As of March 2018, home prices are up 11% over the last year, and the market continues to be as strong as ever. The average single family home price is up to $345,000 in Whatcom County, and $397,000 in Bellingham.
And the trend line continues to go in the direction of appreciation & a strong market. You can see in the chart above, interest in home buying is trending towards 2006 levels (nationally).
When you look at Whatcom County’s home sales, the market keeps getting hotter.
47% of homes sold in first 30 days in February 2016.
56% of homes sold in first 30 days in February 2017
63% of homes sold in first 30 days in February 2018
I get asked a lot if this could be another bubble, similar to how the market was at the peak of the last hot market (2006) before the market collapsed. The answer is no, at least not yet-in our market.
Here is some key differences between the last hot market and this one in Whatcom County.
Population Growth in 2006 in Whatcom County: +4,006 (up to 192,843 at end of 2007).
New Construction Home & Condo Sales in 2006 in Whatcom County: +986.
Population Growth in 2017 +5,130 (population up to 221,404 at end of 2017)
New Construction Home & Condo Sales in last 12 months: +274.
So in the last year we had a higher rate of growth in the county and more people moving here, yet new construction sales are still very low. 274 new homes and condos for 5,130 new residents does not get it done. 5,130 people is approximately 2,500 households. Say 60% are buying and not renting,that means there was demand to meet 1,500 new homes and condo sales. We had 274.
So the lack of supply and growing demand, is real evidence that there is no bubble to burst (locally), because the lack of inventory is going to remain an issue.
Another factor is financing:
In 2006, 10% of Whatcom County home sales were cash transactions. In 2017, 21% were cash transactions.
Even first time buyers today are stronger. They put an average of 5% down according to data on Washington state home buyers in 2017. Compared to 2% down in 2006.
So you have twice as many sales that are cash, buyers are saving more and putting more money down, and the qualifications to get a loan are much more stringent than they were in the last hot market.
Sub prime loans accounted for as much as 20% of the home sales in in 2006 and 2007 before the crash in 2008. As of now, sub prime is just now starting to re-emerge, but it has been a total non-factor over the last 6 years.
With that said, lenders are beginning to offer more sub-prime programs, and advertise for home equity line deals…so this is what can become a problem over time moving forward. Greed and too much debt are often the demise of a strong market.
But in summary:
-As supply and demand goes: New construction starts are way down compared to the last hot market, yet the population is growing at a faster rate in Whatcom County. New construction has been down for over 6 years as the population has been growing at a steady pace.
-As for local debt and financing goes: There is more cash and stronger borrowing practices.
So all of this makes for a market that is not only “hot”, but one that has built a foundation that can last.
With that all said, every hot market historically has a correction at some point…so when a national downturn hits, it’s going to effect everyone. But Bellingham & the Northwest region in general should continue to appreciate over the long term, primarily based on population growth and continued demand & lack of new construction to meet that demand.