Predictions for 2023

Interest rates are higher than they were a year ago and it's definitely impacting our local real estate market. We've had about 8% decline in median home price since summer of 2022 when our real estate had its peak.

So what's 2023 going to look like? Will this be a more prolonged market correction with further declines in 2023? If you are looking to buy in the next year, should you wait another 6-12 months? 

It's difficult to make predictions but I try to take all the puzzle pieces and give each person advice based on their own unique situation. I'll share some numbers that might provide a helpful framework.

Inventory

As of late last week, we had 117 homes for sale in Bellingham. (Under 100 if you look at Bellingham-proper.) So, the options for buyers are still not plentiful. But, last year at this time, we had about half this many homes on the market. It's all a matter of perspective.

The last time we saw this residential inventory this high in Bellingham was in 2020. But back then, buyer demand was also higher; we had 2.75% interest rates and buyers were fleeing Seattle to our "Zoom town" during the Covid shutdown. There's a different energy out there right now.

Until recently, the overall trend of inventory levels in Bellingham has been declining. In fact, up until recently, inventory levels have been steadily declining in Bellingham -- for the last 10 years.  Why? Bellingham is finally on the map. In addition to the influx of people moving to our community, the people that were already here know that it's a pretty special place and they haven't wanted to part with their real estate holdings. They know that building is difficult here, and we aren't building very many new single family homes.

Appreciation

Real estate appreciation in Bellingham is typically steady and high. In fact, Bellingham has enjoyed over 9% appreciation per year over the last 10 years, putting it in the top 10% markets nationally for appreciation. For this reason, if people can swing it, they'll hang on to their property when they upgrade, which leaves less on the market for people trying to get into the market. 

Krista’s Prediction

My prediction is that we will either hold steady in 2023. I think our market correction has mostly happened. If we see further decline it will almost go unnoticed. It's worth noting that 44% of economists believe the FED will lower rates later this year. If this happens earlier than expected (like, in the 2nd or early 3rd quarter), I think we’ll see minimal appreciation (3-5%) in home values this year.

I don't think the traditionally charming or super cool homes in super desirable neighborhoods (think South Hill, Edgemoor, Columbia) will see much of a decline in value, if anything at all. I do not think Bellingham's waterfront properties will be affected. Certain properties will continue to get quick offers, multiple offers, and will support Bellingham’s median home value.

When interest rates show a slight steady/downward trend, I predict we will quickly go back to a heated housing market. The job market is super hot right now. Unemployment is at historic lows. Employers cannot find enough employees to fill their positions. Consumer demand is still there, inflation is bonkers. The Feds have raised interest rates to cool the job market, inflation, and the overall economy. When we see signs of the rate hikes working, interest rates will likely drop and Bellingham's market will heat up (red hot!) again.

In summary, we've seen about an 8% drop in median home price since the peak of 2022. When interest rates go down (which is expected later this year), I think our market will quickly heat up again. I believe Bellingham will continue to stay in the top 10% nationally for appreciation, and real estate here will continue to be a solid investment over the next 10 years.

Whatcom County Market Forecast for 2021

Many interesting market forces in Whatcom County are currently at play: a global pandemic and corresponding job losses, an influx of residents due to wildfires and retirement planning, and a shift from the office to working from home. How do we see this playing out in Whatcom County's real estate market in 2021?

Northwest MLS data confirms what Compass brokers are feeling: record low inventory in homes for sale. Inventory is less than 30 percent of what it was one year ago. Fewer choices for buyers are driving up prices; multiple offers have become commonplace. Median home prices are up 11.3 percent from January 2020.

Will this pace of appreciation continue? I see no reason why not. Interest rates are still at historic lows with a commitment from the feds to remain that way throughout the year. And employment numbers in Western Washington continue to improve. Unemployment rates currently sit at 8 percent, down from April's 16.6 percent. In addition, many people moving to Whatcom County have new workplace flexibility and aren't relying on the local economy for employment. In fact, Bellingham has recently become dubbed a "Zoom town," in part because of its proximity to the Seattle tech hub. Many people are moving from more expensive markets with impressive equity in-hand. For these reasons, I’m anticipating similar market appreciation in 2021 and for it to remain a seller’s market.

Is the real estate market slowing down?

My clients and friends keep asking me if the market is slowing down.

The answer is...yes and no.

Being a regional company with offices from the Portland area to a Bellingham is great because we get regional market updates that help us anticipate market shifts.

In this morning’s meeting, our CEO, Mike Grady, said, “We are still a long way from being a balanced market. We are still leaning towards being a seller's market over a buyer's market.”

Coldwell Banker Bain CEO Mike Grady in Bellevue on the big screen at a sales meeting in Bellingham.

What does a “balanced market” mean exactly?

A balanced market is one that doesn’t favor buyers or sellers, and has about 5-6 months of inventory.

Across the NWMLS, we had 1.9 months of inventory in June, and it was up to 2.9 months by September. By the end of the year we anticipate 3.5 months of inventory. So... inventory is creeping up giving buyers more options.

In Bellingham, our inventory has been inching up slightly throughout the year—but the key word is slightly. We’re still well below the 5 or 6 months mark that a balanced market requires.

I’m personally competing against fewer offers when representing buyers lately. But I’m not sure we’re headed for a significant market correction.

Why? A big influencer is that the economy is still strong. Washington state is adding about 10,000 jobs per month. And only 3,000-4,000 building permits are being issued per month. The demand for housing is still there.

However, interest rates are ticking up, currently sitting right around 5%. There is no real way of knowing exactly what rates will do, but most lenders expect about a 3 rate increase over the next year. That could mean a rate of 5.5%, some say 5.75%, in 2019. Rising interest rates definitely reduce buying power so it it will be interesting to see how that impacts the market.

So, will it be as hot of a market as early 2018? Probably not. Will it drastically change? Probably not. According to Grady, “In Portland and Seattle and the entire I-5 corridor, we anticipate that it will be mostly the same kind of market through the end of 2018 and throughout 2019. Right now there’s no logical reason to believe we won’t lean more towards a seller's market for the next 18 months or so.”