To begin, I want to give you a snapshot of overall market conditions right now.

The last few weeks have been very interesting, what with all the news regarding the home loan market.  At this point the FED has stepped in to keep money available, but the skittishness of investors will keep everything on edge for a while.  The massive amount of home loans due to reach their first interest rate adjustment in October is just the beginning of hundreds of billions of dollars in loans on which the rates will adjust over the next year.  How consumers handle the increased payments and whether financing markets have money available for those who need to restructure debt will have a huge impact on the health of the housing market.  So how does this seem to be impacting our local market?  Let me show you a snapshot.

We track the number of homes for sale and with sales pending every week, and have done so for several years.  Since Bellingham is the largest market (and therefore the most stable), I use it as my canary in the mine.  Following are the numbers over the past 3 months.

What this shows me is that buyers are wary - value is very important to them.  Sellers may be holding off a bit on putting their homes on the market.  But, houses are still selling, and since that is our focus, what do we know about those houses?

First, we know that generally speaking a house is most likely to sell if it is priced below $300,000, although $350,000 to $399,000 has an above average likelihood and the $800,000 to $850,000 range isn’t bad at all. $550,000 to $700,000 is very slow.

We know that of those houses which sold in Bellingham over the past 30 days, 31% of them sold within the first 30 days of their listing date and they sold at 99.6% of list price.  As the time on market increased, the % of sold price to original list price declined.  Even in the slowest sector of the market, 30% sold in the first 30 days at 99.1% of list price.

So what is the bottom line?  Fewer buyers are committing to buy and initial pricing is critical.  Time is not a seller’s friend.  On the other hand, if a home is a good value, a buyer had better make a decision and pay the price, or they will be left to choose from those that are not as good. In a market like this, people buy for 1 of 2 reasons.  Either they walk into a house and fall in love, or they walk into a house and think, “This will work, and if I don’t buy it, someone else will.”  As a seller, you have very little control over the first reaction, but you have total control over the second.  You make the choice.

This year seems to be shaping up as a stable period in the larger market areas but softness continues in most of the county.Bellingham sales were down just two units from April 2006 and Ferndale was up three. Year to date, Ferndale was up one unit sale over 2006 while Bellingham sales increased by 14, or 4.4 percent, indicating that these markets are holding their own against last year.

Here are the data charts for Bellingham and Whatcom County

The picture is not so rosy in the rest of the county, with every other area down from April 2006 and year to date. Pending sales as of the end of April indicate that this imbalance will probably continue through May. Bellingham is ahead of last year, Ferndale is slightly off and Lynden is looking a bit stronger. However, Sudden Valley and Birch Bay pending numbers seem to be off significantly from last year.

Inventory levels in Bellingham are still about 20 percent higher than a year ago, but average prices of the homes that sold remain higher than last year – 3.8 percent in Bellingham and 5 percent for the county as a whole.

Average days on market before a sale are up 42 percent over last year for the county as a whole, but this is a good example of how “averages” can mask what is really happening in a market. Of the homes that have sold in Bellingham so far in 2007, 27 percent sold in the first 30 days after being listed for sale, and they sold at 99 percent of list price (typically the original list price). On the other hand, 33 percent of the sales occurred more than 120 days after being listed for sale, and they sold at 93 percent of list price (which had typically been reduced at least once). My conclusion? It pays to price property right in the first place.

On Tuesday Zillow released their quarter 1 report for 2007 home values. Amongst all the numbers was a big headline for our area: Bellingham was ranked in their top 5 metropolitan areas for price appreciation. We placed 4th with 11.7% appreciation after Corvallis, OR, Grand Junction, CO, and Seattle.

This information came as a bit of a shock to me. I have tracked the real estate numbers for this area for years, and while I saw an increase in 2007, it wasn’t close to 11.7%. When I looked more closely, I saw why, and I also saw an excellent example of why we need to ask questions about the source of statistics before deciding how meaningful it is.

Zillow’s sample included 3 bedroom, 2 bath homes of 1500 square feet. Even allowing for a bit of variation (1.75 as well as 2 bathrooms, 1450-1550 square feet of floor space), only 20 of the 518 homes sold in Whatcom County through the MLS during the first quarter of this year fit that criteria.  That is less than 4% of the homes sold. Common sense would seem to dictate that trying to generalize results based on a sample of that size is ludicrous.

