Real estate sales numbers in Whatcom County for 2006 have provided an excellent example of why one must look beyond the numbers to see what is actually happening in a market. Let’s use Bellingham as an example. 6% fewer homes sold in 2006 than in 2005. At the end of the year the number of homes under contract was down 5% and the number of homes for sale was up 35%. Those numbers are straightforward – now we get to the interesting one.
Despite these indicators of decreased demand, the average price of a Bellingham home that sold in 2006 was up 12% over 2005. Anyone who has been watching the sales of homes in Bellingham over the past year knows that this makes no sense. But numbers don’t lie, so what is happening out there
If we break the numbers down, the answer becomes clear: more homes are selling in higher price ranges, fewer homes are selling in lower price ranges, so when you lump them all together and average…the average is higher. This is not happening because homes are appreciating into higher price ranges – they aren’t. Average prices for 85% of the homes sold in Bellingham have been stagnant between 2005 and 2006. On the other hand, the average price for the top 15% has increased substantially – and this is the important part – because substantially more of them have sold. This does not mean that if a home sold for $500,000 at the beginning of 2006 it will sell for more now…it most likely won’t. It simply means that more expensive homes sold in 2006 than did the year before. What price range are we talking about Over $500,000.
So what do we see for 2007
• Continued high inventory, although not rising as quickly due to a slow down in new construction.
• Prices staying soft through the first half of the year, then firming after price adjustments are made and inventory is absorbed.
• Interest rates rising slightly, but probably staying below 7% for a 30 year fixed rate loan.
• The lower end of the market remaining relatively soft due to high inventory and prices that will still be high relative to local incomes.
We will be looking at the numbers again at the end of the 1st quarter, so stay tuned!