Whatcom County's housing market was very different a decade ago

It's startling to see how different the real estate market in Whatcom County, north of Seattle and near the Canadian border, looked a decade ago.

In 2009 the U.S. was dealing with the burst of the real estate bubble following the global financial meltdown in the fall of 2008. Here's a snapshot of what the Whatcom market, including Bellingham, looked like at the end of 2009, according to The Bellingham Herald archives:

Whatcom home values fell nearly 7% from the previous year. Foreclosures were skyrocketing, with 12.2% of those 2009 home sales involving distressed properties. A whopping 849 properties received a foreclosure filing that year, up from 253 in 2006. Nearly 4% of Whatcom County households were more than 90 days behind on their mortgage payments. The median price for houses sold in Whatcom County that year was $259,900, according to the Whatcom County Real Estate Research Report.

It turned out to be a great time to be a buyer, not a seller, said Troy Muljat, of Muljat Group Realtors.

"Concessions were at an all-time high from 2009 to 2011," Muljat said, noting that it was a time people were turning keys back in and walking away from homes with large mortgages while banks were short-selling foreclosure properties. That made it difficult for the typical seller to find a buyer.

Darin Stenvers, branch manager at John L. Scott's Bellingham office, remembers the increased leverage buyers once had. He said some sellers would offer to pay closing costs, throw in appliances or a lawnmower to close the deal.

That buyer leverage disappeared around 2014 and it's been a seller's dream market ever since.

In 2019 the median price of Whatcom houses sold is expected to be around $400,000 (at the end of 2018 it was $382,800), home values have risen 10%-12% in recent years. By mid-2017, delinquent Whatcom mortgages had fallen below 1%, while foreclosures dropped significantly as few homeowners were underwater on their mortgages.

So how did Whatcom County get from falling prices and plenty of inventory in 2009 to high prices and low inventory in 2019? A strong economic recovery that led to local job growth helped change the fortunes of the market, but the lack of construction between 2009-2012 also had a big impact.

In recent presentations to the planning and community development committees about housing, city officials estimated Bellingham needs about 650 residential units a year to keep up with growth. Between 2009 and 2012 there were some years where Bellingham didn't add more than 100 units built.

"We started in an enormous hole," said outgoing Bellingham Mayor Kelli Linville about the city's current plans to address the housing shortage.

A decade ago Whatcom County had three times the inventory compared to now, Stenvers said. When talking to sellers in 2009, he would typically ask if they wanted to sell in 90-, 120- or 180-days to help determine price. Today the options are more typically 30, 60 and 90 days.

It appears the private sector is playing catch-up when it comes to housing units in Bellingham. The number of permits approved for residential units is approaching 1,000 in 2019, which is the highest level in the last 15 years, said Chris Behee, an analyst for the city during the Dec. 16 committee presentation.

Of those nearly 1,000 approved permit units, 186 were for single-family houses. That's on pace with the last three years, which has averaged 199 annually. In 2009 permits were approved for only 50 houses.

In its concluding presentation, Bellingham city officials found that they are limited to how they can impact the market.

Some of the recommendations given in the report to the City Council include making the permit process quicker, continue to analyze residential zoning and provide incentives to for-profit companies to build affordable housing.

Much of what will influence the market in the coming years is the local and national economy. Interest rates, job growth and construction will be big factors, Muljat said.

Even with recent construction surge, inventory is expected to remain tight. Being sandwiched between the Seattle and Vancouver, B.C., markets will continue to bring newcomers into this market, making it competitive for current renters who want to own a home in Whatcom County.

Whatcom home sales, which have hovered around 3,000 sold units a year for the past three years, should remain flat in the coming years, Muljat said. He also expects home appreciation to return to historical norms, increasing around 4% a year.

"Those appreciation gains of the past decade are not sustainable," Muljat said, adding that a flat, "boring" market would be welcome news to buyers.

What happens with interest rates will also influence the market, he said. When the real estate bubble burst a decade ago, the 30-year mortgage rate was in the 6% range. It fell to the 3% range during the recovery and that's about where it is today.

Stenvers expects home values to rise annually around 6% in the coming years because of that expected tight inventory. Not enough builders are in the area and permit/construction costs will continue to make it difficult to build affordable housing, he said.

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