I am just finishing up April’s statistics and will post them later today. We also keep an archive of our reports on our website. Feel free to read them and draw your own conclusions.

I just finished running all the numbers for March and here is what we’ve got.

2007, through the first quarter, is still holding its own against activity levels and prices in 2006, although this is primarily due to strong January sales. The number of units sold in March 2007 relative to March 2006 declined slightly in every area except Birch Bay/Blaine. The number of residential units sold in Bellingham is up 5.6% over 1st quarter 2006, even though March sales were down 3.2%. Average Bellingham prices increased by 3.1% in the 1st quarter while Whatcom County as a whole ticked up 4.3%, driven by strong increases in both Ferndale and Sudden Valley.

Inventory levels are still much higher (555 units at the end of March 2007 compared with 444 at the same time in 2006), but the number of homes with pending sales have risen to near 2006 levels.

The biggest change over last year is days on market - the average days on market for properties in Whatcom County is up 50% over last year.

The surge in sales which is typical of March definitely occurred, although it was weaker than 2006. However, the strong pending sales we are seeing may bode well for the April and May numbers. Stay tuned, and we will keep you posted.

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The Bellingham Herald is reported yesterday that Global Insight Inc and National City Corp have rated Bellingham and Whatcom County as one of the most overvalued housing markets in the US. They have estimated that our area is 45% overvalued, which is the highest of any metro area in Washington. Furthermore, the authors of the study consider any market over 35% to be extremely overvalued and prime for a market correction.

Those numbers are enough to make anyone wonder what is going on! First of all, let’s clarify that just because the study says that an area is overvalued by a certain percentage, that does not mean that they think prices will drop by those percentages. So homeowners - you can all breathe your collective sigh of relief now.

So what is this study really looking at? They used a variety of data to compile thier numbers including house prices, household incomes, population densities and historical changes in the area over time. What this gives us is more of an affordabilty indicator than market value indicator.

Pricing levels eventually do collapse as fewer and fewer people can afford to buy, but it seems to me that the wild card is the income level (and equity transfer) of incoming population. We have definitely seen a stronger upper end market over the past year, even as overall prices have softened. This also pulls up our average and median prices and tends to skew the “affordability” perception. It almost seems as though a market should be broken up into segments to more accurately determine if it is overvalued or affordable.

So is Bellingham real estate overvalued in my perception?  No.  My standard of measurement is whether people continue to buy.  In the first two months of this year, both the number of properties sold and, more importantly, the number of net pending sales posted, was slightly higher than a year ago.  Average and median prices for the market as a whole are holding their own or up from last year.  So right now, I would say that we are doing just fine, but we need to keep watching the numbers.  �

This year, through February, is comparing favorably to activity levels and prices in 2006.

The number of residential units sold in Bellingham is up 10.7 percent over 2006 and average prices increased by 4.4 percent over the first 2 months of 2006. However, these increases were driven by strong gains in January. February 2007 was actually down 9.2 percent in number of units sold and 3.6 percent in average sold price from February 2006.

Inventory levels are still much higher (507 units at the end of February 2007 compared with 418 at the same time in 2006) and the number of homes with pending sales are down considerably (193 compared to 226 in 2006). Whatcom County posted a gain of 5.1 percent in average sold price in the first 2 months, driven primarily by strong pricing in Ferndale and Sudden Valley. Units sold in the county were off a bit (1.9 percent).

If you would like information about any specific areas, feel free to call us at (360) 527-8766 or email me at lylene@johnsonteamrealestate.com and we will get right back to you. 

To see statistics for all areas of the county, please visit Market News on our website.

The “new” requirements for inspection of septic systems have stimulated some very strong reactions from the local population.  I have lived in homes with septic systems most of my life, I have had a septic system fail, and in my role as a Realtor I have seen other people’s systems fail inspection.  This usually occurs after I have asked a property owner when they last had their system inspected and have been told that it has been working fine, so they have never had it inspected.  If you aren’t having regular inspections, you won’t know the system has a problem until it has failed, and replacement must be to today’s standards (read expensive).

Many of the recent comments I have seen regarding these regulations reveal some misunderstandings that should be addressed.  First, most septic services are certified to inspect your system, and they will do it as part of the pumping.  For some time now, when a septic tank is pumped, the pumper has been required to send a form with the results to the county health department.  Personally, I prefer to have the inspection portion done by the health department because their standard inspection includes a dye test as well as checking the flow, baffles and solids level in the tank. 

