Kitsap County Market Statistics for December 29, 2008

This is the final report for 2008.

The absorption rate for Silverdale remained at 92 weeks of inventory for sale while the county's absorption rate increased to 200.4 weeks.

There were 11 new purchase contracts for the county the past week and the total number of active listings was 2,204.

Happy New Year to all my faithful readers!

Short-Sale vs. Foreclosure: Which Should I Buy?

As a serious buyer, is it better for me to make an offer on a property that is listed as a short-sale or a property that is bank-owned?

For clarification, a short-sale is defined as a home in which the owners are facing problems making their mortgage payments and are negotiating with the lender to sell their home at a lower price than the outstanding mortgage. A short-sale property may be occupied by the owners or vacant.

On the other hand, a bank-owned home is one in which the owners have defaulted on their mortgage and the bank holding the mortgage has assumed ownership of the home. This home is vacant.

Here's the quick and dirty on submitting an offer. A short-sale is a catch-22. Even if the owner accepts the contract terms, the lender has the final word! But with a foreclosed home, at least you're dealing directly with the lender.

What about due diligence on condition? There are no guarantees here. Pay for a general building inspection even though you have no leverage to ask for repairs made by the owner/lender and be prepared for the worst. Also be aware that some owners may intentionally damage the property prior to their leaving.

If it seems too good to be true, maybe it is. That's the risk you face!

Thinking of Remodeling?

If you want to get the lastest information on remodeling your home, I highly recommend you check out this website.

You can also get information for the highest return on investment (ROI) if you look at the 2008-2009 cost vs. value button.

Mortgage Interest Rate Information

The Open Market Committee of the Federal Reserve will be meeting tomorrow and possibly Wednesday. This is the group that sets the federal funds rate which is the rate member banks charge each other for overnight loans (yes, there is still money being lent)!

Anyhow, expect the rates to be reduced another 25 to 50 "basis points" (1/4 percent to 1/2 percent) within a day or so. This could bring the 30-year fixed rates down to 5.25% or lower for the near future.

Also, there is "talk" that the Treasury Department (Timothy Geithner has been selected by president-elect Obama to replace Henry Paulson) or the Federal Reserve may subsidize interest rates for first-time buyers. This could reduce rates another one percent or so. If this happens, and it's a good possibility, I don't believe any action will be taken until after president-elect Obama's inaguration (January 20, 2009).

I'll keep you all advised.

Tax Law Change for Second Properties

If you own a vacation home/second home, read this!

Congress has presented us taxpayers a Christmas tax present effective January 1, 2009. This will have acute tax consequences if you own a vacation/second home and intend to occupy that home as your principal residence in the future.

Current tax code: you can sell a principal residence every two years without any tax consequences on capital gains if you occupy that residence for 24 of the past 60 months. The capital gains exclusion is $250,000 for a single person and $500,000 for a couple. You could then sell that vacation home after 24 months occupancy as your principal residence and use the $250,000/$500,000 capital gains exclusion. Any amount above the exclusion rate is taxed as a long-term capital gain at the 15% rate.

New tax code: you can still sell a principal residence with the current capital gains exclusion but you will only be able to exclude a pro-rata portion of your vacation/second home's capital gains based on the percentage of time you occupied that home as your principal residence.

Call me if you have questions and I can provide more specifics but eventually you'll need to consult your accountant (and hope he/she is aware of the tax code change).

Kitsap County Market Statistics for December 1, 2008

Last week was just another week in paradise for Kitsap's real estate markets. However, being Thanksgiving week there was even less activity than I've come to expect in this cycle. But there were 23 new purchase contracts written which is consistent with the trend over the past two months.

The absorption rate for Silverdale was 100 weeks of inventory for sale. With the exception of two weeks over the past ten, that number has continued to decline slightly as the number of active listings also has declined. But that doesn't mean the Silverdale market has improved for sellers. After the holidays, more listings will "come on the market" so the absorption rate will begin to increase.

The same is true for the county overall. There were eight properties that changed to a pending status out of 2,391 active listings, a dismal absorption rate of 298.9 weeks. That number will certainly decrease, especially after the first of the new year. But it will still average over 120 weeks of inventory for the near future.