There is much rejoicing over the rise in the Case Schiller 20 city composite home price index for a second consecutive month. Consumer confidence is up too. Also the record 7.2% increase in home resales, highest rate of increase in the past 10 years, has turned many heads and inspired speculation that the market has finally bottomed. While we are happy for any good news from the Case Schiller index, we also know that with unemployment still rising (here are numbers for Washington) and with record foreclosure rates, the perception of a price rise is more probably a change in the distribution of sales rather than a rise in price across the board. Much as we do in our affordability calculation below, here is an analysis from Calculated Risk that looks at current house prices in several different ways. About a third of current residential sales are from foreclosures. With the $8,000 first time buyer tax credit set to expire the end of October, buyers certainly have an incentive to lock in purchases now. Although there is a proposal in Congress to increase the tax credit to $15,000 and have it apply to all purchases, it’s more likely that Congress will extend the current program.
 
13 of every hundred mortgages have either missed payments or are in foreclosure. A new graph from the New York Fed shows that at the end of the first quarter in Kitsap County, 2.83 percent of mortgages are 90 plus days delinquent (note this is different than having just missed a payment, though the literature shows that more people missing payments are now unable to recover than before), and that 15.58 percent of subprime mortgages and 14.76% of alt-A mortgages (stated income) were 90 plus days overdue. Based on the national data, these numbers are even higher now, continuing to put downward pressure on prices as distressed homeowners try to do short sales or properties are resold as bank owned.

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 falling from 5.44% last month to 5.33% in August for a typical 30 year fixed rate conforming loan and the median price rising a few percent in July to $251,500, affordability is still 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 fell to 1.21 in July from 1.23 in June. First time buyer affordability also fell to 1.06 from 1.07 last month. Affordability has been eroding for the past 5 months after peaking earlier in the year. Interest rates have remained low, so the perceived erosion is actually a reflection that a greater percentage of homes in the higher price ranges are now selling, causing the median (or middle) price among all closed sales to rise. That’s different than home prices rising across the board. 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	5.33
Median Income	$53,160	$53,923	$54,582	$58,304	$60,719	$65,000	$65,000
Median Price	$184000	$206900	$250000	$275000	$290343	$265000	$251500
Monthly payment	$867	$975	$1182.43	$1378	$1443	$1244	$1121
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	1.21
1st time buyer payment	$693	$780	$946	$1102	$1155	$995	$897
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	1.06

August's APR is 5.444% on a 30-Year and 5.078% on a 15-Year, both Conforming. July's rates were identical, 5.444% on a 30-Year and 5.078% 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 5.516%, down from 6.245% last month. Limits for FHA and conventional conforming loans just 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 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/ .

Hugh Nelson and Taylor Brown Earn Prestigious Designation to Help Homeowners in Danger of Foreclosure

Poulsbo, WA – 8/18/2009 – Hugh Nelson and Taylor Brown of Prowse and Company Real Estate in Poulsbo have earned the prestigious Certified Distressed Property Expert® (CDPE) designation, having completed extensive training in foreclosure avoidance and short sales. At a time when millions of homeowners are struggling with the possibility of foreclosure, the skills and education accumulated by both Nelson and Brown will help benefit Poulsbo-area communities.

Short sales allow the distressed homeowner to repay the mortgage at the price that the home sells for, even if it is lower than what is owed on the property. With plummeting property values, this can save many people from foreclosure and even bankruptcy. More and more lenders are willing to consider short sales because they are much less costly than foreclosures.

In the Poulsbo-area, more than 60 homes are in some stage of foreclosure, and as many as 13% of all mortgages may be in default. It is happening across all price ranges, and the fastest-growing category of homes entering foreclosure is luxury homes in excess of $1 million.

"The CDPE designation has been invaluable as I work with homeowners and lenders on complicated short sales," said Brown. “It is so rewarding to be able to help families save their homes from foreclosure.”

Alex Charfen, co-founder and CEO of the Distressed Property Institute in Austin, Texas, said that agents such as Hugh Nelson and Taylor Brown with the CDPE Designation have valuable training in short sales that can offer the homeowner much better alternatives to foreclosure, which can virtually destroy a credit rating. "These experts also better understand market conditions and can help sellers through the emotional experience,
he said.

