In its annual statistical summary,  the Whatcom County real estate market reported 3,775 sales for a total value of $995,134,398. There were 2229  residential sales totaling $668,812,479, plus 414 condominium sales totaling $78,500,000.

 2009 sales ( units) continued their downward trend. All sales throughout Whatcom County were down about 10%.

 The residential resale market was the only category up by 1%. New construction sales decreased by 33%, condominiums were down 26% and land sales down 18%. These are unit sales.

 The median price declined about 6.5%( $258,000) for a residential resale home in Whatcom County. New construction prices were down about 12% ($263,000) and the median price of a condominium was unchanged at $191,000.

 Among other highlights in the annual CBMA summary:

 1.     Residential and Condominium listings decreased 8%.

2.     The highest residential sale was $2,500,000 in Point Roberts.

3.     The highest condominium sale was $740,000 in Bellingham.

4.     There were a total of 17 residential sales above $1,000,000.

5.     Nearly 75% of all residential sales were below $350,000.

 Residential sales:  Units compared to 2008

 Bellingham down 9%, median price $289,000

Ferndale down 10%, median price $260,000.

Blaine/Birch Bay up 1%, $224,000.

Sudden Valley down 3%, $231,500.

Lynden down 1%, $269,000.

Mt Baker/Deming down 14%, $135,000.

Everson/Nooksack up 17%, $215,000

With the nationwide unemployment rate climbing above 10 percent, could 2010 see even more declines in real estate prices?

One of the most important influences on housing prices is the employment rate. When employment is high, people are more likely to purchase. In such an environment, there is optimism that if you lose your job, you will be able to find a new one.

Today, we’re facing some of the highest unemployment rates since the Great Depression. Is it possible that the housing market can make a recovery in light of these conditions?

Here are several key factors to determine what is most likely to happen in your market.

1. Markets aren’t just local, they’re “hyperlocal.”

Prices may be down in your state, county or city, but up in your local area. For example, it’s common for the first-time-buyer market to have shortages of inventory while the remainder of the market is glutted with inventory.

To determine what will happen in your local market, you must consider the “hyperlocal,” or “micro” market, conditions. In most cases, this means what is happening within a one-mile radius of where the property is located. It also means considering only those properties that have square footage and lot sizes within approximately 10 percent of your property square footage and lot size.

2. Months of inventory on the market are the best predictor of price changes.

Even though the National Association of Realtors is forecasting that existing-home sales will jump 10.8% in 2010, after a 4.8% increase in 2009, the real issue is how much inventory is on the market in your local area.

During the 35-plus years I have been in business, I have found the amount of inventory in a given location and price range to be the best predictor of what prices will do several months from now. As a rule of thumb, price changes lag behind inventory changes by about six to 10 months. If there are only two or three months of inventory in your market, chances are good that prices will be increasing in 2010. On the other hand, if there are eight or more months of inventory, your area may experience price declines well into 2010.

3. Extension of the first-time-buyer tax credit

While many people feel the first-time-buyer tax credit was responsible for the upswing in sales activity this fall, NAR reports that only six percent of the buyers attributed their decision to purchase this fall to the tax credit.

There are two key issues for 2010. First, will the extension of the tax credit produce enough buyers to create a price increase?  Second, what will happen to the market when the credit runs out?  Will sales drop as substantially as they did when the Cash for Clunkers car-buying program ended?  Will NAR try for another extension even though the Obama administration has signaled that  “this is the last time we’re going to be caving to the demands of NAR.”?

4. Demographics bode well for increased sales activity

Gen Y (born 1977-94) are now at their peak time for buying their first home. There are now more Gen Y’ers than there are baby boomers ( 1946-64). This huge cohort of young adults is marrying and having children.

In fact, the typical married Gen Y mom has 2.3 kids. Owning a home is part of their American dream. Although the unemployment rate is even higher among this group, most still have jobs. Coupled with the first-time-buyer tax credit, this could be a strong force to drive prices upward.

5. The Real Issue: Cost of ownership, not sales price

The real driver of price in 2010 will continue to be the cost of homeownership. This is a huge wild card for a variety of reasons.  If interest rates increase from 5% to 7%, or even from 5% to 6%, the impact on monthly payments would take a would-be-buyer off the market.

