Home sales continued to out-perform year-ago totals and prices continued to show signs of stabilizing, according to the latest report from the Northwest Multiple Listing Service.

Pending & Closed Sales Up Over 2008, Median Price Drops

Pending sales for November tapered off from the October surge, but Whatcom County experienced a 25 percent increase from the same period in 2008.

Closed residential sales increased dramatically from November, 2008. Closed sales were up 88 percent, due in part by lower interest rates and first time homebuyer tax credit. The other reason for such a dramatic increase is the tremendous slowdown that occurred last year at this time.

The median sales price is down about 7.6% in November (over November 2008), and down 7.1% year to date.

Inventory Almost at Balanced Market Levels

Overall residential inventory has decreased by 9% year-to-date. November, 2009 vs. November, 2008 numbers are even. For the month of November, months of inventory was at 7.5 months, as compared to November, 2008 when it was 16.5 months. Six months of inventory is considered a balanced market.

Average cumulative days on the market for November, 2009 is 157 days, which compares to only 126 days on the market in November, 2008. The list to sale ratio is at 89% for November, 2009, compared to 91% in November, 2008.

Finally, the absorption rate for residential sales for November was 13.3%. It was 6.1% for the same period in 2008. The absorption rate indicates how many homes are being sold as compared to the number of listings currently on the market. Since November of 2008, that rate has steadily increased.

Holidays can be a favorable time to sell

Buyers tend to encounter less competition for the most desirable homes during these winter months. Also, qualified buyers can expect above-normal attention from service providers who are experiencing a slowdown in their business, including lenders, inspectors, appraisers and title companies.

Agents are able to devote more time to clients and the smaller selection of homes on the market. Sellers can also benefit from showcasing their homes with tasteful holiday decorations, although home stagers caution them to show restraint and not overdo the décor.

There have been several interesting trends happening in the local housing market as of late. Here’s a look at some of those trends, both for the month of September and year-to-date (compared to 2008 numbers).

Pending Sales Up

In September, Whatcom County’s pending home sales climbed 16.5% over the same results from a year ago (from 254 Pending Sales in Sept. 2009 to  218 in Sept. 2008). September’s performance brings a 9% increase in Pending Sales for the year so far (over 2008).

There are several factors leading to this increase in the number of Pending Sales we’re seeing locally: (1) low interest rates, (2) the first-time home buyer tax credit, and (3) lower home prices.

Closed Sales Down
Fewer Pending Sales are becoming Closed Sales locally, as Whatcom County Closed Sales are down 11.5% this year. The greatest obstacle to closing Pending Sales comes from the bank-owned and short sale properties. Lenders on short sales are taking anywhere from two to four months to make a decision on approving or denying the sale.

Despite the challenges with bank-owned and short sale properties, momentum is picking up in the market. Over the past few months, Closed Sales more closely match 2008 results.

Median Prices Down
The median sales price for a Whatcom County home is $260,000 this year: down 7% from the same time in 2008. In September, the median price slipped 9% (compared to September 2008). The following chart shows year-to-date median home prices in Whatcom County, by city.

The pace of local home sales is slowly but steadily absorbing the excess inventory of homes on the market. We are now at eight months of supply of homes for sale, which is still a buyer’s market, but the lowest since this time last year. The return to a better balanced market will bring back longer-term sustainability in Whatcom County.

Importance of Price
Of all the positive forces in the market, however, none is bigger than price. Where a home is well-priced, we are seeing it move in record time.  When the home is not well-priced, it languishes on the market months longer.  Even then, it sells only after reducing to the appropriate price.

Home sellers can save themselves a lot of headaches by pricing their home right, the first time.

Whatcom County Numbers By Community (year-to-date)

Here’s a year-to-date breakdown of the median price, average price, number of units sold and days on market for each area in Whatcom County:

Bellingham:  Median Price, $260,000 (down 7%); Average Price, $295,000 (down 3%); Units Sold, 662 (down 10%); DOM, 96 (down 3%)

Lynden:  Median Price, $266,000 (down 9.5%); Average Price, $281,000 (down 13.5%); Units Sold, 109 (down 26%); DOM, 115 (down 9.5%)

Blaine/Birch Bay:  Median Price, $221,000 (down 10.5%); Average Price, $266,000 (down, 3.5%); Units Sold, 187 (down 13.3%); DOM, 126 (up 15.5%)

Ferndale:  Median Price, $265,500 (down 8.5%); Average Price, $287,500 (down 7.5%); Units Sold, 188 (down 11%); DOM, 103 (down 3.5%)

Sudden Valley:  Median Price, $240,000 (down 10.8%); Average Price, $249,000 (down 9.8%); Units Sold, 106 (up 2%); DOM,  118 (up 9%)

Mount Baker:  Median Price, $130,000 (down 21%); Average Price, $152,000 (down, 17.8%); Units Sold, 80, (down, 20%); DOM, 93 (down 6%)

Nooksack Valley:  Median Price, $215,000 (down, 11.5%); Average Price, $231,000 (down, 16%); Units Sold, 67 (down, 16%); DOM, 82 (down 15.5%)

Local real estate numbers are now in for August. Here are a handful of stats and my analysis for the Whatcom County housing market in the month of August, which I’ve paired with month-to-month and year-to-year comparisons.

