Our North Kitsap real estate market has been even more competitive for buyers. Read on for key highlights from our strong third quarter and insights from Windermere’s Chief Economist, Matthew Gardner. 

Our Competitive Market

North Kitsap’s inventory is now lower than last year while the demand remains high. Remote working culture seems here to stay, opening doors to the greener pastures of Kitsap living. These eager buyers outnumber sellers, which is reflected in the lower volume of closed sales when compared to this same time last year. Our Brokers continue to experience situations where some buyers are outbid either by price or by an all-cash offer. But if you’re looking to buy, don’t let that discourage you. From first-time buyers to seasoned investors, our local experts are here to guide you through this competitive market. 

Market Data

Looking at the last five quarters in the graph below, there is a noticeable plateau for this year’s third quarter when compared to 2020’s third quarter.  But home prices are still increasing, and the amount of sold homes still outpace pending listings as a result of the increased demand.  As we enter the slower season and inventory wanes further, prices may level, which will start to balance out the market.  Or, it will at least start a shift in that direction.

Sale prices in North Kitsap remain strong. And, as you can see below, the listing and sale price divergence went through a slight correction in the second quarter of 2021, but it’s now back on track.  Our agents are still sharing experiences with many eager buyers and many happy sellers due to the continuing demand and our strong seller’s market.

Home Purchase Sentiment Index: Insights from Matthew Gardner

In his most recent Monday with Matthew video, our Chief Economist delivered a comprehensive analysis of the most recent Home Purchase Sentiment Index figures put out by Fannie Mae.  The data comes from a survey containing approximately 100 questions on housing-related topics. Fannie Mae collected 1,000 consumer responses from across the country. As Matthew Gardner says, “It’s the only national, monthly survey that’s focused primarily on housing.”

The survey shows that many Americans continue to think it is not a good time to buy because of the low supply and rapidly rising prices.  However, many feel it is a good time to sell as consumers predict home prices and mortgage rates will go down.  As Gardner explains, “most consumers continue to report that it’s a good time to sell a home, but a bad time to buy. They most frequently cite high home prices and a lack of supply as their primary rationale…However, the good time to buy component did tick up for the first time since March.”  While this is a recipe to shift towards a buyer’s market, we’ll see how things unfold in the coming months.

Gardner sums it up nicely: “The takeaways for me so far are that consumers tempered both their recent pessimism about home buying conditions and their upward expectations of home price growth.”  So again, we are seeing the potential for a shift toward a more balanced market.

Our North Kitsap market performed even better than expected during our second quarter. We’ve compiled key highlights so that you can easily stay informed about our local real estate market.

Our Strong Seller’s Market

North Kitsap’s inventory remains low and demand remains high. Many people are continuing to move out of bigger cities in part due to the remote working culture. There are still many eager buyers and fewer sellers. Our Brokers continue to experience situations where some buyers are outbid either by price or by an all-cash offer in this competitive market.

If you look at the last five quarters detailed in the graph below, you can see that growth trends in volume continue to rise, even when comparing 2020’s second quarter to 2021’s second quarter.  And, our market is definitely heating up this summer.

We’re continuing to see even higher prices. As you can see below, the listing and sale price divergence is shrinking now, as sellers benefit from our inventory shortage, asking for higher prices.  Many buyers are able to meet this demand and we’re still seeing low mortgage rates.

Market Insights from Matthew Gardner

In his most recent Monday with Matthew, our Chief Economist, Matthew Gardner, begins with the staggering fact that “prices have risen almost three-fold, as the cost to finance has dropped by 72%.”  If the number sounds too good (or bad) to be true, that’s because it is. To get an accurate picture, you also have to factor in inflation. Gardner explains that “just like other goods and services, the price of a house today is not directly comparable to the price of that same house 30 years ago because of the long run influence of inflation.”  When you adjust for inflation, the rise in housing prices becomes less drastic. Without adjusting for inflation, “prices have risen by 268%”. But when you adjust for inflation, the “real prices have increased by 83.6%”.  Therefore, the increase is much lower than what most people are discussing today. 

Matthew also compares mortgage payments, another important piece of the puzzle.  Although, without adjusting for inflation, “mortgage payments have increased by 74.3%,” the inflation-adjusted “real payments are 10.7% lower!”  Of course, there are other monthly payments associated with home ownership. This includes property taxes, which do not change with market fluctuations. But this still indicates “that prices have been able to rise so significantly because mortgage rates have dropped”. It’s also because “inflation-adjusted home prices really haven’t skyrocketed – contrary to popular opinion.” 

However, Matthew clarifies saying, “there are some markets across the country where the picture isn’t quite as rosy.  In these places, prices have risen significantly more than the national average.”  The Seattle metropolitan subunit (which extends around our local area) is one of these places. This is largely due to the increasing affluence as a result of the tech boom.  

Not a Housing Bubble

Gardner’s bottom line is this: “there are quantifiable reasons to believe that we are not in a national housing bubble today.” However, he does point out that some markets will see a slowdown in price growth given “where prices are today in concert with the spectre of rising mortgage rates.”  Ultimately, it’s still a strong seller’s market with an overall low supply and high demand. We expect to continue to see issues with affordability as prices and mortgage rates continue to climb.