And changes of this magnitude could take place as early as 2010. The reason?  Interest in the sale of US Treasurys that are used to finance our debt is weak. This means that the government could raise interest rates to attract more buyers. The other issue is the decline in value of the US dollar, which, in turn, can result in inflation. The Federal Reserve typically responds by raising interest rates to cool inflationary pressures.

The third factor that could drive up the cost of home ownership is the decline in tax revenues at the local and state levels. This could result in increased property taxes in some areas. Increased costs shrink the pool of potential buyers, resulting in fewer sales and potentially a decline in prices.

Bottom line:  Watch the sales levels and the inventory in your local area. If sales are increasing and inventory is decreasing, look for stabilization of prices first and then, eventually, an increase.  On the other hand, if the inventory is static or increasing, 2010 will probably be similar to 2009.

Home sales continued to out-perform year-ago totals and prices continued to show signs of stabilizing, according to the latest report from the Northwest Multiple Listing Service.

Pending & Closed Sales Up Over 2008, Median Price Drops

Pending sales for November tapered off from the October surge, but Whatcom County experienced a 25 percent increase from the same period in 2008.

Closed residential sales increased dramatically from November, 2008. Closed sales were up 88 percent, due in part by lower interest rates and first time homebuyer tax credit. The other reason for such a dramatic increase is the tremendous slowdown that occurred last year at this time.

The median sales price is down about 7.6% in November (over November 2008), and down 7.1% year to date.

Inventory Almost at Balanced Market Levels

Overall residential inventory has decreased by 9% year-to-date. November, 2009 vs. November, 2008 numbers are even. For the month of November, months of inventory was at 7.5 months, as compared to November, 2008 when it was 16.5 months. Six months of inventory is considered a balanced market.

Average cumulative days on the market for November, 2009 is 157 days, which compares to only 126 days on the market in November, 2008. The list to sale ratio is at 89% for November, 2009, compared to 91% in November, 2008.

Finally, the absorption rate for residential sales for November was 13.3%. It was 6.1% for the same period in 2008. The absorption rate indicates how many homes are being sold as compared to the number of listings currently on the market. Since November of 2008, that rate has steadily increased.

Holidays can be a favorable time to sell

Buyers tend to encounter less competition for the most desirable homes during these winter months. Also, qualified buyers can expect above-normal attention from service providers who are experiencing a slowdown in their business, including lenders, inspectors, appraisers and title companies.

Agents are able to devote more time to clients and the smaller selection of homes on the market. Sellers can also benefit from showcasing their homes with tasteful holiday decorations, although home stagers caution them to show restraint and not overdo the décor.

The following article on the local condo market here in Bellingham and Whatcom County ran in the Bellingham Herald on Nov. 30, 2009.  To view the complete article, please click here.

I recently had the opportunity to talk with Business Editor Dave Gallagher at the Bellingham Herald about our local home buying season.

To view the complete article, please click here.

Western Washington real estate brokers are crediting the federal tax credit and its impending expiration deadline for a surge in home sales last month. Members of the Northwest Multiple Listing Service reported a 63% jump in pending sales during October, compared to the same month a year ago. The other reason for such a surge of sales was that October, 2008, was the first month after the financial meltdown and sales dropped like a rock.

As of this writing, the homebuyer tax credit has been extended to April 30, 2010. You can read more about this here, in a previous article on our blog.

Pending Sales Up

In Whatcom County, pending sales increased nearly 75% in October compared to the same month a year ago. In Bellingham, pending sales increased 63% for October. Lynden was up 63%, Ferndale increased 105%, and Blaine/Birch Bay increased 67%, while Sudden Valley was up 39%.

The new figures show continued signs of some stability in the market and improving consumer confidence. Inventory levels are down about 10% and Whatcom County added about 313 residential new listings in October: about the same as one year ago.

Median Prices Down

The median price for October was $260,000. And, if you add condominium sales, the median price is $251,000. Overall value decreased 7.1% and 5% respectively.

Majority of Activity Under $350K

For the month of October, 80% of residential sales were under $350,000, versus only 71% a year ago. The upper-end market accounted for about 9% of the sales over $500,000 in October, as opposed to 7.7%  in October, 2008.

Interest Rates Remain Low

The weekly average interest rate borrowers were quoted for 30 – year fixed mortgages at 4.87 percent. Rates for a 15-year fixed mortgage were 4.31 percent.

Delinquencies on single-family homes continued to rise at the two big government-sponsored  mortgage lenders, Fannie Mae and Freddie Mac, indicating that problems have yet to level off.

