In keeping with the spirit of the holidays and the winter solstice, the National Association of Realtors issued a news release yesterday announcing a continuing rise in the sale of existing homes in November 2011. We can all hope that the housing market may at long last be moving in a positive direction. Challenges lie ahead for certain, but a bit of good news is as welcome as a sunny day in December like we are having today!

Here’s a portion of that news release below; if you wish to read it in it’s entirety, Click Here >>

Existing-Home Sales Continue to Climb in November

Washington, DC, December 21, 2011

Existing-home sales rose again in November and remain above a year ago, according to the National Association of Realtors®. Also released today were periodic benchmark revisions with downward adjustments to sales and inventory data since 2007, led by a decline in for-sale-by-owners.

Although rebenchmarking resulted in lower adjustments to several years of home sales data, the month-to-month characterization of market conditions did not change. There are no changes to home prices or month’s supply.

The latest monthly data shows total existing-home sales1, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 4.0 percent to a seasonally adjusted annual rate of 4.42 million in November from 4.25 million in October, and are 12.2 percent above the 3.94 million-unit pace in November 2010.

Lawrence Yun, NAR chief economist, said more people are taking advantage of the buyer’s market. “Sales reached the highest mark in 10 months and are 34 percent above the cyclical low point in mid-2010 – a genuine sustained sales recovery appears to be developing,” he said. “We’ve seen healthy gains in contract activity, so it looks like more people are realizing the great opportunity that exists in today’s market for buyers with long-term plans.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 3.99 percent in November from 4.07 percent in October; the rate was 4.30 percent in November 2010; records date back to 1971.

NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, said housing affordability conditions have set a new record high. “With record low mortgage interest rates and bargain home prices, NAR’s housing affordability index shows that a median-income family can easily afford a median-priced home,” he said.

“With consumer price inflation rising by more than 3 percent this year, consumers are looking to lock-in steady payments by taking out long-term fixed-rate mortgages. However, the problem remains that some financially qualified families who are willing to stay well within their means are being denied the opportunity to buy in today’s market by the overly restrictive mortgage underwriting situation,” Veissi said.

An elevated level of contract failures continues to hold back a broader sales recovery. Contract failures2 were reported by 33 percent of NAR members in November, unchanged from October but notably above a year ago when it was 9 percent.

Contract failures are cancellations caused by declined mortgage applications, failures in loan underwriting from appraised values coming in below the negotiated price, or other problems including lower conforming mortgage loan limits, home inspections and employment losses.

If you are allergic to data, don’t read this, because it has a lot..:-)

Here’s a snapshot of the past 15 months of real estate activity for the Whidbey Island real estate market from Coupeville to Clinton. It excludes Oak Harbor and Camano Island which are very different markets compared the southern half of Whidbey Island.

The graph below shows the total number of single family homes for sale and sold in the past 15 months. Notice the seasonal nature of sales, with the peak month being August, and the lowest in Feb. As winter turns to spring, the activity will rise again, and hopefully bring a positive year.

What you cannot tell from these charts is the activity by different price segments or “layers”. The most active market is the homes priced under $300K. Two thirds of the total sales in the past 15 months have been under $300K even though they represented only 44% of the total homes listed.

This next chart shows you the total Cumulative Days On Market (CDOM) for the homes that sold, plus the final selling price compared to the original listing price.  Notice that the final sales price is in the range of 84-90% of the original listing price.  One comment on this.  People often take their homes off the market for a while, especially in the winter months.  If their home is removed from the market for 90+ days, the statistical data system does not use the previous listing data.  This means the data shown below is actually better than reality.

The chart below compares the average list price of homes still for sale, and the average selling price for the homes that sold. This really is another way of depicting how the lower price range (less than $300,000) is the most active segment at this time. Whidbey’s real estate market is tracking the national market in this respect as this is where there is a significant number of distressed (foreclosed and/or short sales) properties. So while the market may seem to be marginally better than in the past 2-3 years (and it is), the activity is primarily in the lower priced homes.

Please contact me or leave a comment if you have any questions, or would like a more refined analysis for your specific property. This data set is revised each month, and I should have another Market Update for you summarizing 2011 sometime between the 10-15th of January 2012.

