies greatly by price, with an inventory turnover as low as 6.5 months for the lower price ranges and four or more times that long for homes priced above $400,000. The 3 month moving average number of closed sales Countywide is up 57% compared to a year ago, up from plus 38% last month, but temper this with knowing that we were at the very bottom of our market a year ago. Closed sales were down 11% compared with December 2009. January's closed sale median price ($239,700) was almost the same as December, and is less than 1% higher than a year ago.  The number of pending sales in January was up 5% compared to a year ago.  Regional pending sales have tailed off after peaking in October 2009.  The links to regional market trends below will show both tables and graphs that further enhance the data reported below.

See Kitsap County graphs at http://www.bprowse.com/kitsap_market_trends.

Bainbridge Island Real Estate
Bainbridge Island residential properties were selling for a January median price of $553,500, about 10% higher than in December. The more stable three month moving average of closed sale price rose 4% from last month to $515,500 and is 4% higher than it was a year ago. The Kitsap County 3 month moving average median price is about 2% lower than it was a year ago. The 3 month moving average for Bainbridge Island's number of closed sales is 20% higher than a year ago. The 3 month moving average number of pending sales in December rose 31% from a year ago. The 3 month moving average of closed sales is up 57% Countywide from a year ago (when sales were very weak). The number of active listings on Bainbridge (166) is down 14% from a year ago. The inventory turnover (total homes on the market divided by number sold last month) is 10.3 months, slower than the 7 month turnover rate of last month. Bainbridge Island is a buyers market.

See tables and graphs at http://www.bprowse.com/bainbridge_island_market.

Bremerton Real Estate
Statistics are for the Bremerton downtown core and west to Kitsap Lake. The market for other parts of Bremerton and its suburbs should be similar. Bremerton homes were selling for a month end median price of $129,300 at the end of January, about 31% lower than a year ago and down 16% from last month. The more stable 3 month moving average was 22% lower than a year ago. The Kitsap County 3 month moving average median price is about 24% less than it was a year ago. Bremerton's 3 month moving average for number of closed sales is up 10% from a year ago, but for January, there were only 10 closed sales. This will make the inventory turnover (see below) look large. The 3 month moving average of closed sales is up 57% Countywide from a year ago.  The 3 month moving average number of Bremerton pending sales is up 9% from last year. Recall this number includes pending short sales that may not close. The number of Bremerton active listings (150) is 12% lower than a year ago. The inventory turnover (total Bremerton homes on the market divided by number sold last month) is 15 months (way slower than the 5.1 last month and from 10 months a year ago). While prices are way down the rate of sales fell off as well. We'll look to see if this trend continues or is just an isolated case last month. The Bremerton market is probably still a buyers market.

See tables and graphs at http://bprowse.com/bremerton_market  

North Kitsap Real Estate
Statistics here are for Kingston, the largest housing market in North Kitsap. Activity in Kingston should be representative of the other areas in North Kitsap. Kingston homes were selling for a month end median price of about $299,000 at the end of January, 36% higher than a year ago. The low sales volume can produce large fluctuations when one or two high priced homes sell.  The more stable 3 month moving average of closed sale prices is up 41% compared to a year ago.  The Kitsap County 3 month moving average median price is about 2% lower than it was a year ago.  The 3 month moving average number of Kingston closed sales rose 167% from a year ago, while the number of pending sales is unchanged from a year ago. Recall again that sales at the end of last year were very few and far between and that our current pending sales include pending short sales that may not close. The 3 month moving average of closed sales is up 57% Countywide from a year ago. The number of active listings in Kingston (59) is down 13% from a year ago. The inventory turnover (total homes on the market divided by number sold last month) is 14.8 months (a sharp slowdown from the 4.7 months last month). Kingston is still a buyer's market.