The House of Representatives has voted to pass legislation extending the homebuyer tax credit until April 30, 2009.

Last night, the Senate voted 98-0 to pass the legislation. Next, the bill will head to President Obama to be signed into law.

Not Just for First-Time Homebuyers

While the bill extends the $8,000 tax credit for first-time homebuyers, it also makes available a tax credit to homeowners who have lived in their current residence for at least five years.  The credit for these buyers will be capped at $6,500.

Income levels will be extended from the current limits of $75,000 for a single purchaser and $150,000 for couples to $125,000 and $225,000, respectively.  Above those limits there are diminishing credits available.

Housing interests, especially the National Association of Home Builders and the National Association of Realtors, have pushed strongly for the extension, and the Obama administration has also lobbied heavily for its passage. However, not everyone was in favor of it.

Critics of the Housing Tax Credit

Some critics have charged that the tax credit has merely moved sales that would have occurred sooner or later to an earlier date and that, when the credit finally does go away, the market will experience another severe downturn. A diametrically opposed opinion would have it that, while 1.4 million claims have been made, few sales were actually inspired by the credit (i.e. these sales would have occurred with or without the tax credit). Others have argued that the current interest rates and low housing prices are enough of an incentive without spending tax money. The extension is expected to cost an estimated $11 billion on top of the $10 billion that has been spent to date.

There have also been charges of fraud in the operation of the program. To combat this, the new law has some expanded safeguards, including a minimum age of 18 for obtaining the credit, a requirement that a settlement statement accompany the tax return claiming the credit and a prohibition on non-arms length transactions.

Another criticism of the extension has been that it ends just as the “spring market” is getting underway.  Diane Olick, writing for CNBC’s RealtyCheck, said it “is sort of like offering cheap snow boots in July.”

Robert E. Story, Jr., CMB, Chairman of the Mortgage Bankers Association (MBA), today issued the following statement in response to the passage in the U.S. Congress of legislation to extend and expand the homebuyer tax credit:

“At a time when we are finally starting to see some signs of life in the housing and mortgage markets, extending and expanding the homebuyer tax credit is a critical step to keeping the momentum. This has been one of MBA’s top single-family legislative priorities, and we are very glad to see that policymakers on both sides of the aisle see the importance of this measure.

“The existing credit for first-time homebuyers has helped move a segment of potential homebuyers off the sidelines and into their first homes.  By expanding it to qualified existing homeowners, we can help stimulate even more home purchases for qualified buyers.  I also want to applaud measures in the bill that will help eliminate fraudulent use of the tax credit.”

The Homebuyer Tax Credit is Net Positive, But Not the Universal Solution

Following a 98-0 vote in the Senate, the House of Representatives has overwhelmingly agreed to pass legislation extending the home buyer tax credit until April 30, 2009. Next the bill will head to the desk of President Obama to be signed into law.

No one argues the extension of the tax credit has value to the marketplace. But what other immediate steps must be taken — either by government or industry — to create a sustained housing recovery?

It is universally expected that interest rates will rise next year when the Fed is expected to stop purchasing MBS next year. How high, how quickly is a matter for debate.

What is not debatable is the negative impact of higher rates and an ever shrinking credit box. The extension of the Homebuyer Tax Credit will serve to soften these blows. However, a sustained recovery in the housing market must have two key components

1) Stable Employment
2) Access to Credit

In the absence of either of these components, the single shot tax credit will have limited impact. The tax credit is positive, but it’s not a universal solution.

Existing home sales surged in September, bringing sales to the highest point since 2007. At the same time, the Department of Commerce just reported that sales of new single family homes fell 3.6% in September to an annual pace of 402,000 units.

Sales of both existing and new homes had been on the rise of late, encouraging many an economist that the worst is behind us.  Some will say that the new home sales numbers show that this will be a shakier recovery than in past recessions.

That may be true, but keep in mind that home sales as a whole are up by a pretty large margin. Those sales are helping bring down the inventory of unsold homes, which is so vital to returning to sustainable times.

Analysts had expected new home sales to rise to 440,000 units, most likely based on the final push of first-time buyers looking to take advantage of the $8,000 tax credit.

Buyers looking at new homes will find some homes that are already completed and those that are not finished. First-time buyers, who account for nearly 45% of the buyers at the moment, are looking to eliminate any possible risk of missing out on the credit.  Purchasing a home still under construction without a guarantee of closing before 11/30 will push many would-be new homebuyers to existing homes.