The Distressed Property Institute provides live and online courses to train real estate professionals how to help homeowners in distress, with a particular emphasis on handling short sales. “Our goal is to help as many homeowners as possible, by educating as many real eWA professionals as possible,” Charfen said. 'Hugh Nelson and Taylor Brown have demonstrated a commitment to the struggling homeowners in Poulsbo, and will provide much-needed assistance in stabilizing the community."

For more information about CDPE Designation, visit http://www.cdpe.com.

Each month we publish a snapshot of several local markets to show variations in our larger Kitsap County real estate market. July's inventory of homes for sale fell by 29% from a year ago and was slightly lower than in June. This is unusual and implies that some sellers may have decided to wait until they see a better market. The County has a listing inventory turnover rate of about 7.1 months, down from June's 8.5 months, and the best turnover we've seen since 2007. Inventory turnover varies greatly by price, with an inventory turnover under 6 months for homes under $400,000 and 3 to 10 times longer turnover for homes priced above $400,000. July's closed sale median price ($245,000) was up 2% from June and was down 8% percent compared to a year ago.  The number of pending sales in July was up 56% from a year ago and up 12% compared to June.

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

Bainbridge Island Real Estate
Bainbridge Island residential properties were selling for a month end median price of $624,250 at the end of July, down 28% from June. The more stable three month moving average of closed sale prices ($674,733) rose 4.1% from last month and is 16% higher than it was a year ago. The Kitsap County 3 month moving average median price has fallen 8% over the past year. The 3 month moving average for Bainbridge Island's number of  closed sales is 6% higher than a year ago. The number of pending sales in July rose 8% 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 (250) is down 17% from a year ago. The inventory turnover (total homes on the market divided by number sold last month) is 10.5 months, improved from the 19.6 month turnover rate of last month . Bainbridge Island is a buyers market.

See 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 $169,900 at the end of July, about 12% lower than a year ago and down 12% from last month. The more stable 3 month moving average was 6% lower than a year ago.  The Kitsap County 3 month moving average median price has fallen 8% over the past year.  Bremerton's 3 month moving average for number of closed sales is up 12% from a year ago (compared to a Countywide rise of 10%). The number of month end Bremerton pending sales is up 39% from last year, but recall this number includes pending short sales that may not close. The number of Bremerton active listings (183) rose 17% from last month and is 30% lower than a year ago. The inventory turnover (total Bremerton homes on the market divided by number sold last month) is 4.9 months (improved from 5.4 last month). The Bremerton market is probably still a buyers market because of shadow inventory that has been pulled off unsold, but the lower price ranges are definitely selling very well now.

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 $450,000 at the end of July, 22% 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 7% compared to a year ago.  The Kitsap County 3 month moving average median price has fallen 8% over the past year.  The 3 month moving average number of Kingston closed sales is 14% lower than a year ago, while the number of pending sales is 13% 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 10% Countywide from a year ago. The number of active listings in Kingston (68) is down 33% from a year ago. The inventory turnover (total homes on the market divided by number sold last month) is 8.5 months (down from 10 months last month). Sales in North Kitsap still seem to be slower than farther south in the County. Kingston is a buyer's market.

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 July median sales price for Poulsbo was $282,960, down about 17% from a year ago. The more stable three month moving average closed sale price was $309,320, about 8% lower than in July 2008. The Kitsap County 3 month moving average median price has fallen 8% over the past year. The 3 month moving average number of closed sales in Poulsbo rose 6% from a year ago. The number of closed sales is up 10% Countywide from a year ago.  July pending sales were down 19% in Poulsbo. Recall this number includes pending short sales and new construction that may not close soon. The Poulsbo listing inventory (116) is 30% lower than a year ago. The inventory turnover (total homes on the market divided by number sold last month) is 6.4 months, a bit slower than the 5.3 months reported last month. 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.

