Prior to the start of the beginning of the run-up in early 2002, the average selling price of homes in North Kitsap was increasing at an annual rate of about 2.7 percent (shown in green in the graph below). Between early 2002 and early 2009 there was a sharp rise and a similarly sharp decline in the average selling price. Then, beginning in early 2009, prices began to stabilize. Currently, the average selling price is trending downward at a modest 1 percent annual decrease (shown in blue in the graph below). In 2008, I speculated that the lower limit for the average sale price might be the historical trend line (green) in effect prior to 2002. The convergence of the current average selling price trend line (blue) and the historical trend line (green) seems to support this theory. If the theory continues to hold, price declines should moderate even further, or halt altogether in 2011. Based on this analysis, resumption of an upward trend in average selling prices could still be one to two years out.

The pre-2009 pattern for South East Jefferson County (SEJ) is similar to North Kitsap, with a shorter and sharper rise, and a decline that started sooner.  The interesting difference is that the average selling price reached the historical trend line (shown in green in the graph below) more quickly, and then in early 2009 set an upward trend (blue) similar to the SEJ historical trend. If the theory continues to hold, in 2011 the upward trend should moderate to a rate more similar to the historical trend.

The Bainbridge Island (BI) pattern for pre 2009 is also similar to the other two areas, but the changes are more abrupt, including a average selling price decline rate of nearly 25 percent following the peak . As in the other two areas I follow, the price declines began to moderate, but unlike the other areas, the decline trend (shown in blue in the graph below) is still substantial at an annual rate of over 8 percent. If the theory holds for BI, we could see the price declines moderate significantly or stop in 2011 as the blue and green lines converge, and possibly even see the beginnings of an upward trend late in 2011 or early 2012.

 
In summary, these graphs suggest we are at or near the bottom for the average selling price of homes in North Kitsap, South East Jefferson County and Bainbridge Island. The only area that has any meaningful downward trend in prices is Bainbridge, and the graph suggests that may be ending soon. For buyers, the time to act is here. For sellers, big yearly gains in value are probably not going to happen any time soon, but more sustainable growth in prices may not be too far away.

When looking at these graphs, consider the annual increase and decrease figures in the graphs to be approximations only, useful primarily for comparison between time periods. The exact value for each is affected by the points chosen for the start and stop of each period.

Also, any attempt to predict the future, especially by purely mechanical methods such as the one described here, run the risk of being thrown off by unexpected events. While the economic news is currently mildly optimistic, a change in the outlook could change the market forces that propel the average selling prices up or down and significantly alter the outcomes I've outlined.