Hope you had a great Thanksgiving!

The stock market has been up and down recently with investor ambivalence about whether things are getting better or worse. The market rose when NAR reported that September existing home sales rose 10.1%. This large rise was primarily because of the final throes of the first time home buyer tax credit, which has now been extended and expanded. Last week the stock market fell when new home sales in the week of November 13th fell to a 12 year low. As pointed out in the blog Calculated Risk, new home sales, residential investment, and housing starts are much more important for the economy than residential resales. With high unemployment and continued weakness in the economy, new home sales are likely to remain at a low level.

Last month we reviewed how affordability had changed from 2006 considering the other loan types that were available then versus loans available to today’s buyer. Then we followed up with a lengthier post at kitsaphomefinder.net. Although our analysis in this article shows a significant improvement in the affordability of conventional loans over the past year, affordability was much better a few years ago if we compare the exotic loans available then with the conventional loans available today. Here is a recent post from Mark Hanson about the mid to high (MTH) end real estate market, describing the process and stage of the current MTH market.

The hot period for MTH Real Estate was 2003-2007. During this time 75%-80% of all houses either a) changed hands b) were refinanced (including cash-out, which increasing the loan balance c) were built and purchased for the first time d) or leveraged further through the addition of a second or third mortgage. Yes, the potential at-risk population is the vast majority of MTH owners.

Later in the 2009 season we finally saw more MTH houses turn-over but at sharp discounts or on short sale. Unlike the low end of the market the increased activity was not spurred by a surge in buyer demand, rather due to end-of-season seller panic and increased short sale activity. That being said, there is pent-up demand for this sector at the right price. The problem is that the right price on one sale destroys the net-worth of scores more. This type of increased activity in the earlier innings of the MTH collapse is not a positive market factor because it sets comps and locks-in values for everybody.

We can take a look at some mid to high end sales to see how our Kitsap MTH market is doing. Here is a graph of original asking price to sale price for October 2009 sales on Bainbridge Island. As you can see, sale price has diverged from asking price significantly in most cases for sales above $600,000.

With nearly 23% of all loans underwater (owing more than the house is worth) and with the number of distressed properties (in foreclosure or in default) at an all time high, any predictions of rising prices or a market turnaround are premature. It may take years to turn this market around, particularly the mid to high end.

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 falling from 5.22% last month to 5.02% in November for a typical 30 year fixed rate conforming loan and the median price rising about 1 percent in November to $252,950, affordability is very good. 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 remained constant at 1.24 in October, unchanged from September. First time buyer affordability improved slightly to 1.09 from 1.08 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	5.02
Median Income	$53,160	$53,923	$54,582	$58,304	$60,719	$65,000	$65,000
Median Price	$184000	$206900	$250000	$275000	$290343	$265000	$252950
Monthly payment	$867	$975	$1182.43	$1378	$1443	$1244	$1089
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	1.24
1st time buyer payment	$693	$780	$946	$1102	$1155	$995	$871
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	1.09

November's APR is 5.065% on a 30-Year and 4.573% on a 15-Year, both conforming. October's rates were 5.191% on a 30-Year and 4.700% 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. Limits for FHA and conventional conforming loans went up with the stimulus bill signed earlier this year. 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/.

See the link to our http://avoidforeclosurebremerton.com website where we document that 14.4% of all loans are 30 days or more behind in payments at the end of September 2009 according to figures released yesterday by the Mortgage Bankers Association. Prime loans rather than subprime loans are now dominating the distressed properties landscape and falling home prices and unemployment have combined to create a record number of property owners in distress.

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. 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 Novermber 2009 waterfront newsletter.

I'll repost below our current newsletter at prowserealestate.com in its entirety.

Find out about waterfront sales in Kitsap County!

Each month Prowse & Company sends out a newsletter focused on waterfront real estate. See the latest statistics for waterfront sales in Kitsap County, as well as our own waterfront activity. Also check out the Featured Homes section of this newsletter to find out about our latest waterfront listings.

Now you can see the newsletter on line or sign up to receive it by email.

Get the latest Waterfront Update here.

Get the latest Prowse and Company Newsletter here.

Please keep us in mind whenever you hear of anyone who might be thinking of buying or selling a home - anywhere.

Each month we publish a snapshot of several local markets to show variations in our larger Kitsap County real estate market. October's inventory of homes for sale fell by 26% from a year ago and was 8% lower than in September. 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 6.4 months, somewhat better than September's 6.9 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 30 months turnover for homes priced above $800,000. October's closed sale median price ($252,950) was up 1% from September and was about the same as a year ago.  The number of pending sales in October was up 54% from a year ago (recall that October 2008 was a very bad month for our economy) and just about the same as in September. Some regional numbers look like eye popping improvements, but recall that there were quite a few buyers trying to beat the end of November deadline for the first time homebuyer tax credit, so who knows whether this trend will continue.  The links to regional market trends below will show both tables and graphs that further enhance the data reported below.

