Kitsap Real Estate Blog

Highest Rate of Appreciation On This Home In The Country?

No doubt about it, the real estate market outlook has been bleak for a couple of years now. Kitsap County has not experienced the trauma of say Detroit, MI but median prices are down year to year, days on market have been lengthening, Realtors have been feeling the pinch, foreclosures and short sales are up, etc.

But what will the market bottom look like? Many experts agree that the market top probably occurred in late 2006 or early 2007. Things still felt pretty hot with multiple offers on many properties and sellers were still pretty smug. It was several months after the peak before the majority of people really felt it. Could we be at a market bottom now or soon?

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Kitsap County is blessed with an abundance of waterfront property. This is a primary reason that many people move to Kitsap. The popularity for waterfront living contributes to a number of ill effects for marine life among other environmental elements.

kitsap waterfront property

Kitsap waterfront property owners need to be aware of impending changes in land use regulation for the waterfront with its inevitable conflicts, costs and dislocations. Christopher Dunagan of the Kitsap Sun has written an informative article about what is coming up. If you own waterfront… or want… you should read this article.

The most recent office survey for Kitsap County(1) indicates a county wide vacancy of 13.73% in a total of 3,431,254 square feet of buildings surveyed. Bremerton is the largest office submarket with a total of 1,422,433 sf surveyed followed by Silverdale, Poulsbo, Bainbridge Island and Port Orchard in order.

Comparing that to the Colliers Report of the same period the downtown Seattle totals were 37,779,190 sf with a direct vacancy of 8.31%. Both markets saw an increase in inventory because of new construction.

Kitsap added 137,416 sf, mostly in Bremerton, Bainbridge Island and Silverdale. While there was a positive absorption of space for the period, the vacancy rate increased from 12.55% in October of 2007.

Downtown Bremerton Renaissance

The conclusion? Absorption of space up to October of 2008 was acceptable but there is anecdotal evidence that everything halted severely after that. New construction plans have been put on hold indefinitely and a number of largely vacant buildings have been put up for sale. Landlords can expect to lose existing tenants more than gain and should look to manage their properties well until some sort of a turnaround.

It is a good time to be buying for cash flow and certainty of leasing income with the caveat of finding reasonably priced debt financing.

For more detailed information on specific sub-markets or properties email your request to jimfreeman@jimfreeman.com.

(1) Source: Bradley Scott

Port Orchard waterfront and marina

The much beloved Natural Health Food Store has moved to the Westbay Center in downtown Port Orchard. For the past 27 years owner Patricia Anderson has helped thousands of South Kitsap residents with education and products to improve their health through good eating habits. The new store location is 1341 Bay Street, Suite A and is open for business.

This applies to local retailers as well as national chain stores but the experienced local store owners know that the fact that they live in the community and have the opportunity to build social connections with their customers can give them a competitive advantage over the chains with their reliance on price. Ms. Anderson has a number of plans to add products and services to her store to deliver more value to her customers.

Nearly all retailers in Kitsap are suffering from a drop in sales. This is showing up as increased vacancies in the various Kitsap retail centers, although not yet at crisis levels for mall owners. As of the summer of 2007 retail vacancies were still below 7%. If consumer buying habits remain depressed we could see vacancies rise to double digits in retail for the first time in at least a decade.

With the addition of Natural Health Foods the Westbay Center in a counter trend to rising vacancies is able to offer a greater variety of goods and services through local vendors including Café LaGarmache’ Catering, Pedro’s Mexican Grocery and Restaurant, Help Line, a driving school, a tobacconist and the Hi Tide Tavern and Restaurant.

Going Up Or Down?

Year to year comparisons of home sales in Kitsap County continue to broadcast bad news. The NWMLS statistics report for October 2008 indicate a significant drop in volume of residential sales from 2,836 units sold (10/2007 YTD) to 2,148 (10/2008 YTD), a 24%+ decline.

This is what I call a deep background picture. But how useful is it in gaining perspective about what is happening now and for the immediate future. Is it likely that values and sales volume are likely to continue to go down?

Before tackling that question it is important to note the severity of the deeper backdrop, the collapse in the availability of credit and how that affects demand for housing by buyers that don’t currently own a home. Purchases by these owner occupants tend to reduce the supply of housing. Diminishing credit tends to reduce the pool of these buyers because they are no longer able to buy.

On the other hand reductions in prices make home buying more affordable for a larger number of these people so the two trends combined tend to have off-setting affects. Do we have shorter term indicators that might give us a better picture of what is happening now?

Most real estate professionals that study and use statistics will look carefully at the ratio of pending sales to inventory as a more reliable short term indicator, short term meaning 3-6 months. In Kitsap County the October report shows a ratio of 233/2156 pending to current inventory or 10.8% for October, 2008 and a ratio of 290/2314 or 12.5% for October, 2007.