Attached is the latest Gardner Report covering the third quarter of 2011. According to Matthew’s analysis, the economy continues at a tortoise-like pace with slow, plodding improvements. Compared to the first six months of the year, Island County’s unemployment rate fell to (8.8%) from last quarter, but still a slight increase over this time period last year. In YTD Closed Sales, Island County is down 1% in units. Claiming it is still unfair to look at year-over-year prices due to last year’s tax rebate his stats show that prices are down 13% for the past year – and down a total of 34.7% over the past 5 years.

Gardner Report Q3 2011

I don’t usually post another blog or document in it’s entirety, but in this case, I thought it was important enough to do so. Many leading economists and regular citizens, me included, believe solving the nation’s housing crisis is the singular most important near term economic issue facing our nation, not withstanding the current focus on the federal deficit. Below is the National Association of Realtors (NAR) position paper on how to stabilize and resolve the housing crisis in our country.

NAR’s 2011 Five-Point Housing Solutions Plan

NAR worked with two well-respected policy think tanks – the Progressive Policy Institute (PPI) and the Economic Policies for the 21st Century (e21) – that organized and conducted a policy meeting on October 4. New Solutions for America’s Housing Crisis brought together policy leaders, industry representatives, Members of Congress, thought leaders and the media to present ideas and make actionable recommendations intended to stimulate the growth necessary for a sustained recovery in housing and extend an ensuing positive effect on job creation and the broader economy.

It’s no secret our nation’s housing markets remain depressed and continue to suffer. While no one thought the crisis would carry on so long, markets are slowly recovering and are in need of immediate policy solutions to address the myriad challenges in order to stabilize housing and support an economic recovery.

We have long maintained that the key to the nation’s economic strength is a robust housing industry. And, we remain steadfast in our belief that swift action is needed now from Congress and the Administration that could directly stimulate a housing recovery.

NAR unequivocally endorses many of the bipartisan ideas and recommendations that came out of the meeting and we wholeheartedly urge Congress and the Administration to undertake their consideration promptly.

In letters sent Oct. 24, 2011 to the Chairman of the Federal Reserve Bank, President Obama, and Congress, NAR provided recommendations and solutions to stabilize and revitalize the housing industry and economy:

Recommendation 1: Do Not Risk Weakening Our Nation’s Housing Markets Any Further

Recraft the Qualified Residential Mortgage rule mandated by the Dodd-Frank Act to include a wide variety of traditionally safe, well documented and properly underwritten products. Requiring a 20% down payment coupled with stringent debt-to-income ratios and rigid credit standards – as defined under the proposed rule by six federal regulators – would be detrimental to prospective home buyers, especially first-time and middle-income buyers.
Restore higher loan limits supported by FHA and the GSEs to provide liquidity in housing markets and to assure mortgage financing options while stabilizing local housing markets. On September 30, the loan limits in 669 counties and 42 states declined. Already, this has had a harmful impact on our fragile housing recovery. Sellers have had to lower their price in markets where mortgages backed by FHA and the GSEs are no longer available. Buyers are confronting higher mortgage rates and larger downpayments because only private mortgages are available in these high-cost markets. In some instances buyers have given up their home search entirely.
Resist proposals that call for changing the tax rules that apply to homeownership now or in the future. Without a doubt, now is not the time to change the mortgage interest deduction or any other housing incentives. Making gradual or targeted changes would send the wrong signal further undermining confidence and further depressing home values.

Recommendation 2: Restore Vitality to Our Communities and Neighborhoods by Reducing the Foreclosure Inventory

Support S.170, The Helping Responsible Homeowners Act, sponsored by Senators Barbara Boxer (D-CA) and Johnny Isakson (R-GA). Their bill would remove refinancing limits on underwater properties for borrowers that have been paying on time, and would eliminate risk-based refinancing fees charged by Fannie Mae and Freddie Mac.
Support bipartisan Senate efforts calling for improvements to the Home Affordable Refinance Program (HARP). Led by Senators Barbara Boxer (D-CA), Johnny Isakson (R-GA) and Robert Menendez (D-NJ), the time is appropriate to enhance HARP and provide refinancing opportunities to at-risk borrowers as an alternative to defaulting on their mortgage loans.
Direct Fannie Mae, Freddie Mac and servicers to prioritize short sales above foreclosures.
Support all necessary foreclosure/loss mitigation efforts to keep American families in their homes. Reology Corporation’s President and CEO, Richard Smith, has proposed a debt for equity approach to help underwater borrowers in trouble keep their homes and lower their monthly payments while lenders take a smaller hit than they would have with a default and foreclosure. We call on Congress to introduce legislation adopting this innovative proposal.