The numbers may already be bearing this out. In September, sales of existing homes jumped 9.4% to an annual rate of 5.57 million. This is the highest rate in more than two years.

In this housing market, not many positive records are being set. One notable exception comes as a great surprise to the casual market observer – length of time on the market. In this down market, well-priced home are selling in record time.

And time, as the old saying goes, is money.

Market is moving slower

With the torrent of down news about the housing market over the past couple of years, most people would expect that all homes are languishing on the market, just praying for a buyer to appear.

The market as a whole is certainly moving much slower than it did a few years back. The average market time for existing home sales now stands at 120 days, which is nearly 40 days longer than during the peak of the market in 2007.

But that picture alone is a bit deceiving; that’s not the whole story. A more detailed look at  today’s market reveals a different picture.

Overpriced vs. Well-Priced Listings

When we separate September 2009 home sales into categories of those that required a price reduction before selling (Overpriced Listings) and those that did not (Well-Priced Listings), we find that the Well-Priced Listings are selling in just 31 days.

As you can see in the above table, a different story emerges for the Overpriced listings. They average 137 days on the market (nearly four and a half times as long!), and they are requiring an average price reduction of 14% (that’s a difference of $42,000 on the selling price of a home that’s initially listed at $300,000).

That extra 4-5 months of selling time hurts in a couple of ways.

The financial impact

First, these homes end up selling for less than they could have if they had just started off priced right. Our market, like all others around the country, has seen declining prices over the past two years. Since the peak in prices in 2007, the average sales price has dropped about one-half a percent per month. That means the 4-5 months of extra marketing time cost the seller an additional 2.5%, or $7,375 for the median priced home of $295,000.

The emotional impact

So, the financial impact of pricing the home right is significant. The emotional impact is also huge. Five additional months of keeping the home in show condition, of the feeling of being in limbo, and missing the chance to move to that next home that better suits the seller’s current needs, are also a big part of the equation.

What happens when it’s priced right… the first time

More and more sellers are beginning to understand these factors. In September, 45% of sellers priced their home right and sold in an average of 31 days. Still not a majority of sellers, but the percentage is up significantly since the start of the year.

The overpriced seller should not beat themselves up too much. In a changing market, it is sometimes hard to know what the right price is.  Sometimes it takes entering the market to get feedback from buyers to know if the price is right. The key to finding the right price in those instances is to quickly review the market feedback and then make a swift price adjustment to bring it in line with the market. When done, our market’s steady activity tells us these sellers will find a ready and willing buyer.

Coldwell Banker recently conducted a survey of more than 1,000 men and women to see if any differences exist between the two groups when it comes to buying a home. The results were pretty interesting… Here are some of the highlights:

Women may be inclined to make up their mind more quickly than men …
When asked how long it took before they knew their home was “right” for them, almost 70 percent of women had made up their mind the day they walked into the house, compared to 62 percent of men. Conversely, significantly more men needed two or more visits to make up their mind: (32 percent of men vs. 23 percent of women).

Women would rather live closer to their extended family than to their job …
Fifty-five percent of women find it more important to be closer to their extended family (those that do not live in their household) than to their job, compared to only 37 percent of men.

A home’s security is a deal-breaker for both men and women …
Sixty-four percent of women said that if they found the home of their dreams but had concerns about its security, they would no longer be interested. More than half of men agreed (51 percent).

Couples say that no one “wears the pants in the relationship” in terms of major financial decisions …
When asked who wears the pants in the relationship (when it comes to major financial decisions, such as purchasing a home), almost 70 percent of respondents living with their significant other said it’s actually mutual.

However, 23 percent think that they, themselves, wear the pants in the relationship, not their partner. More men than women said this (26 percent vs. 20 percent, respectively).

Men and women agree on how they would use a spare room, for the most part …
When the respondents were asked how they would use an extra 12 x 12 room if it could be anything they wanted, men and women agreed on the top three most popular, and very practical, responses:
1. Bedroom: 25%
2. Office/Study: 15%
3. Family Room / Den: 11%

However, men really do want a “Man Cave”…
Interestingly, out of the 8 percent who indicated they would turn that spare room into an entertainment center, it was a preponderance of men leading the charge.  In fact, four times as many men as women said they would use the extra space for recreation / entertainment.

You can find out more about this survey here.