See tables and graphs at http://bprowse.com/north_kitsap_market  

Poulsbo Real Estate
These statistics are for Poulsbo, including the downtown core, from the head of Liberty Bay southeast to Ne-Si-Ka Bay, and parts north to Sawdust Hill Rd. Other parts of Poulsbo and its suburbs should have similar trends. The January median sales price for Poulsbo was $287,500, down about 6% from a year ago. The more stable three month moving average closed sale price was $277,709, about 17% lower than a year ago. The Kitsap County 3 month moving average median price is 2% lower than it was a year ago. The 3 month moving average number of closed sales in Poulsbo rose 67% from a year ago. The 3 month moving average of closed sales is up 57% Countywide from a year ago.  The 3 month moving average of pending sales was up 44% in Poulsbo. Recall this number includes pending short sales and new construction that may not close soon. The Poulsbo listing inventory (80) is 46% lower than a year ago. The inventory turnover (total homes on the market divided by number sold last month) is 6.2 months, a bit worse than the 5.9 months reported last month - but still very good. Poulsbo is probably still a buyers market because of the shadow inventory of homes pulled off the market in the past year without selling.

See tables and graphs at http://bprowse.com/poulsbo_market  

Silverdale Real Estate
Homes in Silverdale were selling for a January median price of about $230,000. This median is down 4% percent from a year ago. Silverdale's more stable 3 month moving average median closed sale prince in December of $259,667was up about 2.5% from a year ago. The Kitsap County 3 month moving average median price is 2% lower than it was a year ago.  The 3 month moving average for Silverdale's number of closed sales was 57% higher than a year ago. The 3 month moving average of closed sales is up 57% Countywide from a year ago.  The number of Silverdale pending sales in January is up 10% from a year ago, but recall this number includes pending short sales that may not close. The number of active listings in Silverdale (65) is 14% lower than a year ago. The inventory turnover (total homes on the market divided by number sold last month) is 7.2 months, slower than the 5.2 months last month. Silverdale is probably still a buyer's market because of the shadow inventory of unsold homes not currently on the market that will deter prices from rising.

See tables and graphs at http://bprowse.com/silverdale_market  

Our most recent market report newsletter from Prowserealestate.com is reposted here in its entirety.

A recent Wall St Journal Article by Economics Editor David Wessel ("Geithner Gets Some Credit–But Still No Cheers") highlights the current paradox with the economic recovery. Stocks have rebounded, helping banks raise more capital. Mortgage rates have come down, but the value of commercial and industrial loans held by commercial banks continues to fall, recently down about 18% from a year earlier (while their cash assets have increased almost 30%). While the Treasury Secretary's policies have worked better, faster, and more cheaply in getting capital flowing back into the big banks, the lack of commercial lending hurts all but those corporations large enough to sell their own bonds. Large banks see their stock rising and want to return to paying large bonuses to their employees, while main street sees 9.7% unemployment and 15% of homeowners (almost 25% of all borrowers) owe more than their homes are worth. For them, to be told things could be worse is not comforting.

The Making Home Affordable loan modification program is in flux as officials now realize that the present program of reducing payments by adjusting interest rates and loan terms rather than reducing principal is not helping several million homeowners as anticipated. Fewer than 100,000 permanent modifications have been approved to date. Experts are predicting many additional foreclosures, since the trial modification period is approaching for many homeowners. Others are debating the merits of revising the program to allow principal reductions, allowing homeowners to stay and rent, or pushing for more short sales or deed in lieu of foreclosure sales. For those buyers making offers on short sale properties, the biggest drawback has been that the bank loss mitigation departments are understaffed and overloaded with offers and associated seller financial paperwork, thus taking far longer to respond to sellers than the typical buyer is willing to wait.

As we look at our January Kitsap real estate market, there are some other trends around the country worth noticing:

• The latest survey of refinancing by Freddie Mac shows that 33% of owners refinancing are putting cash in to reduce their loan balances, an all time high.
• The number of million dollar sales in California declined by 24% last year. In Kitsap County, while total closed residential sales in 2009 exceeded 2008 by 8%, the number of 2009 sales above $1 million fell by 12% compared to 2008. The number of sales above $2 million fell by 86% in 2009 compared to 2008.
• Half of off all outstanding mortgages are at rates that exceed 6%. Despite the current low 30 year fixed conventional rates of about 5%, the wave of refinancing is mostly over, with many homeowners (more than 25 million) lacking equity to refinance and lower their payments.

Pending sales in January rebounded while closed sales declined, much as pending sales had declined in the previous two months. Short sales, foreclosure sales, and even some non distressed sales are delayed or are failing to close because of the added difficulties in getting bank approvals and the more difficult lender climate, which makes it more difficult for any borrower to obtain a loan. In December, there were 228 closed sales and 196 pending sales. In January there were 172 closed sales and 252 pending sales. Shown below is a graph of month-by-month pending sales vs closed sales. 

 

Residential Highlights
Kitsap County's residential inventory in January (1437 listings) is about 5% higher than December and down about 20% from a year ago. This is the first rise in the number of listings in some time, and may be evidence that we'll see a more typical seasonal listing curve, with then number of properties for sale rising into mid summer and falling off as the we get later into the year. We may at least see some of the shadow inventory become active again as foreclosures increase and sellers come back to test the market. The number of pending sales in January was up 5% compared to a year ago. You may recall that financial crisis really hit a year ago in December with the failure, takeover, or bailout of the largest banks, investment banks, AIG, Fannie Mae and Freddie Mac, and other entities - so the comparative numbers with the previous year will start looking better as we go forward.  The 3 month moving average number of closed sales Countywide is up 57% compared to a year ago, up from plus 38% last month, but temper this with knowing that we were at the very bottom of our market a year ago. Closed sales were down 11% compared with December 2009.

 

Prices are steady...
The median price in Kitsap County has been pretty steady this year, and is up slightly from the beginning of the year. January's median price ($239,700) was almost the same as December (see graph of 3 month moving average below), and is less than 1% higher than a year ago. The current low median price coupled with historically low interest rates offers good affordability. Conventional mortgage rates are now just below 5% for 30 year loans. There is speculation that rates will rise later this year, and one significant factor is the Federal Reserve's stated intention to curtail its purchases of GSE (Fannie Mae and Freddie Mac) mortgage backed securities. Jumbo loans are offered at about .8 to .9% higher than the 30 yr fixed rate conventional.  Earlier this year passage of the President's Stimulus Program restored the conventional, VA, and FHA loan limits to $475,000 in Kitsap County, which has helped sales of higher priced homes. Now the homebuyer tax credit has been reworked to give some incentive to move up buyers as well as first time buyers. Our median price graphs shows a 3 month moving average of prices, which better shows trends and reduces the month-to-month fluctuations.

 

Seller expectations…
The January median list price fell again from $309,000 to $299,900. This is significant since our market median list price remained nearly steady at $350,000 for a couple years before falling off significantly late in 2009. The trend of falling sale prices has convinced many sellers who remain on the market to lower their asking price. The County has a listing inventory turnover rate of about 8.35 months, slower than December's 6.0 months. Shown below are graphs of inventory and inventory turnover for Kitsap County in 2007-10.

Last month’s slowing of inventory turnover rate was the result of fewer closed sales and the first increase in inventory in some time. The inventory turnover also varies significantly by price range, with higher priced homes selling more slowly than lower priced homes. We've made the point recently that the higher price ranges will be much more difficult to reduce in inventory because with today's lending environment the pool of buyers have been greatly reduced. See the graph below for a better perspective. With this month's slowing in inventory turnover, the turnover in the upper price ranges fell significantly. Every seller is in a price war and beauty contest at the same time. If your price is not best among comparable properties, the chance of sale is very small.  Below is a historical depiction of the changes in the ratio of listings to closed sales.

 

 

The number of pending sales in January was up 5% compared to a year ago. The statistics for January pending sales (compared to January sales last year) varied for different parts of the County. Below is a busy graph showing the 3 month moving average of pending sales for different parts of the County. Notice how pending sales have fallen off since their peak last fall.

That's our report for January! We look forward to having the opportunity to help with your future purchase or sale.

Brenda Prowse

 

As we approach the end of January, some of the economic optimism of late 2009 has faded, and Americans are reassessing their outlook for this year.  The stock market has fallen more than 500 points, but the market that in many ways continues to be the most central concern is real estate. Calculated Risk blog published an article about the Special Inspector General's quarterly report on the Troubled Asset Relief Program (TARP), which asserts:

"...the Federal Government's concerted efforts to support home prices risk re-inflating that bubble in light of the Government's effective takeover of the housing market through purchases and guarantees, either direct or implicit, of nearly all of the residential mortgage market."