In September those numbers were 14.0% for September, 2008 and 10.1% for September, 2007. The healthy improvement for September 2008 would otherwise be an eyebrow raising possibility of improving conditions but the slide back again in October would not detract from the formation of a possible bottom to further price decline in Kitsap County or at lease a reduction of the rate of decrease.

Many unknowns face us in the coming year with likely reductions in incomes, increasing unemployment and the results of various stimulus plans being rolled out but if you are a buyer worried about the value your newly purchased home falling from where you bought it, you might take heart.

Kitsap Commercial Industrial Real Estate Announcement

First Building In Phase One Development Scheduled For Completion

SFI Holdings LLC announces the opening of the first building of phase 1 of their 80 acre Gig Harbor North Airport Industrial Park located adjacent to the Port Orchard Airstrip, a private airfield located at 12300 Sidney Road in Port Orchard, WA. The steel frame structure contains a total of 11,600 sf and can be divided into individual suites as small as 2,000 featuring both office and warehouse. The Park is accessible to Highway 16 at the Burley-Olalla and Mullenix interchanges.

The first building is scheduled to be ready for occupancy by December 1, 2008. The Gig Harbor North Airport Industrial Park is the closest park in Kitsap to the Narrows Bridge and access to I-5. Approximately 20% of the building is pre-leased.

Contact the Leasing Broker, Jim Freeman of Coldwell Banker Park Shore Real Estate at 360-616-7924 for leasing information or email questions to jimfreeman@jimfreeman.com.

Gig Harbor North Airport Industrial Park

Companies located in the older sections of the Gig Harbor North Airport Industrial Park have played an important role in the economic development of South Kitsap County and the Port Orchard area. The forerunner to one of Kitsap’s most successful manufacturing companies, Leader International, got its start in a former airplane hangar at the private airfield. Leader now occupies over 100,000 square feet of new industrial space in the Port Orchard Industrial Park, employees more than 50 people and was listed by the Puget Sound Business Journal in the top 100 fastest growing privately held companies in Washington State.

The Gig Harbor North Airport Industrial Park is currently home to Seattle Marine Construction. President Shannon Wagner and his team is the number one service provider for the Pacific Northwest fishing fleet when they need repairs and remodeling in port. Seattle Marine is also a manufacturer of high quality cabinetry and other building components.

Business and industrial parks that provide affordable, well planned infrastructure for such young and fast growing companies provide much needed jobs and incomes for workers living on the Peninsula. Economic development authorities in the county estimate that some 20% of the Kitsap workforce thought to be over 100,000 people must commute out of the county everyday to go to work. Parks like Gig Harbor North Airport Industrial Park provide high quality startup and expansion potential to create jobs and income, save fuel, reduce emissions and help Kitsap parents and adults to spend more time in their community for family, cultural and civic activities. Privately owned, zoned and developed land for industrial use is in short supply in the county.

I have teamed up with a team of family practice doctors to develop a new complex of five adult family homes on a site two blocks north of the main entrance to Harrison Hospital. We are still in the preliminary planning stages with Miles Yanick, internationally known architect from Poulsbo, WA.

The complex will consist of 5 adult family homes, each with 6 resident rooms for a total of 30 rooms. Twenty of them will be single occupancy and 10 will be available for double occupancy for couples or friends. At the center of the complex there is a family practice medical clinic and physical therapy treatment facility. Board certified physicians and registered nursing staff will be within walking distance of the homes to provide in home care, improving residents’ health while reducing the cost and complexity of physicians visits and medication management.

There is no set date for building construction and operations start-up but permits for the first home could be available as early as February of 2009 with construction to begin in the spring. We are looking to grow our team to include a home director, prospective co-workers, investors and/or owner operators.

Each home will be sited on a separate tax parcel with the possibility of multiple owners working under a cooperative management arrangement for medical services, supplies procurement, co-workers, property management and maintenance and other benefits of economies of scale not possible with single homes, all while maintaining a high quality home environment.

Or the project could be purchased as a whole.

If you are a care professional or real estate investor committed to creating the best environment for the care of women and men who need assistance with their daily needs and working with a community of like minded individuals then fill out the contact form in the right hand column above. Or, you can contact me directly at 36–616-7924.

I look forward to hearing from you.

The news about Fannie Mae and Freddie Mac will definitely mean more bad news for home values everywhere, including Kitsap County home values. Fannie and Freddie are the two largest holders of US home mortgages. They are public stock companies chartered by the federal government to provide liquidity for home loans. They purchase home loans from other originators and banks and either hold them or package and re-sell them as mortgage backed securities.

