Local home prices still low, pending sales rise
photo by Isaac Bonnell
Here’s the big question: When will we hit the bottom of this recession?
Nobody really knows, but everybody has their own predictions. Other than blind confidence, the only thing to look at is the numbers. And for more than a year now, the numbers haven’t looked good.
Nationally, the number of new homes being built has dropped 48.4 percent since March 2008, according to the U.S. Department of Housing and Urban Development. Likewise, home sales for both new and existing units have dropped tremendously.
But Western Washington — and specifically Whatcom County — have fared better than the rest of the nation.
“We have steadily seen the number of sales drop, but average and median prices are holding fairly stable,” said Lylene Johnson, a Realtor with The Muljat Group who tracks local market trends.
For example, the median sale price of a home in Whatcom County dropped 7.3 percent, down to $259,450, from the first quarter of 2008 to the first quarter of 2009. The year before that, the median sale price dipped just 3.4 percent.
Like all statistics, the median home price is affected by a variety of factors — in this case, the number of homes being sold and the price range.
As for total home sales, that number dropped from 470 in the first quarter of 2008 to 310 in the first quarter of 2009 — a drop of 34 percent. So with a smaller sample size, the price of each unit sold will have a greater effect when determining the median.
So what kept the median home price from plummeting, like what happened in other regions?
“The reason is the mix of housing types being sold,” Johnson said, adding that homes sales have slipped in the $300,000 to $500,000 range. “The upper end stayed strong for quite some time, and that held the median prices up.”
Normally, homes under $300,000 account for just over half of the real estate market. At the end of 2008 and the early months of 2009, however, that same segment accounted for 70 percent of all sales, Johnson said. This was due in part to fewer people trading up to a larger home.
“The upper ranges are dependent on sales in the lower ranges because of the move-up buyers,” Johnson said. “The other factor that supports the upper range is the move-in buyer, people coming from outside the region, and fewer people are coming into the region.”
Freeing up financing
Throughout all of the ups and downs of the real estate market, demand for buying a home hasn’t changed, said Jon Soine, a Realtor at Windermere.
“We’ve had several open houses in the last 30 days with more than 100 people coming through,” Soine said. “You can’t tell me that there’s not pent-up demand with that many people coming through.”
And since there are much fewer new homes being built, the demand for existing homes has remained high.
“At the rate we’re selling now, we’ll probably be out of new houses by June of this year because builders are not applying for permits,” Soine said. “And when inventory drops, the price goes back up.”
This, of course, is all based on the availability of financing.
Interest rates have now dropped under 5 percent, nearing a 40-year low, but getting a home loan in the first place is still difficult.
“Conventional loans are still tight,” said Nicole Walker, a senior mortgage advisor with Homestead Mortgage. “You can still do a 95-percent-down conventional loan, but they are hard to come by because the mortgage insurance companies are tight about who they will insure.”
Mortgage insurance companies insure the lender against a default on the loan, but with so many defaulted mortgages lately, these companies are becoming more selective on who they will insure.
The Federal Housing Administration (FHA), however, has seen a large increase in the number of loans it insures. This type of loan is very attractive because it requires only a 3.5 percent down payment, compared to a 10 percent to 20 percent down payment in a conventional loan.
“FHA was sort of forgotten about and most brokers in the last five years didn’t have access to that loan, it was just at banks,” Walker said. “Since the conventional industry has since pulled out of 100 percent, zero-down loans, there was a flood of people dumping potential borrowers into FHA loans.”
Under such a deluge of demand, the FHA briefly lowered its maximum lending limit for Whatcom County to $307,000, but recently raised it back to the previous amount of $375,000. Several local Realtors said they hope this brings homebuyers back into the upper price ranges.
No matter the home price, homebuyers need to keep a long-term perspective when considering to enter the real estate market right now, Walker said.
“First-time buyers need to be very aware that buying a home with very little down requires that the home increase in value or they need to pay down the loan before they sell it,” Walker said. “With the current market, there’s no assurance that their home value will go up within the next five years. So pick a home that you really like and can see yourself in for the next 10 years.”
‘The glimmer of hope’
As the real estate market enters into the busy summer season, there is some good news on the horizon.
“The glimmer of hope, so to speak, is that beginning in March, pending sales have been up for six weeks in a row,” Johnson said. “It’s not much, but it’s the first time in about a year and a half that they’ve been up at all.”
Low interest rates and low home prices seem to be drawing people back into the market, Johnson said. But whether or not the recently-passed tax incentives are making a difference is still up in the air.
“I’m personally not seeing as much impact as I thought I would with the $8,000 first-time-buyer tax credit,” Johnson said. “That’s $8,000 in your pocket. It’s money that does not have to be paid back. That really surprised me because I see that as being a big deal. That’s $8,000 you get back on closing costs or your down payment.”
So, does all of this signal that the economy is starting to pull out of its nose-dive?
We’ll just have to wait for new numbers to find out.
By the numbers
The following statistics on the Whatcom County real estate market for the first quarter of 2009 were compiled by Lylene Johnson at The Muljat Group:
- Median sale price: $259,450, down 7.3 percent from 2008
- Average sale price: $296,407, down 7.6 percent from 2008
- Total home sales: 310, down 34 percent from 2008
- Since March, though, pending sales have been up each week.