The Calculated Risk article also published this graphic from the report, showing the different ways that the government is currently supporting residential real estate and lending in our markets. The report also outlines why "too big to fail" institutions benefitted from the TARP while contributing to the problem, and that these institutions have grown larger and more problematic as a result.

As portions of government support for home prices wind down and withdraw price support as our economy recovers, the article speculates that home prices will continue to fall. Interest rates will rise and demand for housing will fall.  Our own opinion is that we'll see a greater adjustment in higher priced homes than at the low end of the market since loans are more difficult to obtain and an increasing number of owners of higher priced homes will be subject to defaults and foreclosures.

While the wave of subprime adjustable rate mortgage payment resets has passed, a new wave of resets, most prominently option-ARM mortgage payment resets, is about to begin. Many of the Option ARM loans went to purchase more expensive homes, so we expect more defaults in higher priced homes this year. See this graphic published by the IMF posted in an older article on the Calculated Risk Blog.

Also, unemployment continues to force defaults even among conventional borrowers, who now make up the largest group of defaults and foreclosures by loan type. See this graph, again from Calculated Risk, "Statistical Recovery and Human Recession," showing how unemployment in this recession compares with other recessions since World War II.

While this discussion at the national level will have an impact on our local market, it is important to distinguish that not all markets will be effected in the same way. For instance, Kitsap County has only 7.5% unemployment, while the national rate is 10%. Fewer defaults occur in Kitsap County as a result of unemployment.

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. Note that unlike the discussion above these calculations only compare the affordability of standard conventional loans, not the different types of loan products that have been offered. 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 5.34% in December to 5.13% in January for a typical 30 year fixed rate conforming loan and the median price falling in January to $239,950, affordability is improved slightly and remains very good. The outlook for rates is that they will continue to rise in the coming year, with some experts predicting they'll reach 6% by the end of 2010. 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 improved to 1.29 in December from 1.27 in November. First time buyer affordability improved to 1.13 from 1.11 last month. 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	5.13
Median Income	$53,160	$53,923	$54,582	$58,304	$60,719	$65,000	$65,000
Median Price	$184000	$206900	$250000	$275000	$290343	$265000	$239950
Monthly payment	$867	$975	$1182.43	$1378	$1443	$1244	$1046
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	1.29
1st time buyer payment	$693	$780	$946	$1102	$1155	$995	$837
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	1.13

January's APR is 5.191% on a 30-Year and 4.573% on a 15-Year, both conforming. December's rates were 5.444% on a 30-Year and 4.952% on a 15-Year, both conforming. After rates rose somewhat in December, they are again back at very attractive levels. If you qualify for FHA, VA, or USDA loans , these programs have are attractive for low downpayment buyers. Limits for FHA and conventional conforming loans went up with the stimulus bill. The FHA maximum is $475,000, and the conventional conforming limit has returned to $475,000. Lending programs for jumbo loans have improved considerably, 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 5.895% on one major bank web site - unchanged from 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/.

As reported in the North Kitsap Herald, Thursday night, January 28th, is your chance to contribute to Haitian relief by dining out at any number of restaurants in downtown Pouslbo. See details here.

Recent news from the National Association of Realtors is that December home sales were down 16% nationally compared to November, yet 15% higher than December 2008. You'll recall that November ended the initial first time homebuyer tax credit, so sales then were inflated by buyers rushing to meet the deadline. Even though the tax credit has been renewed and expanded, there isn't the same urgency on the part of buyers. With so many Americans having lost equity in their homes (we calculated 8949 homeowners underwater in Kitsap County - but many more have lost a sizable amount of equity), few are in a position to benefit from the new tax credit for move up buyers.