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

Bainbridge Island Real Estate
Bainbridge Island residential properties were selling for an October median price of $492,000, about 6% lower than in September. The more stable three month moving average of closed sale price fell 8% from last month to $536,333 and is 12% lower than it was a year ago. Sales at the top of the market lagged - there werre only 5 closed sales above $900k in Kitsap County last month. The Kitsap County 3 month moving average median price has fallen 6% over the past year. Note that prices tailed off at the end of last year so we expect this gap to close in the coming months. The 3 month moving average for Bainbridge Island's number of  closed sales is 35% higher than a year ago. The 3 month moving average number of pending sales in October rose 57% from a year ago. The 3 month moving average of closed sales is up 8% Countywide from a year ago. The number of active listings on Bainbridge (208) is down 14% from a year ago. The inventory turnover (total homes on the market divided by number sold last month) is 8.7 months, an improvement from the 9.3 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 $160,000 at the end of October, about 23% lower than a year ago and about the same as last month. The more stable 3 month moving average was 18% lower than a year ago.  The Kitsap County 3 month moving average median price has fallen 6% over the past year.  Bremerton's 3 month moving average for number of closed sales is up 14% from a year ago. The number of closed sales is up 8% Countywide from a year ago. The 3 month moving average number of Bremerton pending sales is up 15% from last year, but recall this number includes pending short sales that may not close. The number of Bremerton active listings (153) is 29% lower than a year ago. The inventory turnover (total Bremerton homes on the market divided by number sold last month) is 6.7 months, a little worse than the 6.1 last month. 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 $292,000 at the end of October, 21% lower 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 down 34% compared to a year ago.  We are getting more sales in the higher price ranges as some sellers reduce their asking price. The Kitsap County 3 month moving average median price has fallen 6% over the past year.  The 3 month moving average number of Kingston closed sales rose 29% from a year ago, while the number of pending sales is 100% higher than a year ago. Recall our current pending sales include pending short sales that may not close. The number of closed sales is up 8% Countywide from a year ago. The number of active listings in Kingston (58) is down 38% from a year ago. The inventory turnover (total homes on the market divided by number sold last month) is 3.9 months (better than the 9.8 months last month). While this is probably a statistical anomaly, we definitely see evidence of lower prices and higher sales. We suspect that Kingston will continue to be 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 October median sales price for Poulsbo was $302,500, down about 8% from a year ago. The more stable three month moving average closed sale price was $298,500, about 8% lower than in October 2008. The Kitsap County 3 month moving average median price has fallen 6% over the past year. The 3 month moving average number of closed sales in Poulsbo rose 5% from a year ago. The number of closed sales is up 8% Countywide from a year ago.  October pending sales were up 29% in Poulsbo. Recall this number includes pending short sales and new construction that may not close soon. The Poulsbo listing inventory (85) is 41% lower than a year ago. The inventory turnover (total homes on the market divided by number sold last month) is 53.9 months, better than the 5.2 months reported last month. Poulsbo’s market has been humming along for the past several months, but it 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 October median price of about $277,250. This median is up 5% percent from a year ago. Silverdale's more stable 3 month moving average median closed sale prince in October of $274,083 was down about 2% from a year ago. Silverdale’s median price fell sooner and has remained fairly stable over the past year. The Kitsap County 3 month moving average median price is down 6% compared to a year ago.  The 3 month moving average for Silverdale's number of closed sales was 17% higher than a year ago, compared to a rise in closed sales of 8% for the County as a whole. The number of Silverdale pending sales in October is up 11% from a year ago, but recall this number includes pending short sales that may not close. The number of active listings in Silverdale (81) is 31% lower than a year ago. The inventory turnover (total homes on the market divided by number sold last month) is 8.1 months, lower than the 5.5 months reported last month. Silverdale has been one of the area’s better markets, 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  

You may already have heard that the homebuyer tax credit has been extended, with an important modification that lets move up buyers participate even if they aren't first time homebuyers.

Here is part of the press release from NAR, including a link to a table that explains the new law in detail:

Expected to contribute approximately $22 billion to the economy, Congress overwhelmingly passed a bipartisan measure this week extending the $8,000 home buyer tax credit to April 30, 2010.

The legislation, which is part of a larger bill that also extends unemployment benefits, was signed into law by President Obama today.

More people are now eligible to take advantage of the law, which includes a $6,500 tax credit for buyers who are current home owners and have lived in their home for five of the past eight years.

Income limits for eligible home buyers were also expanded to $125,000 for single buyers and $225,000 for couples, up from $75,000 for individuals and $150,000 for couples. Qualifying home prices are capped at $800,000.

NAR's Government Affairs Division has compiled facts on the changes made to the current tax credit.

From the Calculated Risk post, "Unofficial Problem Bank List Grows to 505."

Washington State leads the way with more than 26 percent of its banking industry either under formal enforcement action or having failed. No wonder the esteemed governor wrote a letter to the state’s congressional delegation complaining about bank regulators (see Wall Street Journal article).

Washington Gov. Christine Gregoire sent a letter to her congressional delegation Oct. 9 complaining that "federal regulators have applied inflexible 'one size fits all' regulatory standards on community banks and potential investors that hinder the ability of these community banks to weather the financial storm and actually inhibit opportunities to raise critically needed capital at the local level." Her letter came just days after the Federal Reserve declined to approve the sale of Frontier Financial, the fifth-largest bank in her state, to a New York investment fund for $450 million. Frontier Financial Chief Executive Patrick Fahey declined to comment.