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.
