Whether the events of the past year are deemed good or bad for the consumer will be seen through the filter of the glass half empty/half full perspective.
The runaway price increases that we saw in 2004 & 2005 have ended, meaning that this year’s buyers have not seen their equity levels shooting up, but more buyers have the opportunity to buy a home. You can’t find a 3.5% ARM any more, meaning that a buyer can’t qualify for as much house as before, but long terms rates are still very low, so that buyers should be able to continue to make the payments 3 years from now. More houses are available and are taking longer to sell, meaning that buyers have choices and the opportunity to do critical things like inspections. Sales are still happening, but the balance of power in a transaction has evened out considerably between buyer and seller.
Everyone knew that the hot market was not sustainable, but now that it is adjusting, fear seems to reign. We are not seeing a bust – we are seeing reality reasserting itself. So what are the numbers of reality Year to year changes – 2006 to 2007 – show the number of units sold in Bellingham down 1.8%, average sold price up 2.2% and median sold price up 3.1%. Whatcom County numbers for the same period show the number of units sold down 4.7%, average sold price up 1.7% and median sold price up 2%. What is perhaps more meaningful at this point, however, are the 4th quarter numbers – 2006 to 2007. They show number of units sold in Bellingham down 16.8%, average sold price down 3.3% and median sold price down 2.5%. Whatcom County has followed suit with the number of units sold down 14.8%, average sold price down 1.4% and median sold price down .7%.
Areas hardest hit in the county were Sudden Valley and Birch Bay/Blaine, which saw the number of units sold fall by 35.7% and 21.5% over 4th quarter sales in 2006.
So why is this happening – beyond the obvious factor of the market being extremely overheated The turning point was actually the middle of August, when problems in residential financing became a national issue. Continuing issues create tighter credit requirements that cut some buyers out of the market entirely, but they have also had a tremendous psychological impact. Investors in single family homes have largely withdrawn from the market, new construction projects in the pipeline have continued to add inventory and many people who want a home are nervous about paying too much. It all adds up to a pause in the market.
So what is the outlook Pending sales as of the middle of December were once again down substantially from 2007, indicating that closed sales in January will be down unless there is a major buying push at the first of the month. On the longer term, however, I see the market stabilizing over the next year. On a national level, public & private moves to provide a safety net for consumers in danger of foreclosure should temper that impact a bit. While foreclosure rates in Whatcom County have remained low, the psychological impact of the federal numbers has certainly been felt. On the local level, the number of houses for sale has been declining over the past 3 months at a faster rate than is usual for the 4th quarter. If this trend holds, it will help to keep prices stable. Rents seem to be increasing. Combined with somewhat softer (or at least stable) prices, this will make residential real estate more appealing as both an investment and a home. The underlying reasons why people live here have not changed – the quality of life is still wonderful and we still have people coming to town. The quieter market may make it possible for them to buy.
If you would like information about any specific areas, feel free to call us at (360) 527-8766 or email Lylene and we will get right back to you.