There is still a great deal of uncertainty in our economy, and there will be more trials over the next year. Congress (through the Stimulus bill), Treasury and the Federal Reserve (though a near zero Federal Funds target rate and the purchase of debt and mortgage backed securities from Fannie Mae and Freddie Mac) have pumped a huge amount of money (more than $200 billion by Treasury and about $1.25 trillion by the Fed) into our economy. As demand for goods and services increases, there will be a threat of inflation (too many dollars chasing too few goods). One uncertainty is whether the Federal Reserve will have the resolve to raise their target rate in spite of political pressure to keep rates low. Related to this, the Treasury has stopped purchasing mortgage backed securities from Fannie Mae and Freddie Mac, and the Federal Reserve has announced it will stop purchasing these securities at the end of March. Another uncertainty is how much interest rates will rise to attract private investors back into this market. While some experts expect mortgage rates to rise only a few tenths of a percent, others have predicted that rates will be 6% by year end. These uncertainties are playing a role in the doubts currently circulating about whether or not to confirm the nomination of Ben Bernanke to continue as Chairman of the Federal Reserve Board of Governors.

There is also uncertainty about what will be done to alleviate the perception that some of our financial institutions are too big to fail. Despite being saved by the the taxpayers late last year, many of these institutions have profited and grown this year, now making the influence of the largest bank (actually bank holding companies) considerably greater than it was when markets failed in fall 2008. The administration has recently proposed curbs on the lending and investing activities of these big banks, and while it might appear that this was a reaction to the Democrats recent loss of a Senate seat in Massachusetts, the program, at least according to one source, has been in preparation and review for many months. Just a case of bad timing.

Each month we publish a snapshot of several local markets to show variations in our larger Kitsap County real estate market. December's inventory of homes for sale fell by 25% from a year ago and was 10% lower than in November. The listing inventory fell sharply late last year and has never recovered this year, implying that there is a considerable shadow inventory of homes with sellers waiting for a better market. The County has a listing inventory turnover rate of about 6.0 months, somewhat better than November's 6.1 months, and considerably better that we've seen for the past year and a half. Inventory turnover varies greatly by price, with an inventory turnover as low as 4 months for the lower price ranges and as much as 25 months turnover for homes priced above $800,000. December's closed sale median price ($239,950) was about the same as in November and was 8% higher than a year ago (median price dipped very low in December 2008 before rebounding somewhat to near its current level).  The number of pending sales in December was up 38% from a year ago (recall that December 2008 was a very bad month for our economy) even though pending sales have fallen steeply the past 2 months (as the first time homebuyer tax credit deadline passed). Regional pending sales have tailed off after peaking in October.  The links to regional market trends below will show both tables and graphs that further enhance the data reported below.

See Kitsap County graphs at http://www.bprowse.com/kitsap_market_trends.

Bainbridge Island Real Estate
Bainbridge Island residential properties were selling for an December median price of $505,000, about 3% higher than in November. The more stable three month moving average of closed sale price fell 1% from last month to $495,000 and is 5% lower than it was a year ago. Sales at the top of the market, while still pretty slow, did improve somewhat compared to previous months. The Kitsap County 3 month moving average median price is just about the same as it was a year ago. Note that prices tailed off at the end of last year so this parity is not unexpected. The 3 month moving average for Bainbridge Island's number of  closed sales is 50% higher than a year ago. Recall that sales were very weak at the end of 2008 and the number of closed sales at the end of last year was improved. The 3 month moving average number of pending sales in December rose 53% from a year ago. The 3 month moving average of closed sales is up 39% Countywide from a year ago. The number of active listings on Bainbridge (162) is down 16% from a year ago. The inventory turnover (total homes on the market divided by number sold last month) is 7 months, improved from the 11.7 month turnover rate of last month. Bainbridge Island is a buyers market.

See tables and graphs at http://www.bprowse.com/bainbridge_island_market .

Bremerton Real Estate
Statistics are for the Bremerton downtown core and west to Kitsap Lake. The market for other parts of Bremerton and its suburbs should be similar. Bremerton homes were selling for a month end median price of $153,150 at the end of December, about 2% higher than a year ago and down 4% from last month. The more stable 3 month moving average was 22% lower than a year ago. The Kitsap County 3 month moving average median price is just about the same as it was a year ago. Bremerton's 3 month moving average for number of closed sales is up 13% from a year ago. The 3 month moving average of closed sales is up 39% Countywide from a year ago.  The 3 month moving average number of Bremerton pending sales is up 13% from last year. Recall this number includes pending short sales that may not close. The number of Bremerton active listings (138) is 25% lower than a year ago. The inventory turnover (total Bremerton homes on the market divided by number sold last month) is 5.1 months (better than the 6.1 last month and from 8.7 months a year ago). The Bremerton market is probably still a buyers market because of shadow inventory that has been pulled off unsold.

