
The mid-year numbers are in, and the market remains hot. The chart above shows median sales prices for single-family residential homes in Bellingham (top line) compared to all of Whatcom County (lower line), with a rolling three month average. The effect of the rise in interest rates in 2022 is clearly reflected in the price trends. At the start of 2022 mortgage rates averaged around 3%, and by the end of the year had more than doubled to about 7%. Prices peaked in June and July at $765,000 for Bellingham and $650,000 for Whatcom County. By the end of 2022 the median price in Bellingham had dropped to $647,000 (down 15.4%) for Bellingham and $570,000 (down 12.3%) for Whatcom County, erasing all gains for the year. Buyers were relieved to see reductions in prices, but were initially hesitant to borrow at the higher rates after missing a chance to borrow at the historic lows of the previous few years. Many stayed on the sidelines, hoping prices would continue to fall. Some brave buyers took advantage of the lower prices with the hope of a future rate refinance. “Marry the House, Date the Rate” became the motto of the hopeful.
We only know where the bottom of the market is when we have passed it, and in hindsight those buyers who made a move in 2023 appear to have made the right decision. Prices have stabilized and climbed back, even as rates remained over 6.5%. Bellingham prices have been back to the summer 2022 highs since January 2024, ending June at $775,000. Whatcom County climbed back to that previous peak in May 2024, then dropped slightly to a median sales price of $632,000 at the end of June.
The number of closed sales dropped significantly during that period, down 18% to 215 June closings in Bellingham, and down 23% to 639 sales for all Whatcom County in June. Part of this was due to fewer buyers willing to borrow at higher rates, but it was also due to a lower supply of available homes. Many homeowners who locked in at historically low rates have been unwilling to sell and give up their fixed rates. Supply versus demand has remained steady, so even though closed sales numbers are down, it has remained a seller’s market. Median days on market has remained incredibly low, at only 6 DOM for Bellingham and 8 DOM for Whatcom County at the end of last month. Bidding wars are still very common, especially within Bellingham, with many homes selling over list price.
Where do we go from here? Nobody knows for sure, but my crystal ball says that prices are only going to continue to rise. Recent economic numbers have shown inflation is nearing target levels, and the Federal Reserve has signaled a readiness to start cutting rates, possibly twice by the end the year. Buyers have already gotten used to rates in the mid 6% range, with prices rising. If mortgage rates drop below 5% I think the demand is going to blow wide open, with all the buyers who have been sitting on the sidelines jumping back in. Rates at that level still won’t be enough to enough to entice more sellers, so buyers will be fighting over a stubbornly low supply level. Bidding wars will intensify and prices will jump. If you are thinking about buying this year, I recommend making your move sooner rather than later.
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