The good news is there is still plenty of money for employed homebuyers with good credit and a down payment. And there is a reason for buyers who have been waiting on the sidelines to act immediately. The lowest interest rate—hovering around 6%–is only available for “conforming” loans. Conforming is limited to $567,500 and is being lowered to $506,000 January 1. Jumbo loans—over the conforming limit–runs about 2% more currently. This is the last opportunity for buyers to receive the $61,000 spread at the lower interest rate. The loans must close prior to the end of the year.

While sellers are withdrawing their homes from the market because of few higher-end sales, the slow October pushed up the absorption rate. Expect this to continue to ratchet up going into winter as sales numbers decline in the normal slower selling months ahead. A six to seven month supply of homes is an ideal market. As we approach that number, prices for sellers will firm up. Less than six months inventory produces a seller’s market. Gig Harbor has seen supply as little as three months.

Time to market homes was 134 days in October rather than 118 days in September, again not unexpected.

The graph depicts year-to-date median sales prices over the past several years for single family and condos for Gig Harbor and Key Peninsulas.  These are down 7% from 2007 and 5% from 2006, typical for the entire Puget Sound.

The median sales price–$300,000 for the single month of October,  compares with May 2005 local prices, but is better than national statistics with prices either at or nearing 2004 levels.   It was the end of third quarter 2007 that the subprime mess was disclosed and when sales prices stopped accelerating. Median price is the midway point in number of sales.

Homes actually selling are averaging 4% less than their list price, perhaps an indication of realistic pricing strategy for those sellers whose homes are receiving offers. There is still a very large discrepancy in list prices of unsold homes and sales prices—nearly $170,000, or nearly $75.00 per square foot. The average home is 2287 square feet. Intent sellers are looking at the per square foot price of homes selling comparable to theirs—not just the comparable listings—and are pricing accordingly. 

This table shows single family home and condo sales for the year. Prices are down about 2% in Key Peninsula and 7% in Gig Harbor.

Year-to-date Median Sales Prices

Carole Holmaas is an Associate Broker at Windermere Real Estate, licensed since 1967. She may be reached at Carole@ISellGigHarbor.com or 253.549.6611

New homes are on track this year for merely 70-75 sales. Typically three-quarter of the annual sales total is reached by September 30—this year only 47 homes have closed in the first nine months. This is a 59% decline from 2007 and 71% decline from 2005–the slowest of the four best years from 2002 to 2005 (208 to 292 sales for each year).

With 169 homes completed or under construction—this equates to a 32 month supply at the 2008 selling pace. 2000 was the last year this slow, with 98 sales at year end. the supply has dropped more than sales would indicate as builders have placed some of their homes in the rental pool.

Sales are slow, or non-existent, for builders in new subdivisions of Chelsea Park, Harbor Crossing, and Crescent View Estates. Quadrant’s Ridge at Gig Harbor has 10 homes under contract and about the same number reserved. Many of the homes on the market are on odd lots or on in-fill lots in mature subdivisions. 

Building permit applications have dropped sharply for Pierce County and the city of Gig Harbor. While most future new construction in Gig Harbor will take place within the Urban Growth Area the county is responsible for all permits in Key Peninsula. 

NEW HOME INVENTORY

	Gig Harbor	Key Peninsula
Median List Price	$736,000	$342,500
Average Sq Ft	3505	2297
<$300,000	1	12
$300,000-399,999	3	11
$400,000-499,000	10	3
$500,000-599,999	10	1
$600,000-699,999	23	3
$700,000-799,999	26	4
$800,000-899,999	12	2
$900,000-999,999	5	1
$1,000,000-1,249,999	6	1
$1,250,000-1,499,999	3
$1,500,000>	7

The median sales price has declined $40,000 in the past quarter, reflecting the tighter credit market and as well as an average 150 square foot smaller home. Never have homes been built as large as those selling today. Five years ago the average square footage was 2543—today it is 2804. And it was 200 square feet smaller eight years ago.

There are 16% fewer new homes on the market than a year ago. But supply will need to contract even more before prices will firm up for builders. Meanwhile buyers have as many choices as there is candy in a candy store.

More than 50% of Gig Harbor’s inventory is over $700,000 whereas 60% of Key Peninsula’s new homes are priced less than $400,000. Close-in lots are in higher demand, lots have become more expensive to develop, and, in Gig Harbor, lot supply is dwindling quickly. When the market turns around there will be a large pent-up demand for new housing.