Even when these securities are sold Fannie and Freddie will usually hold some re-purchase risk in the event of default or other payment guarantees to the bond holders in the event of mortgage defaults. Thus, the financial guarantee that these companies are able to offer is determined by what regulators call tier one capital. The tier one capital of these companies has been depleted due to mortgage defaults and is thus reflected in a lowering of their stock prices.

This bad news and the failure of Indymac Bank due to the same phenomena follow all the previous 18-24 months bad news for home loans. They follow massive changes in lending rules addressing down payment requirements, income ratios and credit score based loan rates that cumulatively have reduced the supply of new mortgage money and disqualified more than half of potential home buyers due to credit.

Read about the recent developments in the mortgage market.

Less supply of buyers and mortgage money means falling prices. How is this reflected in Kitsap home sales statistics?

Number One: Inventory Is Up Year To Year:

Total actives in the month of June 2007 were 2,339 homes and in June 2008 there were 2,462 homes, up slightly. Interesting to note that the June 2007 ytd inventory was 3,746 and the June 2008 ytd inventory was 3,746 homes, down A LOT. This probably means that fewer people are even attempting to put their homes on the market and that the speculative “flips” are stopped dead in their tracks (professional investors excepted).

Number Two: Total Volume Of Sales Is Way Down.

June 2007 YTD units sold was 1,699 and June 2008 YTD units sold was 1,229, a 28% decrease.

Number Three: The Kitsap County Median Home Price Is Down 7.6%

The June 2007 median price was $292,000 and the June 2008 median price was $269,900

Number 4: The Number of Pending Sales In Kitsap County Has Decreased.

Pending sales in June 2007 YTD was 2,088 and in June 2008 ytd was 1,436.

Pending sales are a better short term indicator but the gross numbers do not reveal trend changes as accurately as trailing 12 month moving averages of the pendings/inventory ratio but they do reflect a bad condition. The question is: What does the future hold for sales volumes and prices?

My prognosis: With continuing reductions of home loan money and reductions of the pool of buyers due to credit adjusted underwriting sales will lag and prices continue to fall some more.

What can homeowners and the Kitsap community do? One suggestion is to work harder at economic development. Increasing incomes and economic opportunity attract new residents and strengthen existing ones to qualify for home loans. One great opportunity is to strengthen agriculture in the county. Have a look at the Kitsap Community and Agricultural Alliance who are working to do just that.

National Prices Still On The Downslide.

Have a look at what’s happening in national markets housing markets.

Housing Prices Down by 0.6% in April 2008

Tags: housingprices, real estate markets

It’s a buyer’s market for housing, no doubt about it. Cash is king but you need to have the cash in order to sit on the throne…or do you?

You have probably heard a lot about the mess in the mortgage markets. By my unofficial count banks, mortgage companies and investment bankers have announced over one hundred billion dollars in losses because of “faulty loans” made to people with less than perfect credit. A billion here, a billion there, pretty soon it adds up.

These losses have thrown the financial markets into a tailspin. The Federal Reserve acted quickly to lower short term interest rates. That, combined with sudden and steep losses in world stock markets led investors to sell stocks and buy safe bonds such as US Treasury Securities. This led to lower interest rates on bonds and lower home loan rates.

Hooray! Lower rates, falling home prices..this is good for new folks who want to buy homes today, right? Well, sort of.

At the same time the two largest purchasers of home loans in the US, Fannie Mae and Freddie Mac announced new rules that effectively raised rates and tightened lending standards for people with lower credit scores. Before December 26, 2007 borrowers with FICO scores of 620 and higher could qualify for zero down loans with very attractive interest rates, say at 6.5%. On December 27 these two giants announced rules that effectively raised those rates as high as 8.5% for borrowers with a score of 620 and decreased the amount of income they would allow for total debt service. People with scores above 700 got access to even lower cost rates.

Ouch! That is a 25% increase in home loan rates for people with low scores. Did your income increase by 25% during that two days? Did your credit score improve to 700?

Oh, oh. Effectively, people with credit scores under 700 may not be able to borrow! No loan, no home, right?

Well, maybe not.

The turmoil in the mortgage market has brought about a change of thinking. Many people are beginning to dust off the techniques used in the 70’s and 80’s, a tough time in the real estate and finance markets and use innovative financing techniques that in effect give buyers and sellers the opportunity to create their own capital outside the system of traditional lenders.

More concretely, lease purchase financing and seller financing are bobbing up to the surface as viable alternatives for people who have been shut out of the institutional marketplace. To find out more about how to mix traditional and alternative lending to your advantage visit the Kitsap Real Estate Advisor.

Changes are in the making for unsecured lending as well. What I think are revolutionary changes in how lending may look in the future are being implemented successfully by online “people to people” lending efforts like Prosper.com. Take a look at the future and see how it might help you and everyone else.