Recommendation 3: Open Opportunities for Private Capital to Return to the Mortgage Marketplace to Foster New Demand among Responsible Homebuyers

Open up the FHA Section 203(k) rehabilitation loan program to investors to encourage purchasing of foreclosed property. This will facilitate the rehabilitation of the existing housing stock and help reduce the inventory of foreclosed homes.
Require the GSEs to temporarily suspend investor financing limitations, especially the limit on the number of mortgage loans allowed for any one investor/borrower (currently 4 for Freddie Mac and 10 for Fannie Mae). This will give small, private investors the opportunity to absorb some of the excess inventory, resulting in the stabilization of prices for existing real estate-owned (REO) properties.

Recommendation 4: Support a Secondary Mortgage Market Model that Includes Some Level of Government Participation

Reject proposals that call for full privatization of Fannie Mae and Freddie Mac. This is not an effective option because private firm’s business strategies will focus on optimizing their revenue/profit generation. This model would foster mortgage products that are more aligned with the businesses goals than in the best interest of the nation’s housing policy or the consumer.

Recommendation 5: We Call on the White House to Hold a National Housing Summit to Articulate a New National Housing Policy and Move the Provision of Housing to the Front of the Nation’s Domestic Agenda

Homeownership matters! It represents the single largest expenditure for most American families and the single largest source of wealth for most homeowners. The development of homeownership has a major impact on the national economy and the economic growth and health of regions and communities. Homeownership is inextricably linked to job access and healthy communities and the social behavior of the families who occupy it. We recognize the serious public debate as to which tax and spending policies will best support the sound fiscal management that our nation requires.
However, we urge caution against dismantling or eliminating vital resources for housing that provide important economic, social, and societal benefits. We call on the White House to empanel a body comprised of public and private industry participants to fashion a national housing policy that is flexible enough to address the varying needs across the nation, whether it’s homeownership or rental housing, production or preservation.

In conclusion, we emphasize again the recovery of the broader economy depends on housing. The last two and a half years have shown that, with housing prices bumping along the bottom, a robust economic recovery will remain exceedingly difficult. The National Association of REALTORS stands ready to work with Congress and the Administration to move this 5-point plan to help restore housing and grow our economy.

To learn more about NAR’s position on the Housing Crisis and potential solutions, please visit the National Association of Realtors website.

The above chart shows the last 15 months of real estate activity for South and Central Whidbey. See discussion below:

The summer finished with a total of 103 homes being sold in July-Sep 2011 compared to 83 for the same period last year which is an increase of 24% more homes sold. This high sales rate in the summer meant that the overall sales for 2011 YTD is now slightly higher than 2010 with a total YTD homes sold of 225 vs 220 in 2010.

Interestingly, the average sales price of homes for the 2011 YTD in South and Central Whidbey increased slightly from $353K to $357K; however, the median sales price (midpoint) dropped from $309K to $280K. Also of note, and related to the median price drop, is the fact that in 2011, 34% of all sales in South and Central Whidbey were bank owned properties or “short” sales (selling for less than owed to the lender). That compares to 22% at this same time in 2010.

The overall trends for South & Central Whidbey real estate we are seeing are as follows:

1) Total home sales are about the same as 2010. In 2010 there was a surge in the spring associated with the tax credit incentive, while the 2011 has been more of an organic demand. This is encouraging.
2) A large number of those sales are in the lower price range, which resulted in the median sales price dropping. That has been offset by an increase in higher priced home sales, most of which were waterfront homes.
3) The percentage of distressed home sales has unfortunately increased significantly, and they now represents 1/3 of the total home sales.
4) Both average and median list prices are declining, as home sellers continue to recognize the downward price pressure present in the market.

Showing activity and sales slowed in the first half of October as expected. As of 10/15/11, 10 homes had sold and an additional 19 were pending sale. This is the time of year that some sellers, knowing that the pace of sales slacks off, remove their homes from the marketplace. In real estate parlance, these homes are “parked”. Experienced agents understand this dynamic, and they can often provide you with access to these properties by getting the seller to agree to what is known as a “one party show”.