See tables and graphs at http://bprowse.com/bremerton_market  

North Kitsap Real Estate
Statistics here are for Kingston, the largest housing market in North Kitsap. Activity in Kingston should be representative of the other areas in North Kitsap. Kingston homes were selling for a month end median price of about $299,000 at the end of December, 94% higher than a year ago - December 2008 was a terrible month for Kingston home sales. The low sales volume can produce large fluctuations when one or two high priced homes sell.  The more stable 3 month moving average of closed sale prices is up 13% compared to a year ago.  The Kitsap County 3 month moving average median price is just about the same as it was a year ago.  The 3 month moving average number of Kingston closed sales rose 175% from a year ago, while the number of pending sales is 100% higher than a year ago. Recall again that December 2008 had very low sales and that our current pending sales include pending short sales that may not close. The 3 month moving average of closed sales is up 39% Countywide from a year ago. The number of active listings in Kingston (62) is down 21% from a year ago. The inventory turnover (total homes on the market divided by number sold last month) is 4.8 months (better than the 8.7 months last month, not to mention the 78 month turnover of last year). Our guess is that Kingston is still a buyer's market because of the shadow inventory.

See tables and graphs at http://bprowse.com/north_kitsap_market  

Poulsbo Real Estate
These statistics are for Poulsbo, including the downtown core, from the head of Liberty Bay southeast to Ne-Si-Ka Bay, and parts north to Sawdust Hill Rd. Other parts of Poulsbo and its suburbs should have similar trends. The December median sales price for Poulsbo was $254,250, down about 30% from a year ago. The more stable three month moving average closed sale price was $282,709, about 18% lower than in December 2008. The Kitsap County 3 month moving average median price is just about the same as it was a year ago. The 3 month moving average number of closed sales in Poulsbo rose 50% from a year ago. The 3 month moving average of closed sales is up 39% Countywide from a year ago.  December pending sales were up 50% in Poulsbo. Recall this number includes pending short sales and new construction that may not close soon. The Poulsbo listing inventory (98) is 36% lower than a year ago. The inventory turnover (total homes on the market divided by number sold last month) is 5.9 months, somewhat worse than the 4.2 months reported last month - but still very good. Poulsbo is probably still a buyers market because of the shadow inventory of homes pulled off the market in the past year without selling, but looks like it has improved recently.

See tables and graphs at http://bprowse.com/poulsbo_market  

Silverdale Real Estate
Homes in Silverdale were selling for a December median price of about $274,000. This median is down 4% percent from a year ago. Silverdale's more stable 3 month moving average median closed sale prince in December of $275,417 was up about 5% from a year ago. The Kitsap County 3 month moving average median price is just about the same as it was a year ago.  The 3 month moving average for Silverdale's number of closed sales was 8% higher than a year ago. The 3 month moving average of closed sales is up 39% Countywide from a year ago.  The number of Silverdale pending sales in December is up 44% from a year ago, but recall this number includes pending short sales that may not close. The number of active listings in Silverdale (62) is 25% lower than a year ago. The inventory turnover (total homes on the market divided by number sold last month) is 5.2 months, better than the 5.7 months last month. Silverdale is looking now like a seller's market, but there appears to be a large shadow inventory of unsold homes not currently on the market that will deter prices from rising.

See tables and graphs at http://bprowse.com/silverdale_market  

Each month we publish a Waterfront Update Newsletter showing our Kitsap County waterfront listings, giving detailed statistics for the number of waterfront listings, pending sales, and closed sales in various price ranges for each area in Kitsap County for Bremerton, Central Kitsap, Silverdale, Poulsbo, North Kitsap, and Bainbridge Island. Our waterfront page in the Kitsap Market Trends section of the web site has all the information below. The graphs below show history for the total number of listings and number of closed sales each month.

 

See current Prowse and Company waterfront homes and land listings.

Click here to download the latest copy of the Prowse and Company waterfront newsletter.