At the beginning of each month the Kitsap Sun publishes an article about the Kitsap real estate market timed with the release of the latest NWMLS statistics, to which we want to add a few comments. The median sales price has risen about 4% since January, but that's a result in a change in the distribution of what is selling (ie the middle sold price is higher because more higher priced properties are selling). The typical seller experience is still one of dropping price again and again until they get an offer that is well below their asking price. So this rise in median price does not indicate that all prices are moving higher. Most prices are still moving lower.
Lower priced homes are still selling much faster than higher priced homes, and the approaching deadline for expiration of the first time buyer credit is an important factor in that. As an aside, one analysis showed that the taxpayer cost for each additional sale resulting from the credit was about $43.4k per home sold. More higher priced homes are selling now as the impact of unemployment and the poor economy has caused more distressed sales in the higher price ranges. Foreclosures among prime borrowers now outnumber those of any other type of loan. Also the availability of jumbo loans has improved - though interest rates for jumbos still have a significant premium.
The Sun article mentioned the glut of short sales and foreclosures. Seattle has actually suffered the greatest year-over-year rise in foreclosures among large metropolitan areas. Many people have lost jobs or had large mortgage payment increases (resets of ARMs for instance) or suffered other hardships only to find that they can't refinance or sell without a loss because their home value has fallen. It's to everyone's advantage that these sellers be able to complete short sales of their property (assuming they can't stay in their homes by doing a loan modification). Banks get more for the home and avoid the costs of foreclosure, the house is better maintained so property values in the neighborhood stay higher, prices fall less, and the seller's credit is much less damaged. Foreclosure should remain an option for sellers who could continue to make payments but are unmotivated to do so.
However, at this point lenders - especially the large banks and GSE’s - are not yet organized to process short sales in a timely manner, so it becomes very tedious and requires a very patient buyer to complete a successful short sale. Getting through the glut of distressed properties is a vital part of restoring the health of banking and lending, as well contributing to our economic recovery. Given all the help the large banks received from the tax payers to help keep them solvent, we think that the large banks should be doing more to facilitate timely responses to requests from sellers to allow short sales of their property.
Closed sales this year are 4% behind last year (6% behind last month), pending sales are running 27% ahead (27% ahead last month). The County has a listing inventory turnover rate of about 7.4 months, down from July's 6.4 months but still pretty good compared to earlier in the year and in 2008. In July, there were 284 closed sales and 346 pending sales. In August there were 243 closed sales and 348 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. 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.
Residential Highlights
Kitsap County's residential inventory in August (1793 listings) is about 2% lower than July and down about 27% from a year ago. This trend is counter to most years and suggests, at least at this point, that a portion of last year's sellers may be waiting for conditions to improve. In part inventory has been held down artificially by the accounting for 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. The number of pending sales in August was up 24% compared to a year ago and about the same as July. The 3 month moving average number of closed sales Countywide is up 12% compared to a year ago, improved from plus 10% last month.
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. August's median price ($245,000) was down 2.6% from July (see graph of 3 month moving average below), and is about 13% lower than a year ago. This low median price coupled with historically low interest rates (but higher than earlier this year) has maintained good affordability. Conventional mortgage rates have been holding fairly 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, which should give a lift to sales of higher priced homes. 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.
Seller expectations…
The August median list price fell from $339,250 to $337,500, continuing the downward trend of last month. This market is in transition, with the percentage of sales in the upper price ranges still depressed compared to the past several years and what could be a large number of listings withdrawn into a shadow inventory that could return to the market if prices improve. The inventory turnover (total homes on the market divided by number sold last month) is 7.4 months, worse than the 6.4 months in July. The inventory turnover also varies significantly by price range, with higher priced homes selling 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. 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 is up 24%. The statistics for pending sales (compared to August pending 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. Note the improvement in Bainbridge Island and Poulsbo, where the median home price is higher, while areas like Bremerton appear to have leveled off. Also the strong rise in Port Orchard stood out.
