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Kitsap Real Estate Market Report - June 2011
By Admin
Over the past month the stock market has fallen and the economy has slowed. National real estate prices continue to fall. RealtyTrac’s Rick Sharga makes the case that there will be no housing recovery until 2015. The Economic Cycle Research Institute is quoted to say that we are in a pervasive and persistent cyclical turn [downward], not just a one or two month affair. The New York Fed’s William Dudley predicts that economic growth will pick up in the second half of this year. In the mean time a Wall Street Journal article advocates that with today’s low interest rates and better than average ratio of income to home prices, now is the time to buy a home. John Burns Real Estate is predicting that rental demand in top markets is about to explode and will rise more than 25% over the next 3 years, an optimistic call for multi-unit apartment construction. Confusing, isn’t it?
Calculated Risk blog confronts the question more narrowly in an article titled, “Key Question: Is the Slowdown Temporary?” After weighing some of the conflicting factors, the author concludes:
I think the data will help us over the next month or two. If the impact was temporary, auto sales and manufacturing should rebound by July. If there are more severe issues, the weakness will persist.
We have to also remember that Residential Investment (RI) will probably make a positive contribution to the economy this year, for the first time since 2005. The five years of drag on GDP from RI (2006 through 2010) is the longest period on record, breaking the previous record of four years from 1930 to 1933. The positive contribution this year will mostly be due to a pickup in multifamily construction (apartments) and in home improvement. Of course single family housing starts will continue to struggle.
Since RI is the best leading indicator for the economy, I think a pickup in RI suggests the recovery will continue. This isn’t perfect - nothing is - but RI is usually a strong leading indicator for the business cycle.
So for now I’ll stick with my general forecast for 2011: growth will remain sluggish, but I expect 2011 to be better than 2010 for both employment and GDP growth.
The number of closed sales in Kitsap County in May was up about 6% from April and down about 23% from a year ago. Pending sales rose about 4% compared to last month and were 28% higher than a year ago, but recall that pending sales took a nose dive last year in May after expiration of the home buyer tax credit. In April, there were 183 closed sales and 279 pending sales. In May there were 193 closed sales and 289 pending sales. 35% of the closed sales were distressed properties. 40% of the pending sales were distressed properties. In 2010, 25% of all closed sales were distressed properties, so we are seeing more distressed sales now than previously. Among closed distressed sales, bank owned sales were more than 2 times the number of short sales closed. This ratio has been declining the past several months. Shown below is a graph of month-by-month pending sales vs closed sales. Pending sales tend to lead closed sales in direction if not magnitude by about 2 months. Based on past trends, we expect the number of closed sales to rise next month.
See more at http://www.prowserealestate.com/Blog/Kitsap-Real-Estate-Market-Report-June-2011
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