Second, there has long been a requirement on the books for regular pumping of septic tanks, but the county has never had the staff to enforce this requirement.  The new regulations take a step toward enforcement by requiring an inspection certificate as part of every sale and puts the responsibility of confirming that certificate on the escrow company.  Newer, more complex, systems approved over the past few years actually require that the owner have a signed contract with an inspection company for regular inspections.

In short, most of these regulations are not particularly new and different - they have been on the books in some form for some time.  What is different is that the county (spurred by the state) is trying to come up with some enforcement methods.

As someone who has experienced the good, the bad and the ugly of septic systems, I have our system checked faithfully.  It is both unpleasant and expensive when a septic system fails, not to mention the health issues that can arise. Bottom line, these regulations are common sense, and unfortunately, based on my observations of people and their septic systems, sometimes it does need to be legislated.

A long-time method of helping cash short buyers buy homes has been to have a seller pay for all or part of the buyer’s closing costs.  If a seller isn’t willing to discount the price, the purchase price is often increased by the amount of the closing costs.  This practice has been coming under fire in recent years, apparently due to flagrant abuses of the concept.  In some cases prices have been raised substantially and cash kicked back to the buyer with the collusion of agents and appraisers.   The rule of thumb that has developed amoung reputable real estate practitioners is that all movements of money must show up on the HUD-1 (the settlement statement done by the escrow officer that shows all funds into and out of a transaction).

That standard is now being called into question by a particular apppraiser and educator in the region, but there continues to be support for it in legal circles.  This practice, properly disclosed, has been a critical tool enabling many people to buy homes, so I think it is essential that information disseminated by either point of view is accurate.  Today I received a link to a website that reports the federal conviction of a real estate practitioner for fraud in this regard.  Fortunately it includes a link to the indictment, which in my reading presents the facts differently than the article on the website is reporting.  I have the distinct feeling that the reporting is a case of trying to bend the facts to fit the writer’s bias, which leads me to discount everything the site reports.   If the facts do not support his conclusions, his conclusions will be ignored - and if that is consistently the case, the conclusions will still be ignored if the facts eventually are right.  I would urge the owner of the site to report the facts - because we need to know them.  They will speak for themselves.

We thought it might be fun to share “snow days” photos - the last time I remember a snow like this was about 10 years ago!  If you would like to look at our photos, go to www.homedebut.com/317901.  If you would like to add yours to the tour, send them to Lylene@JohnsonTeamRealEstate.com and I’ll try to get them up (Nickie is the one who is good at this, but she can’t get to the office right now…I wonder why?).  Give me a caption and let me know where they were taken - then we can all send the link to our out-of-town family and friends.

I’m a numbers person. I love to gather the statistics, compare data and look at percentages. A problem with numbers is that they can be combined in so many different ways to show so many different things. Another problem is that they are one-dimensional – the result rather than the process. Trying to get a handle on Whatcom County’s current real-estate market is difficult because the true picture involves the process as well as the numbers. 

To summarize what is going on right now:

• The number of houses sold in Whatcom County during the first nine months of 2006 was down anywhere from 8-28 percent, depending on the area.
• Average prices are up 8.5 percent over last year in Whatcom County as a whole and 6.3 percent in Bellingham.
• From second quarter to third quarter this year, Whatcom County averages are up only 0.4 percent and Bellingham is up only 1.7 percent.
• My prediction is that we will probably see a 2005 to 2006 average price increase of 5 percent or less overall. Yes, that means the fourth quarter will continue to slow.

This does not mean that a house that sold a year ago will sell for 5 percent more – in fact, it may sell for less. Averages are the aggregate and reflect only those homes which have sold; right now, only the best are selling.

The property has to be special in multiple ways – condition, location, amenities and price. If it is, it may sell quickly. If it isn’t, it won’t. Just having a really nice house isn’t enough – there are simply too many really nice houses available right now.

Bottom line: It is a great time to buy and a challenging time to sell. Whether buying or selling, it has never been more important to know the market. How you respond will depend on your individual needs.

The good news for sellers who want to move up is that you can give someone a good buy on your house because you can get a good buy on a new one. The good news for current homeowners who don’t want to move is that, like the stock market, your gains or losses are only on paper until you sell. The good news for investors who want to buy is that there are some good values available.  The other news for investors who have to sell is that you may need to get creative if you bought recently.