Hot Houses!
Low Interest Rates, Inventory Spurring Whatcom County’s Residential Market

 by Heidi Henken

 

Outside, at this writing, it’s a typical Bellingham day: overcast and a little bit drizzly. But, if the weather says one thing, the real-estate market says another. Drizzle or not, it’s hot out there.

Low interest rates, our beautiful rain-fed scenery, accessibility of the Internet and prices that buyers from places such as Southern California find irresistible are some of the factors local experts say are combining to create a buying boom in Whatcom County that’s so intense it could almost be called a frenzy.

A few years ago, real estate became so hot in the Seattle area that sellers were fielding multiple offers and there were bidding wars for certain properties. This trend has moved northward.

“A phenomenon we’re experiencing on a daily basis is multiple offers,” says Mike Kent, a Windermere agent and vice president of the Whatcom County Association of Realtors. “That’s a new territory for us in Whatcom County. It’s not unusual, if the house is priced competitively, to have three or four offers within the first few weeks.” And, he adds, agents also see some bidding wars as buyers “are beginning to compete for properties.”

Christy Austin, branch manager for Pacific Republic Mortgage’s Bellingham office, shares Kent’s opinion.

“I’m hearing that there are double and triple offers on homes,” she notes. “That tells me, one, that there are more buyers out there than sellers and two, there are a lot of people buying at this time.”

 

Key factors

Low interest rates on home mortages are driving the boom, Austin says. As of this writing, 30-year loan rates were “hovering between 6.625 and 6.75 (percent), which is fantastic,” she notes

“We’re still under 7 percent, and that’s fantastic; anything under 8 is fantastic,” Austin adds. “The interest rate, combined with the availability of homes and buyers, is keeping our market going.”

Inventory is another factor, says Kent. Not only are there more buyers than sellers, there are fewer homes for sale this spring. Last November, during what the local real estate profession considers the “off season” with fewer listings, there were 495 homes for sale in Whatcom County. In the second week of April, during “peak season” here, there were 393 homes listed.

“Those numbers should be reversed in a normal cycle,” Kent explains.

Interestingly, even with multiple offers and short inventory, the average time a home has spent on the market in the same time period hasn’t changed much. In fact it was slightly longer, 95 days in April, compared to 90 days in November. But, Kent adds, the median price of a home increased from $188,000 in November to $214,900 in April. That’s a jump of nearly $27,000 in the last six months.

“Sales rose 10 percent above the 2000 level,” says Julia Hansen, an economics professor at Western Washington University and editor of the annual Whatcom County Real Estate Research Report. “Price appreciation picked up a bit as well. In recent years, the median price of a home in Whatcom County has been increasing by about 3 to 3.5 percent per year. In 2001, however, the median price rose by 4.5 percent.”

In Bellingham, the median price increase was even steeper, she reports, rising by 5.4 percent.

The Whatcom County Real Estate Research Report tracks and analyzes figures and trends in local real-estate sales on an annual basis. While the 2001 report wasn’t completed at press time, single-family residential sales figures in 2001 broke the previous record for sales set in 1989, according to Hansen.

While the present market may be booming, Hansen also notes that the 2001 jump is still appreciably less than the housing boom of the late 1980s and early 1990s. “Sales rose by 36 percent in 1988 and another 19 percent in 1989, leading to four consecutive years of double-digit price appreciation,” she reports.

 

Concerns about affordability

Troy Muljat, of the Muljat Group real estate firm in Bellingham, is president of the Whatcom County Association of Realtors. He agrees that the residential market is “probably as strong as it’s been in about 10 years.” In particular, he notes, the “new construction market is very solid.”

But, in Muljat’s view, that’s a double-edged sword. There’s an “imbalance of inventory” in the new construction market, Muljat says, because there are very few lots for homes. “We’re not seeing new construction permits where they should be,” Muljat remarks.

Muljat says he’s concerned that people wanting to buy homes in lower price ranges are being priced out of the market. “It’s a good market,” he explains, “but with values increasing as much as they have, I don’t want the average home to become outside the grasp of the average home buyer.”

Kent agrees that there’s “an increasingly short supply” of affordable homes. Because of the reduction in inventory, “Buyer’s agents are having an increasingly challenging time finding the right house,” he notes. At the same time, Kent also observes, “The more expensive homes are really desirable in the market right now.”

It’s a matter of relativity. High-priced homes for Whatcom County’s market can look like bargains to buyers from California, or even the Seattle area, Kent observes.

“They’re downsizing into what to us is high end,” he says. “To them, it’s like the gold rush.” These out-of-county buyers “believe values (here) are going to rise,” Kent adds.

He also believes the Internet is helping to sell newcomers to Whatcom County. For one thing, people with jobs “wired to the Internet” can live anywhere they want, Kent notes. For another, real-estate Web sites, in particular those showing dramatic water-view vistas, are selling potential newcomers on the area in a way that wasn’t possible before cyberspace, he says.

Kent reports his Web site had 5,204 visitors from 10 different countries in just one month. If you multiply that by “400 or 500 agents” who he estimates have sites showing Whatcom County real estate, it’s “no wonder we’re growing.”

 

Solid commercial market

Commercial real estate may not be experiencing the same sudden boom as the residential market, but those who deal in the commercial field say it’s currently healthy. Commercial figures for the 2001 Whatcom County Real Estate Research Report were still to be compiled and analyzed at press time.

A pair of local experts, Richard Eggemeyer of Coldwell Banker Miller Arnason and Daryl McClelland of Windermere, both say they’ve been kept busy by the commercial market.

“I don’t know if my experience is reflective of the entire market,” Eggemeyer cautions. “I’ve been extremely busy; much busier than I had anticipated given the economic climate that we’re operating in.”

“The markets are going along. All of us are pretty busy,” McClelland agrees. He is a member of a group of 20 commercial agents who meet monthly to network and compare notes.

While Eggemeyer works with a number of out-of-area clients, most of the commercial activity he sees is coming from local businesses expanding operations. Eggemeyer works with the retail, industrial manufacturing and warehouse sectors of the market. Of those, he says, the industrial manufacturing and warehousing are the strongest sectors of the commercial market; the softest is office and retail.

How long is the hot residential market going to continue? That depends. Kent says the peak season typically runs “the next 60 to 90 days (figured from early April).” Austin believes it will continue through spring, but doubts that the rush will continue into the summer.

“The Federal Reserve Board is meeting on May 7 and again in late June,” Austin reports. “The common thinking is that they’ll probably raise the interest rates at that time. How much is the question.”