It has been a while since I have had time to analyze the active listing and closed sales real estate data for Whidbey Island, so I thought it would be good to give everyone an update. The data presented below is through the end of September, just as we are headed into what has traditionally been a quiet time for real estate sales. The conversation among realtors is that this year is not typical in any way, and we are hearing from many of our potential buyers that they are adopting a “wait and see” approach as we head into the fall. In other words, even though they may be actively looking, some of them are waiting to see if prices will soften a bit more before making any offers. So if you have your home listed, and have seen a little more traffic since the end of summer, you are seeing those buyers poking around. Are many making offers right now? Selectively, yes they are, so we are all hopeful that we will see some sales activity in the final months of the year. So now to the numbers. Comments follow the tables.

Active Listings as of 10/1/10
As you can see there are still a large number of homes for sale on Whidbey Island; however, compared to 2009, there are 10% less homes for sale now. Both average and median listing prices have decreased by 5-8% compared to last year. I think we can safely assume that everyone who does not live under a rock has figured out that there is a soft real estate market. As noted in the actual sales data shown below, much of what sold in 2010 has been the lower priced homes, and the decrease in list prices for the upper half of the market was substantially higher otherwise the average and median list prices would have actually increased. 70 of the homes listed above are Pending Sales, which is less than last year at this time by about 10 homes.

Closed Sales YTD as of 10/1/10
If you only took a quick look at the YTD sales data above you would conclude that prices are going up, since the average and median price of homes that sold is about 4-6% higher than last year. However if you look carefully you will notice that what has sold is in the lower half of the price range. This reflects the incentives available to buyers and investors in the spring, as well as the continued activity in modestly priced homes. The upper half of the inventory is still relatively slow going, and prices are not going up in that segment of the market. Based on the specific situation of home sellers they are either holding pat, reducing prices a bit as an incentive, or even deciding to remove their homes from the marketplace for a while.

If you have any questions or would like to discuss your specific situation as a home buyer or seller, please don’t hesitate to email me at linda@lindacasale.com or call at 360-770-5550

It is amazing the variety of homes that are available for sale on Whidbey Island. That is why I think I enjoy helping buyers and sellers find their dream homes. Because more times than not, we have the dream home here they are looking for.

We have homes on high bank waterfront which afford views of whales passing by in the Saratoga Passage, homes on low bank which let you race out the front door and kick up the sand, and fish from the shoreline. We have homes on acreage with gardens, ponds, wetlands and wooded spaces. We have small community style homes for those who want private space to live near others, and 20+ acre farms for land lovers.

And yes, now is really a great time to buy! Home prices are low, interest rates are low and some of the local banks like Peoples Bank and Whidbey Island Bank have incredible loan packages available.

Why is it good for sellers? Well even though there is plenty of inventory, when the pricing is right, savvy buyers and good agents will find your home. The internet has made everyone more aware of what a good priced home is. This is good for both buyers and sellers. Email me and request “10 tips for buying your home”.

Mexican Standoff?

Wikipedia describes it as a slang term used for a stalemate or impasse, a confrontation that neither side can win in the foreseeable future. It describes the conflict between buyers and sellers in the real estate market today. There is a huge amount of nostalgia for the boom days of 2004 and 2005 from sellers. They have been racking up the profits in their notebooks that they will make when they sell. They have ignored data, and continued to believe that this is a short term adjustment. Soon things will be back to normal and their house will sell for what it should sell for if everything had just kept going the way it was in the early part of this decade.

Buyers on the other hand have embraced this. They hope that prices continue to drop, and that interest rates do not climb. When they look at a house the 1st thing they want to know is what the “property history” was. Which is to say, how long has it been on the market, and how much has the price come down? What is the assessed value. We didn’t pay much attention to assessed value before, but now those low assessments can add ammunition. Bottom line is how much more we can expect to get off of the price.

Where does this leave us? The Mexican Standoff. Buyers keep looking, it waiting for prices to take further cuts and sellers continue to hold firm. In fact, it has become hard to explain some huge discrepancies in the pricing of homes in some neighborhoods. It really comes down to those who are holding and those who have decided to play in the market as it is today.

