Whatcom County and Bellingham might avoid the brunt of the subprime mortgage fallout despite dour predictions from a report released Nov. 13. Increasing home equity, a lower number of homeowners with subprime loans and lower foreclosure rates make professionals familiar with the region’s real estate industry optimistic.
They said trends in Bellingham contradict some of the findings in the Foreclosure Spillover report released by the Center for Responsible Lending in November, although none objected to the foreclosures forecasted by the report — 289 foreclosures are projected to occur in Whatcom County next year, when the majority of the subprime loans reset to higher percentage rates.
The report said these foreclosures could decrease home equity in Whatcom County by $14 million. The report relies on an Immergluck and Smith study done in Chicago demonstrating houses within an eighth of a mile from a foreclosed property also drop in value by 0.09 percent. They said the impact is cumulative, so equity could drop 36 percent for a neighborhood block if four properties foreclose within an eighth of a mile radius.
While Julia Hansen, economic professor at Western Washington University’s College of Business and Economics, agrees that the forecasted number of foreclosures is possible, she said she disputes the reported impact of foreclosures on adjacent properties because the Chicago-based study will not necessarily translate to Bellingham. Bellingham has greater population growth than Chicago, which should keep demand high here. Therefore, vacant houses are not as likely to stay vacant for long and become magnets for crime that can depreciate an entire area.
“You have to be skeptical about any one study,” Hansen said. “Because there are different ways for evaluating research.”
She said the study can be viewed as a positive indicator since the Bellingham foreclosure rate is less than the state average of 16.6 percent. Bellingham and the state are both below the national average of 18.8 percent.
“It’s a serious problem, we will be affected, but we won’t be hit as hard as other parts of the country,” Hansen said.
Lylene Johnson, owner of The Johnson Team and managing broker for The Muljat Group South, said Bellingham foreclosures are the lowest in the country. She compiles monthly statistics for Whatcom County, and she said her numbers don’t mirror the national averages she’s seeing.
Since there’s not a big drag on the market from foreclosures, she said, depreciation is not a big issue here. She added the housing market didn’t succumb to heated speculation that precipitated the dramatic home equity loss in other markets like Las Vegas.
“Housing demand is steady in Bellingham,” Johnson said. “Our market has been a little more conservative and that has saved us.”
The median price for a Bellingham house is holding up. The average Bellingham home costs $258,000, up 4.3 percent, according to Zillow’s Third Quarter 2007 Home Value Report released Nov. 20. Nationwide, home prices fell 5.7 percent to $244,000.
Sidney Stonecipher, loan originator for Peoples Bank, said she sees how an appraiser might assign lower property values for homes if foreclosed homes nearby sold for less. It’s the pattern she would expect from basic supply and demand principles. But she said Tom Follis, Peoples Bank’s appraiser, does not use a foreclosure’s selling price to indicate fair market value unless many foreclosed houses from the same neighborhood go on the market.