The beginning of our latest local market report at bprowse.com is quoted below:

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.