The funniest part of all of this is that those sellers, who don’t want to budge on their early decade expectations, will turn around when they are looking at homes to buy. In a flash, they are critical of any seller who has not responded to the current economic climate.

So what to expect with this standoff? I think prices will continue to drop. Not fast, but they will drop because inventory is increasing with fewer sales, and there are many more foreclosure and short sale homes coming on the market. Just the small increase in interest rates recently sent the buyers back to reconsider buying a home. It is a fragile situation for all. We need buyer confidence to see the trend diminish. It is not good for people to lose their homes, and it is not good for people to hope that people will have to sell for less.

What is important to do, and what is not, for properties I represent for sale?  In my profession I must ask this question for each of the properties I represent every day.

First and foremost, it is important that I make sure that my clients properties are being presented in an inviting way to the buying public.  This means that I have the highest quality photos and marketing text.  This creates for the buyer a pleasing and anticipatory climate while finding out what they wish to know, and helps them in their decision to follow up further on this property.

Second, is the property being listed in the places that most serious buyers look for homes? Studies show that 87% of all buyers begin their search for properties on the internet.  Usually that is at one of the national or a strong regional real estate websites. Today buyers are able to get more information than ever before about the market, how the  homes that they are considering match up in pricing to similar homes in the same community,  and other pertinent information that helps them narrow their search.  I check the websites where my properties are listed, make sure that the photos and information is formatted correctly and that we are getting hits and follow through views on the pages.  If not, I make the changes needed to bring it to the high standard I have set.

Third, is my market presence strong? Am I easily reached?  Is my presence in the on line community and the real world community a benefit to my clients?  This takes effort, as the there are always many ways a Realtor can choose to promote their listings in a way that is not offensive and  shows a benefit to the community.   I have found a strategy that works for me, and it is highly beneficial to my clients too.

This is just a small part of what a day in the life a professional Realtor is like.  If you want to know more please call or email me.  And yes, that is an important part of my day too…..talking to you.

Looking at Whidbey Island Real Estate Statistics ending  Dec 2009, our year to date sold homes finished ahead of last year.   Active listing inventory is down but I think that may have more to do with it being December, and we will need to see what happens in the early months of 2010 to give any weight to this statistic.   The year to date sold prices is down ( -11% ) on South Whidbey.  So, even though we see some stabilization, there are still homes being sold at lower prices today.   Because we have so few homes that sell, many of our statistics can be highly affected by a sale of a foreclosure home.  So this must be considered when applying data to our outlook.  Days on market, (DOM) are up, which usually reflects less buyers currently moving forward to purchase. Again, seasonality is a big issue here, and December has not usually been a strong month.

It is clear now that the housing boom of 2004 – 2006 was temporary and artificial. It wasn’t an indication of forever escalating prices; though many seemed to believe so. The boom market was a bubble of inflated prices and irrational expectations of unqualified profits. These beliefs were fed by bank and mortgage companies making loans that should not have been made.  Just as the stock market bubble that preceded the Great Depression created investors of doormen, maids, construction laborers, bartenders, and others seeking to capitalize on skyrocketing stock prices; the housing bubble created a wild frenzy of speculation and inflated home prices that was impossible to sustain.

Homeowners who purchased anticipating great profit,  particularly those who bought early enough to borrow against their profits, have seen their dreams of easy money and growing equities vanish. More than two million of those homes have fallen to foreclosure, and many more may follow. This is a depressing fact, but one that we will have to consider in pricing homes for sale in the future.

Hindsight is great, and shows the error of such paths. We should have known better, but we didn’t want to miss what appeared the opportunity of a lifetime. Homes, however, are not a commodity to be traded like soybeans, pork bellies, or precious metals. Homes are just that, a place to live, raise a family, create memories, and find solace at the end of day.

The bursting of the housing bubble may ultimately restore order to both housing and the financial markets; and hopefully a repeat of this will not occur in the near future.

With that in mind, should anyone buy a home today? Of course some should. But those who are motivated solely by profit may find disappointment. Will home prices increase?  Absolutely. But it may take time, and it may not be what everyone’s expectation has been.

History tells us that the prices of those homes bought with careful consideration of both location and value will increase at a rate above the rate of inflation.  It is therefore important in the new year to take a look at the home you have for sale, are considering selling, or to buy, and see if it fits the new criteria.  If not, it may be time to adjust your thinking.