Active Listings, Pending Sales and Closed Sales
We’re seeing less listings on the market than we have in years past. Current local active residential listings are down by about 11% from the same period one year ago.

I recently commented on the trend of rising pending home sales on the national level, and we’re noticing that same trend here at home as well. Local pending sales numbers are up 14% for the month, and they are up 8% for the year over the same period last year.

However, not all of those pending sales are turning into closed sales. Closed sales are down 10% for the month and down 15% for the year, which may be attributed to a growing number of transactions missing their closing date deadline (I’ll talk about this more later).

The graph below shows the trends in the number of Whatcom County homes for sale, the number that have sold, and the number that are pending, from June 2008 to August 2009.

Median, Average Home Prices Down

Whatcom County’s year-to-date median home price has fallen 5.3% from last year. It now stands at $265,000, compared to $280,000 this time last year.

The average price of homes for sale in Whatcom County has also dropped from this time last year (down 2.5%), from $448,000 to $433,000. As you’ll notice, the average home price is significantly higher than the median home price, as average prices are skewed upward by the higher priced homes on the market.

The following graph shows the discrepancy between the average price of homes for sale and the average price of homes sold in Whatcom County, for the past 14 months.

Condos
Condominium pending sales continue a downward trend both for the month (down 23%) and the year (down 35%). Closed condo transactions also remain slower: down 50% for the month of August and down 50% year to date.

Local Price Reductions = Rising Affordability Levels
Fortunately for buyers, price reductions have put local housing affordability levels at their highest levels in decades. Add attractive interest rates and an $8,000 tax credit for first time home buyers, and what we get is a situation that is enticing buyers back into the market (as seen in the rising number of pending home sales, both on the national and local levels).

Common Transaction Delays and Disruptions

On the downside, many local transactions are missing their closing date. Last minute demands from lenders are common and final underwriting reviews are causing delays. Inexperienced appraisers are gumming up the works as well. For those of you who are planning to take advantage of the $8,000 first time homebuyer credit, plan ahead and allow for delays.

The Road Back to a Balanced Market
Our market will need a string of months of positive sales growth if we are to get back to a truly balanced market. That is because inventory levels still place us squarely in a buyer’s market, with a 10.1-month supply of homes for sale (meaning it would take about 10 months for our current inventory levels to sell, were no new listings to be introduced to the market).

Prices will continue to correct down until we are back in a balanced market, which is characterized by a four to six-month supply of homes. Fortunately, we have already seen evidence of local prices stabilizing in the last few months. And, with the amount of activity we’ve seen in the last three months, we may have reason to believe that a balanced market is not too far away.

Looking at the most recent local housing numbers, most numbers are moving in the right direction, with Bellingham neighborhoods coming to life and move-up buyers re-entering the market.

Recovering Market
The variable results we saw in July reflect what we’d typically expect from a recovering housing market—a few steps forward for some neighborhoods, a step back for others. Whereas comparisons to a year ago reflect some substantial gains, on a month to month basis, we’re probably going to experience some “spongy” results for a while.

Tax Credit Motivation
First time buyers are motivated by a looming deadline for the federal $8,000 tax credit, which is propelling activity. There seems to be a feeling of urgency to take advantage of this program before it goes away on November 30, 2009.

Pending Home Sales Stable
The Whatcom County housing market continues to show mixed signals, but the most important number, pending home sales, is trending in the right direction.

Pending sales are contracts that are accepted by a seller but have not yet closed. They represent the most current activity and show how active buyers are in the market. Nationally, the Pending Sale Index has increased for five consecutive months. Even though Whatcom County was about even from July 2009 to July 2008, the trend is positive. I expect the Pending Sales Index to continue rising over the next few months.

Inventory Levels Flat
While the local housing inventory levels have ebbed and flowed during the past year, recent numbers are pretty flat from this time last year. Currently, our market is at about 7.8 months of inventory (which is the current amount of inventory divided by the average monthly sales).

Closed Home Sales Down Slightly
Unfortunately, the number of closed home sales in July 2009 was down 3% from a year ago, logging 213 sales versus 220 in July of 2008. After June sales posted only the second consecutive month of year-over-year increase in about two years, it is disappointing to see fewer sales in July.

The difference in the performance of closed and pending sales is due primarily to the fact that many local sales are simply taking longer to close. Short sales, where the net proceeds to the seller will not cover the outstanding debt on the property, are taking 60 to 90 days to close, as the buyer and seller must wait for the bank to approve the sale.