Poulsbo’s North Kitsap market picked up in our first quarter despite a seasonal slowdown. We’ve compiled key highlights so that you can easily get informed about our local real estate market. 

Our Strong Seller’s Market

North Kitsap’s inventory remains low and demand remains high due to people moving away from the bigger cities and COVID-19 changing the way we work. There are still many eager buyers outnumbering sellers. Our Brokers continue to experience situations where some buyers are outbid either by price or by an all-cash offer in this competitive market.

If you look at the last five quarters detailed in the graph below, you can see that a similar growth trend in volume is repeated when comparing 2020’s first quarter to 2021’s first quarter.  Get ready for the market to continue to heat up as we move from spring to summer.

With our low supply, we may see even higher prices. This strong seller’s market is driving us toward an affordability ceiling. As you can see below, there’s a growing listing and sale price divergence. Sellers continue to benefit from our inventory shortage. Prices may soon be too high for some people to afford to buy a home here.

Affordability Issues and Market Insights

Matthew Gardner, Windermere’s Chief Economist, continues to track this affordability ceiling in his most recent Housing and Economic Update: “If the pace of home price growth continues, many households will start to be priced out” of what people can actually afford.  As Gardner points out, we need more supply, and we need home prices to drop to alleviate this market strain.  

Unfortunately, that might not happen fast enough for many hopeful homebuyers to make their dream a reality. Gardner reminds us that the cost of materials, recent storms, and the current housing market prices have all added to the cost of building new homes. This, in turn, will add to the listing price.

Additionally, Gardner points out that mortgage rates have risen after “a jump in bond yields has led rates to spike” as the country re-opens and economic activity increases. The resulting potential inflation causes the 10-year treasury interest rates to rise in hopes of attracting more buyers.  However, it is still far below standard rates and shouldn’t be a concern for buyers right now.

Ultimately, it’s still a strong Seller’s Market with an overall low supply and high demand. We expect to continue to see issues with affordability as prices continue to climb.

Poulsbo’s North Kitsap market saw a strong end to 2020. We’ve compiled key highlights from our fourth quarter as well as some useful insights from Windermere Real Estate’s Chief Economist, Matthew Gardner. Gardner also offers his 2021 market forecast with some uplifting and interesting predictions.

Our Strong Seller’s Market

Poulsbo’s inventory remains low while demand is high from people moving away from the bigger cities. Buyers, the market is in the usual seasonal slowdown – but not as slow as expected given COVID-19. There are still many eager buyers outnumbering sellers. Our Brokers have seen an increase in situations where some buyers are outbid either by price or by an all-cash offer.

In 2020’s fourth quarter, the average sale price in North Kitsap was up 21.3% year-over-year at $597K. Sale prices continue to hover close to listing prices, indicating strong demand.

2021 Forecast 

In his final Monday with Matthew video of 2020, our Chief Economist, Matthew Gardner, shared his 2021 forecast for the housing market. He’s optimistic and for some good reasons.

First off, Gardners expects mortgage rates will not rise significantly on a local level, nor will they vary significantly throughout different regions across the U.S. Since mortgage rates are heavily tied to 10-year treasury maturity rates/yields, rates shouldn’t rise significantly until the entire market recovers from the COVID-19 slowdown.  Another great sign is that Gardner expects home sales will grow significantly, from 5.55% in 2020 to 5.93% in 2021. That’s “to a level we haven’t seen since 2006,” Gardner explains.  With the continuation of historically low mortgage rates and the consistent increase of home values, 2021 looks bright.

“No! There isn’t a housing bubble forming. But price growth will slow & sellers may feel like it’s a collapse … it isn’t collapsing, it’s just normalizing.”

Matthew reminds us that there are pitfalls to be wary of in this strong market. First and foremost: “we need more inventory.”  With the shuffling to new homes, and the huge wave of “first-time buyers [that] will continue to be a major player in the housing market,” many are making moves in a flood that will not persist. Buying during the pandemic will slowly settle. People are expected to stay in their homes longer, especially homeowners who have chosen to refinance. House values will rise due to the lack of supply, and that may price out many buyers who want to purchase in our area. 

Western Washington’s Market Report

• Total Sales: 26.6% increase from Q4/2019, but 8.3% lower than Q3/2020
• Homes for Sale: 37.3% lower than Q4/2019, and 31.2% lower than Q3/2020
• Pending Sales: up 25% from Q4/2019, but 31% lower than Q3/2020

• Average: $617,475 (up 17.4% from Q4/2019). This continues the trend of above-average appreciation of home values.
• Interestingly, prices between Q3 and Q4 of 2020 only rose by 1%.  Is there a price ceiling we’re reaching?
• Mortgage rates will stay competitive as the market continues to charge toward a price ceiling and potential affordability issues.

• Average: 31 Days (16 days less than Q4 just one year ago)
• In Kitsap County, average days on market: 17

Conclusion