We, the real estate brokers, noticed it right away when the market shifted a few weeks ago. Bellingham, almost overnight, went from being a steaming hot real estate market, to not. I think most real estate brokers were surprised, as I was, how quickly the cool down happened. What does this mean for Bellingham home owners, and especially buyers and sellers, hoping to enter the market in the coming months? Below are my thoughts on what this change in the market really means.
Is there a Bubble, and if so is it about to POP?
I have been asked this question more times than I can count in the last few weeks. With interest rates for mortgages above 5% for the first time in years, and the current rate of inflation, buying a home is not as easy as it was just a few short months ago. Does this mean that we are over-valued and inflated? Did this happen due to the low interest rates and the competition we have had over the last few years? Will this be like it was in 2008? In 2008 the bottom fell out of the market and many were left with homes that were upside down. (By upside down I mean that people owed more on their mortgages than the property’s market value was worth).
First I must say, I don’t have a crystal ball and I just don’t know. I didn’t predict the crash of 2008 and there were lots of telltale signs that we just don’t have in today’s market. People are not getting 100% loans for their purchases and paying for those homes with variable interest loans. People have equity in their new home purchases because most loans I see are putting down at least 10% of their purchase price. But, I also just don’t see the Bellingham market coming down in market value any time soon.
What’s going to happen in Market moving forward?
Again, I don’t have a crystal ball, so these are just my educated guesses. What I imagine will happen is there will still be strong competition out there for certain homes. What kind of homes will still see competition? Really special homes that offer something out of the ordinary to buyers. Location is of course first on the list of things that make certain homes special. I would say view, upgrades, and floor plan come next in making a home special. Special homes, in almost any price range, will still sell immediately and possibly with multiple offers still in this market.
What if a home is great, but maybe not super special or unique? It will still sell. Instead of getting multiple offers though it may only get one. List price, instead of being a starting point, will now be a number a seller should hope to achieve.
Homes that need updating, repairs, or have an adverse condition may sit on the market. ( An adverse condition is anything negative that can’t be changed by the home owner. Examples are backing to a busy road, power lines overhead, or even a neighbor’s barking dog). These homes will still sell as long as they are priced correctly. Sellers should expect to negotiate repairs, buyer’s closing costs, and other things that haven’t been common place for years.
Buyers will have an easier time getting a home under contract. As I stated above, special homes will still receive multiple offers. But, great homes might not, and these homes will be available to buyers at list price, and sometimes even a little bit below. Buyers will be able to ask for home inspection contingency, and have financing contingencies in their offer. Gone are the days that all contingencies must be waived for a buyer to have a chance. Now, when it comes to a special home, waiving contingencies may still be the difference that gets your offer chosen over another. This will have to be discussed with your real estate agent (me!) at the time of submitting an offer.
Where are Bellingham’s Buyers coming from?
Buyers still want to move to Bellingham. Climate change refugees are the number one reason that I hear for buyers wanting to relocate to the Bellingham area. People are escaping places with wildfires, not enough water, and extreme heat. People are looking for a beautiful, temperate place that allows for outdoor living. Bellingham fits that bill. Climate change maps show the Bellingham area as getting more rain in the future. More rain, though possibly undesirable for those of us that live here, is very attractive to many buyers. Buyers love our beautiful Lake Whatcom that provides our fresh, wonderful water to all of Bellingham. The ability to work from home since COVID has also opened the doors to Bellingham. People are able to choose to live in our beautiful neck of the woods, and lots are making that choice. This influx of people will keep the market from really seeing a down turn.
What I predict will happen is this graph will level out somewhat and our appreciation will slow down. I don’t see values actually declining though.
If you’d like to discuss your personal situation please don’t hesitate to reach out to me.