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!
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