Why the Bellingham Real Estate Market is Slowing

In working with buyers and sellers of real estate, a big part of our responsibility in the beginning and throughout our time with a client is properly setting and managing expectations.

It had become the new normal to explain the "5-day auction" to a seller."If you choose this sale process, we will first work with you to optimize your property inside and out, have it staged, photographed, assemble all the marketing, and price it somewhat aggressively...""We'll then hit the market on X date, give buyers time to travel from afar, host a gaggle of showings, host an open house if it's appropriate, and on Y date we'll review offers."

The generally predictable results of this strategy were sale prices often many digits above list price, with few if any contingencies, many disappointed buyers who lost the bidding war, and double-digit annual appreciation levels.

Not every seller wanted the auction approach; some wanted to price for a more traditional, "We'll wait for the one buyer who will pay our price" listing.

But overall, lots of buyer competition, multiple offers, and escalation over list price was the norm.

That very much still exists in some cases, but it is no longer what we emphasize when setting seller expectations.

A major reason for that is the increased interest rates.

Let me offer up a case study:

A buyer comes to us, having been pre-approved for a mortgage with a $3000/month principal and interest payment.

They also have $100,000 for a down payment.

When rates were 3% that $3K/month payment qualified them to borrow $711,000 on top of their down payment.

When their dream house hit the market at $650,000 they could offer $50K, $100K, or even up to $161,000 OVER list price, and still be within their $3000/month budget.

Competition was BRUTAL among buyers, and prices soared.

Then, recently, in an effort to cool down the national 8%+ inflation, interest rates began to rise and have now topped 6%.Our buyer from before, who is still shopping, can still afford $3000/month... and still has that $100K down payment...But with a 6% interest rate, their maximum loan amount is now $500,000.The amount they can borrow has declined by 30%.They now can't escalate over the $650K list price on their dream house.

Heck, they're $50K short of even offering list price.

Make no mistake: The US economy *desperately* needed this to happen.

If that $650K house continued to appreciate at Bellingham's market-wide 2021 rate of 20.2%......in just 5 more years it would be priced over $1,600,000.

LET ME BE CAREFUL TO ADD THIS:

Inventory is still incredibly low.

Prices are still incredibly high.

Bellingham's housing crisis is still incredibly real.And the market has -- and will continue to -- shift, as long as buying and selling property occurs.

If you want to talk about it, and analyze your own home's current place in the market, just reach out.

If you're someone who like simple visuals, here's Grace's infographic version of the story above: