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A History Lesson - A Look to the Future…

Looking back over the past seven years - to the beginning of the boom in 2006, through the slump of 2008 to 2010, and now as the market begins to rebound – it is interesting to see how Whatcom County fared.  The table below shows the broad view.

Whatcom County Residential Sales – Full Year

 

2006

2013

% Change

Units Sold

540

410

-24.1%

Average Sale Price

$325,676

$268,477

-17.7%

Median Sale Price

$283,485

$246,000

-13%

  The totals show the change, but they don’t reflect the journey.  Let’s take a look backward with a focus on the first quarters of the past 8 years. 
            In 2006, every area in the county was strong in number of sales and prices.
            In 2007, some soft spots were showing up.  Bellingham and Sudden Valley were still strong.  Ferndale sales were flat, but prices were holding, but the rest of the county was starting to slide, with fewer sales and lower prices.
            By 2008, sales were down everywhere except Ferndale, Lynden & Nooksack, and prices in most areas were dropping.
            In 2009, sales were down anywhere from 24% to 52% (33% for the county as a whole), and prices were dropping everywhere…except in Birch Bay/Blaine.
            By 2010, the sales stimulated by tax credits kicked in, and first quarter sales were higher from 6% to 83% (29% for the county as a whole), although prices continued to drop.
            In 2011’s first quarter, Bellingham was the only market with more sales than in 2010 – every other area dropped, with overall county sales coming in 18% below 2010. For the most part, prices continued to drop, although not quite as much.  Bellingham was the exception, with prices increasing slightly.
            2012 started with sales up strongly in all areas except Bellingham, and prices down everywhere except Sudden Valley and Birch Bay/Blaine.
            2013’s first quarter has been mixed, with sales up strongly in Bellingham (21%) and up 8.5% overall in the county.  Pricing has been up a bit, particularly in the median, indicating that we are getting more sales at higher price points.
                                       
This is also seen in the table below, which shows the distribution of sales by price range in Bellingham over the first quarters of 2012 and 2013. 

1st Quarter 2012 Price Ranges in $1000s

Total Sales Volume

Total Units Sold

Average Sales Price

% of Market

Changes in 1st Quarter Year to Year Distribution of Residential Sales in Bellingham

 

 

 

 

 

<300

$20,565,250

98

$209,849

66.2%

300 to <500

$15,124,400

39

$387,805

26.4%

>500

$5,103,000

9

$567,000

6.1%

>750

$2,705,000

2

$1,352,500

1.4%

1st Quarter 2013 Price Ranges in $1000s

Total Sales Volume

Total Units Sold

Average Sales Price

% of Market

Unit Change

Average Price Change

<300

$25,955,194

115

$225,697

65.3%

17.3%

7.6%

300 to <500

$16,966,049

45

$377,023

25.6%

15.4%

-2.8%

>500

$8,317,400

14

$594,100

8.0%

55.6%

4.8%

>750

$1,972,500

2

$986,250

1.1%

0.0%

-27.1%

This is the history – what is the future?  We can be fairly sure it is going to change in fits and starts, based on the past and the continuing uncertainly in both politics and the economy.  The number of homes sold and sale prices bounce up and down constantly, so one month it looks like everything is booming and the next it looks like the market is taking a nosedive.  That’s why looking at the history is so important…it tends to even out the bounces.  For predicting the future, we have found one of the best indicators to be changes in inventory relative to homes under contract.  And that is where the big news is right now. 

To demonstrate:  At the beginning of 2007, inventory levels in Bellingham were rising, but pending sales had started to drop.  By the end of 2007, inventory levels were down 9%, but pending sales were down 87% from the prior year.  Inventory continued to drop until 2010, when it rose for a few months, but by the end of the year it was dropping again, and it is continuing to drop.  Mid March of 2010 had 516 homes for sale in Bellingham.  The same week this year offered 295 homes for sale. 

On the other hand, pending sales have increased almost every month since December of 2010 – usually by double digits.       

I expect the housing market in Whatcom County is going to be very active and growing in 2013.  This is good news in many respects, but it also brings some challenges.

  • Greater demand, fueled by continuing low interest rates, will put upward pressure on prices.  While inventory should increase somewhat as prices strengthen, there are still many homeowners who cannot afford to sell due to their debt level, so those homes won’t come into the inventory pool.  The number of short sales and bank owned properties has been declining.  While we are seeing more new construction, spec construction financing for builders is still tight and tends to limit the number of small builders who can contribute to the new home inventory.
  • With greater demand, prices will start to float up and make it harder for buyers to find what they want at a price they can afford.
  • The largest immediate concern of higher prices is the issue of appraisals.  Appraisers can only use sales to establish a home’s value for the purpose of a loan.  If all the sales are subject to financing and all the financing is subject to past sales and if the past sales prices do not reflect the current market…we get low appraisals.  What breaks the cycle?  Some cash sales, some owner financing sales, some buyers bringing higher down payments to the transaction, very gradual price increases.  And the reality is that some sales will be lost because of a low appraisal.

I’m going to repeat my advice for buyers and sellers in this market:  Be Realistic.

  • Sellers, you still need to have the best house available if you want to sell.  The houses that sell look the best, smell the best, are in the best locations and are priced to beat the competition.  Starting with a higher price gets you less money in the long run.
Buyers, do your homework so when you find the best house, you won’t need to think about it, because you if you do, you will probably lose it.  Have your financing set up before you even start to look; sellers with choices don’t take offers from unqualified buyers.  Face the fact that if it is the best house in the market, you will probably need to pay full price or very close thereto.    

www.JohnsonTeamRealEstate.com also includes a constantly updated list of newly listed properties and a list of properties being offered as short sales & foreclosures (REOs), as well as the entire listing database of the Northwest Multiple Listing Service, fully searchable to your specifications.