The NEW, CHANGED Bellingham Real Estate Market
Quick: What are those 3 most important words in real estate again???
Location! Location! Location!
Am I right?
Those are right some of the time... but not at this time.
It is, on this day in late October, 2022, a new market.
Since this blog post began exactly two years ago, I've reported multiple times on consistent "up-and-to-the-right" categories of various data:
Average and median prices
Price Appreciation rates
Absorpotion rates
Rental rates
Average number of offers
Amount of sale price as a % of list price
Number of sales above $1M
New housing starts
Population growth
Out-of-State buyers
Number of cash buyers
And more.
That was then.We're in a new landscape now.
Let's start with, "What is currently happening?"
After all, if you're about to engage in ANY substantial endeavor, it would behoove you to first get a grip of what's going on in the arena you're about to enter.
Real estate in the market-wide perspective is all about numbers.
Your individual house, the one you're buying or selling, that's obviously highly personal and unique to your tastes, its condition, its location, sunlight, view, noise, and several other factors...
Those factors aren't graph-able; they're singular, subjective points.
But all individualized factors being equal, a house's general range of value, how long it's going to take to sell, how many buyers might fight over it, etc., those things are all driven by broad, generalized data that can fit on a graph.
Data about other current and recent sales in the neighborhood, the town, the market area.
Data about mortgage interest rates.
Data about supply and demand, employment, inflation, scarcity, vacancy rates.
Those add up to create and define the greater landscape that you will be operating in as a buyer or seller.
As we all knew would eventually happen, considering that no bull market has ever lasted forever, that landscape has now changed.
The data we track
At BNP, there are several key metrics that we track, analyze and discuss on a weekly basis.
This data is a 10,000-foot view of the local market for us.
Staying on top of these numbers sort of puts the ball on about the 50-yard line if we are called to do a careful market analysis on an individual property, be it for a buyer or a seller.
We track Active inventory
Active inventory is the "supply" side of the economic equation.
Let's use our hypothetical village of 100, and apples as the product.
If most of the 100 residents in our village want to buy an apple, and there are only half a dozen apples available to buy, the apple sellers can charge a lot -- and usually get it.
Well, it's common knowledge that the real estate apple cart has been lean on apples these past few years.
But that was then.
Now, the apple cart is seeing a growing number of apples available to buy.
Increased supply is a factor that leads to softening prices and generally slower sale times.
In the MLS graph below, we see the recent reversal of year-over-year Active inventory declines, changed now to an abrupt increase in supply.
This change has basically brought us back to 2018 levels for this time of year.
We track Pending percentage
The number of Pending sales reflects the "demand" side of supply & demand.
This means, of all the homes "listed" on the MLS, how many are actually Pending (under contract) with a buyer?
Hypothetically, if there were 162 homes on the market...
And 100 of those were Pending, on their way to a closed sale...
We would divide 100 by 162 and arrive at...
61.7%.
We would therefore have a Pending percentage that rounds to 62%.
Those were Bellingham's real numbers exactly ONE YEAR AGO, to the day.
Today, there are a total of 202 single family detached homes listed for sale in Bellingham (technically, "Area 860" by MLS standards).
And within those 202 listings, 57 are Pending, for a Pending percentage of 28%.County-wide, the Pending percentage is 29%.
For both of these areas, this is the first time we've seen Pending percentages dip into the 20's since we began weekly tracking of the numbers in October 2018.
County-wide, year over year, Active inventory has doubled, and Pending percentage has halved.
Below is our current heat-map for Bellingham, with green icons representing Active listings, and yellow representing Pending sales.
We track Median Price
Price is affected heavily by supply and demand, to be sure.
But price also heavily AFFECTS supply and demand.(In economics, this would mean that price is an endogenous (or dependent) variable).When both supply and prices are low and/or (relatively) affordable, buyers come out in droves.
That's what we saw as the economic stimulus began and insanely low interest rates were the norm.
In June of 2020, the median price for a 3 bed 2 bath in Bellingham was $469,000 and median sales went from "Just listed" to "Pending" in 6 days.
Demand increased.
In June of 2021, the median price had risen to $650,000 in that same 6 days.
Interest rates stayed low, demand increased even more.
In June of 2022, the median price in Bellingham hit a peak of $821,000 and still sales took a median of 6 days.
Then, finally, as inflation hit 40-year highs, the Federal Reserve increased the key interest rate, and the correction began to take hold.
As of this writing, all Bellingham sales in the past 60 days have had a median price of $662,000 and time on market has almost tripled to a median of 17 days.
Despite how incredibly hot the market was, how long it had been that way, and how recently we can look back and point to "5-day auctions" and sales six figures over list price, it is critical, as a buyer or seller, that you understand the vast implications of how this change, this new market, affects your plans.
Now, when we talk to buyers and sellers
It is now a new conversation.
Until recently, we delivered a certain type of talk at the start of our work with new clients.
If you think of the real estate market as being like a river, the talk at "put in" where we were about to start our journey sounded like this:
"The river is in full flood!"The water is high, and cold, and full of obstacles."Strap on all your safety gear, cinch it down tight, triple-check it, and stay ready.
"With some rapids, we're going to have to try 4, 5, 6 times or more to get through, but eventually we'll make it.
"I don't care if you've rafted 100 times in years past... this time is different!"
Now we set different expectations
The real estate river is not in flood anymore.
Sellers: Even though your friends got the E-ticket ride a year ago and sold for $100K over list with no contingencies...
Those conditions have mellowed, materially, and sales are not usually "unconditional" anymore.
Buyers: Even though a year ago your maximum budget of $3000/month could get you $715,000 in mortgage because interest rates were at or below 3%...Those rates are long gone.
That $3K monthly payment now gets you about $450K.
Let's be clear: It's not (at all) nuclear winter out there.
Currently 1 in every 3 Pending sales in Bellingham went under contract with a buyer in 10 days or less.
Of the 152 Bellingham closed sales in the past 60 days, 32 sold for more than list price, indicative of multiple buyers competing to get the house.
Bellingham's market is still very, very strong, and yet neither buyers nor sellers "hold all the cards" in a transaction.
It is, after nearly a decade of trending more and more towards a seller's market exclusively, showing signs of balance.
And as long as real estate is transacted, from the first inhabited caves to whatever the future of human shelter might look like, the market will always ultimately ebb and flow.
It's as natural as the tide.