Carole Holmaas is an Associate Broker with Windermere. Her real estate blog is http://blog.ISellGigHarbor.com. She can be reached at Carole@ISellGigHarbor.com or 253.549.6611.

The number of pending home sales–sales negotiated but not closed–is gradually improving, with September’s sales just 10% down from last year. This is an improvement after numbers have run a negative 13-58% all year.

County-wide pending sales were up 22% last month and Western Washington figures were up 4.1% from a year ago.

Gig Harbor’s higher value homes are keeping sales a bit lower but that is expected to change as the national rescue plan makes money less expensive for homes financed above $572,500. Recently the spread between interest rates for conforming and jumbo loans has been as much as 2 ¼%. Traditionally the difference has been less than 1%.

Other areas in the county reflective of fewer sales include Steilacoom and Dupont. Dupont’s sales come from new construction and builders have cut back to fit market conditions. The homes around Lakewood’s lakes have also seen a drastic slowdown in sales recently…for the same reason as Gig Harbor.

Dissecting sales currently pending, including new homes that were “pre-sold” and negotiated as long as six months ago, provide some interesting facts. This represents data from the Multiple Listing Service for both Gig Harbor and Key Peninsula as of October 26 for single-family homes.

Most of the sales fall into the expected pattern—bunched under $400,000. Interestingly though, there is a bulge in the $600,000-649,999 category. This represents a selling price range where the buyer can borrow less than $572,500, utilize a 10% down payment, and receive the best interest rate. Characteristics of this bulge are varied…two salt waterfronts, one lakefront, two new homes and two distressed sales, obviously with some overlaps.

Of these 61 pending home sales, over one-quarter—17–are in the area north of Gig Harbor, which includes two new neighborhoods…Harbor Crossing and Quadrant’s Ridge at Gig Harbor. 10 of these are in the Ridge where Quadrant just announced it will start building one level homes and homes with the master bedroom on the main floor. This should hold appeal to a different blend of buyers than the current inventory does. Bennett Homes, one of Harbor Crossing’s builders, is sitting with all unsold inventory and Little Boat LLC has sold nine since opening in 2007. There are no pending sales in Harbor Crossing at this time.

18 or nearly 30% of the sales are new construction, distributed throughout the price ranges, with nearly all sales in Gig Harbor North and in Key Peninsula.

Salt waterfront is represented with five sales and lakefront another two.

Distressed homes—a home foreclosed and owned by the lender or a home in default that needs lender approval to sale—represent 26% of the sales. While this is more than the local area has experienced previously, it is not as bad as the nation-wide picture of 35-40% of sales. Distressed sales put pressure on house prices because many are sold at discounted prices.

This is probably the single largest factor currently driving the drop of sale prices. This should improve as the national rescue plan provides avenues for owners to refinance and not default. As the number of these sales diminishes, other owners will not face the discounted prices for competition. These homes run the gamut of price ranges, from $120,000 to $670,000.

Carole Holmaas is an Associate Broker at Windermere Real Estate in Gig Harbor, licensed since 1967. She may be reached at 253.549.6611 or Carole@ISellGigHarbor.com.

New sales, commonly referred to as “pending sales” are down also. Northwest Multiple Listing Service, the source of these statistics, reports only the list price for pending sales and it is likely the closed price will be something less. In Gig Harbor the median pending price is just $350,000—a $269,000 spread or 44% less than list price. As the pendings translate to closed sales in 30-45 days it appears the future median sales price will be even less than September’s $385,000. In Key Peninsula pendings are running $62,000 or 28% less than list prices, forecasting lower October sales prices as well.

This just emphasizes the point that the higher end (currently above $600,000 for Gig Harbor and $250,000 for Key Peninsula where there exists over 36 months of supply) is stuck, as financing has become more difficult and buyers have lost investment value in the recent market bust.  

Homes that did close in September sold in 90-105 days on average. But listed homes are pushing 135-150 days on the market without selling.

There are a couple of bright spots—both the area surrounding the city of Gig Harbor and the Wauna/Minter area are on a par with the number of sales from last year. And median sales prices in the area surrounding the city of Gig Harbor have actually jumped up for the first nine months of the year, compared to 2007—from $420,000 last year to $472,000.

In analyzing where sales prices are heading, one needs to look at two trends—1) year-to-date, compared to last year and 2) current month-to-month figures. This data for localized areas is presented in the two tables below.

 Year-to-date Comparison

 Month-to-month Comparison