This an archive copy of our October newsletter.
According to a recent report at Calculated Risk, real home prices (accounting for inflation) have fallen to the levels of 2000, whereas nominal prices are still at the 2002-2003 levels depending on the price index used. The graph below shows that Kitsap County nominal median home prices (not as accurate as the methods used for the home price indexes) have fallen back to mid 2004 levels.
A report at Housing Wire states that Moody’s Analytics forecasts that home sales are nearing a bottom, but that prices will continue to fall until early 2012. In another report at Housing Wire, former RealtyTrac executive Rick Sharga predicts that housing will bottom at the end of the yearand remain flat until 2014.
Last month the US sued 17 banks seeking damages from loans sold to Fannie Mae and Freddie Mac. Other investors have sued banks, for instance this report from Housing Wire about areal estate investment trust suing Bank of America. Recently California withdrew from the 50 state foreclosure talks against large banks. To better understand the complex efforts by various entities against the large banks, we cite a recent article in The Economist, which summarized the demands facing Bank of America:
The lawsuits fester in 3 categories. The first if these, responsible foe $12 billion in paid claims, and another $18 billion in specific reserves, covers litigation in state courts over mortgages sold to investors with allegedly faulty representations as to their quality. An $8.5 billion settlement announced in June with various investors was supposed to have staunched the bleeding in this area, but the deal has recently appeared to unravel. A second category involves alleged violations of federal underwriting laws that are expected to grind through the courts over many years. The final category, tied to irregularities in the foreclosure processes, is currently the subject of negotiations with a number of states attorneys-general.
One group not recouping much from the banks are the borrowers who took out the loans, though it’s fair to say that debt forgiveness should not be completely overlooked. While the number of seriously delinquent borrowers has fallen to 2008 levels, there are still about 4 million loans that are either 90+ days delinquent or already in the foreclosure process. Nationally, more foreclosures are being initiated. One aspect of the distressed sale process now garnering more attention is the efforts of banks and collection agencies to obtain deficiency judgements (to collect unpaid loan balances) against homeowners who previously lost their homes to foreclosure or sold through short sales. In Washington foreclosures (unless judicial) the lender normally doesn’t have the right to pursue a deficiency against the first lien, but can do so in many cases against 2ndliens such as home equity lines of credit. Terms of the lender’s release of the seller’s lien dictate whether the bank has the right to pursue the deficiency following a short sale.
The Occupy Wall Street movement is a reaction to the sense that the common man has been forced to absorb the brunt of the suffering brought about at the hands of Wall Street and the large banks, among others. The movement is still spreading around the country. On Friday night, three stationary helicopters over Seattle covered the protests at Westlake Center.
Residential Highlights
Kitsap County's residential inventory in September (1672 listings) is about the same as August and about 5% lower than a year ago. Distressed properties listed in the MLS make up about 19% of our market, up from 17% in August. At the end of September, RealtyTrac showed 742 (830 last month) Kitsap County homes either in default, in foreclosure, or bank owned. At the beginning of the year there were 1473 distressed properties, so we've seen a decline of 50% this year. The MLS shows only about 43% of the distressed property inventory, so there could be as many as 425 distressed properties that have yet to be put up for sale. While this is large potential increase, it is much smaller than at the beginning of the year.
Prices are falling...
Kitsap County's monthly median closed sale price in September ($233,000) was down 1% compared to August and down 4% compared to a year ago. The more stable (but also lagging in showing trends) 3 month moving average (see graph below) of the median closed sale price ($236,833) is about 1% lower than last month and about 9% lower than a year ago. Our median price graphs show a 3 month moving average of prices, which better shows trends and reduces the month-to-month fluctuations.
Seller expectations…
The September median list price was $289,000, about 3% lower than last month and 3% lower than a year ago. The County has a listing inventory turnover rate of about 8.4 months, slower than the 6.9 month turnover in August. The turnover rate has been driven by the under $200k market, where there was 5.3 months of inventory, and in the $200 − 300k market, where there is 7.2 months of inventory. All higher price ranges have 10 or more months of inventory. Inventory turnover is the number of months it would take to sell the current inventory at the current rate of sales. In September, the number of listings fell and number of sales fell compared to August. Shown below are graphs of inventory and inventory turnover for Kitsap County in 2007-11.
The inventory turnover also varies 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 more difficult to reduce in inventory because today's lending environment has greatly reduced the pool of qualified buyers. There were 2 sales in the $800k and above range among 130 listings County-wide in that price range. Only Bainbridge Island had sales above $800k. 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 September was up 13% compared to a year ago and was down about 3% from August. The statistics for September pending sales varied for different parts of the County. Below is a graph showing the 3 month moving average of pending sales for different locations.