http://bprowse.com/poulsbo_market  

Silverdale Real Estate
Homes in Silverdale were selling for a July median price of about $308,000. This median is down 2% percent from a year ago. Silverdale's more stable 3 month moving average median closed sale prince in July of $308,500 was up about 5% from a year ago. The Kitsap County 3 month moving average median price is down 8% compared to a year ago.  The 3 month moving average for Silverdale's number of closed sales was 19% higher than a year ago, compared to a rise in closed sales of 10% for the County as a whole. The number of Silverdale pending sales in July is up 120% 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 43% lower than a year ago. The inventory turnover (total homes on the market divided by number sold last month) is 3 months, improved from last month's rate of 4.9 months. 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.

http://bprowse.com/silverdale_market  

July 2009 Kitsap Real Estate Market Statistics

There is good news - the number of closed residential sales in Kitsap County in July was the highest since July 2007. Closed sales this year are 6% behind last year (11% behind last month), pending sales are running 27% ahead (29% ahead last month). The County has a listing inventory turnover rate of about 6.4 months, improved from June's 7.1 months and the best turnover we've seen since 2007. In June, there were 249 closed sales and 372 pending sales. In July there were 284 closed sales and 346 pending sales. Shown below is a graph of month-by-month pending sales vs closed sales.

A typical pending sale should close within 60 days, so we should see the closed sales lagging pending sales by about 2 months. However, in our situation the closed sales level has not reached the pending sales level for 6 months, so something else is up. Pending sales have been running ahead of a year ago and closed sales behind a year ago every month this year principally because short sales are categorized as pending, even though many will either fall apart or be delayed months in closing. Tighter lending standards, delays in approving short sale offers, and sellers and bank owned properties with little room to give have made it more difficult for Realtors to close sales. Shown below are graphs of inventory and inventory turnover for Kitsap County in 2007-09. The inventory turnover also varies significantly by price range, with higher priced homes selling much more slowly than lower priced homes. See the graph below for a better perspective - note that this month’s graph shows that while turnover is still very fast below $200k, it actually got worse in the $200 to 300k range. However, in the higher price ranges it is definitely improving even though it is still slow. This month’s improvement in the overall turnover is the result of improvement in the higher price ranges. 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. Note also the trend in number of closed sales has improved steadily.

Listing Invetory

Kitsap's listing inventory was 1830 listings at the end of July, 28% lower than a year ago and 4% higher than last month. Normally we see inventory building this time of year.  In part it has been held down by short sales, where properties with offers still awaiting bank approval are shifted to pending status even though many of these properties are still open to receive other offers.

Kitsap Listing Inventory

Pending and Closed Sales

The number of July pending sales rose 21% compared to a year ago (56% last month) and were down 7% compared to June. The statistics for July pending sales (compared to July sales last year) varied for different parts of the County. Below is a messy graph showing the 3 month moving average of pending sales for different parts of the County.

The 3 month moving ave number of closed sales Countywide (see graph below) is plus 10% compared to a year ago, improved from minus 3% last month and the first month of year-over-year improvement since prior to 2007 - looks good to me.

Median Sales Price
The median price in Kitsap County has been pretty steady this year, and is up slightly from the beginning of the year. July's median price ($251,500) was up 2.7% from June (see graph of 3 month moving average below), and is about 6% lower than a year ago. This low median price coupled with continued low interest rates (but higher than earlier in the year) has improved affordability to where it was at the start of the decade. The recent fall in interest rates has made a great difference in affordability for conforming conventional, VA, and FHA buyers. The recent rise of about a half point rise in conventional mortgage rates has continued to hold steady. Jumbo loans are becoming more accessible - they are offered at about .8 to .9% higher than the 30 yr fixed rate conventional.  With passage of the President's Stimulus Program, the conventional, VA, and FHA loan limits were restored to $475,000 in Kitsap County. We have reworked our median price graphs to show a 3 month moving average of prices, which will better show trends and reduce the month-to-month fluctuations.

Kitsap Median List and Sale Prices

July's median list price fell to $339,250 from June's $350,000, a drop of about 3%.  The median list price had been on the rise for the past several months. In a normal market with falling listing inventory and a rising number of sales, we should see sales prices going up. However, this market is in transition, with the percentage of sales in the upper price ranges depressed compared to the past several years and what could be a large number of listings withdrawn into a shadow inventory that will probably return to the market if prices improve.