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Investors in single family homes have largely withdrawn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.
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