Is this the right time to sell?

By Stacee Sledge, for The Bellingham Herald

Bubble, bubble, toil and trouble.

We hear a lot these days about a national real estate bubble. But before you capitulate to increasing reports of a potential market burst, look at Whatcom County’s real estate records — and take heart.

After two or three years of record-low interest rates, resulting in record-high new construction, home sales in Whatcom County show no sign of slowing. Market value, too, is holding strong — the area has seen appreciation in housing prices every year of the past 21, when they began being tracked, except in 1991, according to Realtor Larry Humes of John L. Scott Real Estate.

Kirk Ghio, Realtor with Muljat Group Realtors, underscores the strength of our local real estate market. “This is an excellent time to sell a home in Whatcom County,” he said, “and that’s especially true for Bellingham.

“Interest rates have been at historic lows for the past few years. They have begun to creep up, but are still incredibly attractive to buyers.”

Current buyers may be motivated by a fear of steeper interest rates by summer’s end, when many analysts believe the Federal Reserve will begin raising interest rates — a situation that will affect real estate nationwide.

Whatever their motivation, “we have a record number of buyers looking in Bellingham, and a much lower than normal inventory of homes to choose from,” said Ghio. “When demand exceeds supply, prices have to rise.”

“One reason for such a limited inventory of homes on the market right now is that so many homeowners took advantage of the low interest rates and refinanced their homes over the last couple of years,” he said.

“Those people made a commitment to stay in their homes for a while to benefit from the lower payments, and to recover the upfront costs of refinancing. As time goes on more people will be ready to sell, bringing supply more into balance with demand.”

Another reason for the continued clampdown on inventory is the increasing popularity of Bellingham. “It seems like every magazine you open has Bellingham on a list of top places to live, retire, raise a family, golf, whatever,” said Ghio. “Our prices seem high to us, but relative to the rest of the West Coast we’re still a bargain.”

That means an influx of buyers willing to plunk down excess equity on Whatcom County properties.

Glenn Wielick, vice president and manager of Washington Mutual Home Loans Center, agrees that interest rates remain near historically low levels. “Back in June of 2000, the average 30-year conforming fixed rate was 8.375 percent, with no loan origination fee,” he said. “In May of 2003 it was 5.25 percent with no loan origination fee. That rate today is 6.375 percent.” Even with recent upward creeping, Wielick said his office currently has more than 150 customers — many of them first-time homebuyers — who are pre-approved and working with Realtors to buy new homes. “The purchase market is still incredibly hot, and although the refinance activity has slowed significantly, it still accounts for about 25 percent of our business.”

That’s not to say that higher interest rates don’t have an effect. As an example of the power lower interest rates can have on a customer’s ability to purchase a home, he explains: “At a principal and interest payment of $1,199 per month, a homeowner could afford to borrow $200,000 at today’s interest rates of 6 percent. At a rate of 8.25 percent, which was common for much of 2000, the homeowner could only borrow $160,000 and maintain that same $1,199 payment.”

According to Ghio, economists for the National Association of Realtors expect that mortgage interest rates will rise above 6.25 percent by the end of this year, with some predicting rates reaching 6.4 percent and others as high as 7 percent.

But these numbers are still below Wielick’s example, and shouldn’t cause a significant cut in buyers’ borrowing power in the near future. Our local market may dampen slightly, but those in the real estate industry say it will not be distinguished.

“Five years ago it wasn’t uncommon to do a comparative market analysis for a seller who had been in their home for five or six years, and find that the value had barely changed from when the home was purchased,” said Ghio. But home prices are now rising at a faster pace.

Kiersten and Michael Barr lived in their cozy Columbia cottage for just more than five years. The couple recently decided to sell for a variety of reasons, but their main motive was a common one: space. They found a perfect next property, and wasted no time having their Realtor plant a “for sale” sign in their yard in December.

While it used to be typical for a house to be on the market for 90 days before a “Sold” banner was slapped across the “for sale” sign, the Barrs saw an immediate bidding war on the first day their house hit the market.

Bidding wars in the first few days on the market have become routine, according to Ghio. Aggressive buyers will put an “escalator” clause in a purchase and sale agreement, automatically increasing the purchase price above the next highest offer. Homes frequently sell above the listed price, sometimes for substantially more.

“I came home from work that day to a half a dozen people staring in our windows,” said Michael Barr. “Our place hit the market on a Tuesday and we got a full-price offer on Wednesday.”

The Barrs’ Realtor suggested they accept offers through the following Sunday, and then make their decision. They ended up with eight offers, four of them with escalation clauses.

“Each clause worked against the other, which drove the price up, up, up,” said Barr. “It was pretty astounding. One potential buyer even had their agent tell us that they would help us move!”

The offer the couple chose included a massive nonrefundable earnest money check and waived every contingency. The buyer also agreed to let the couple stay in the home rent-free for a month after closing, while they waited to finalize the close on their next property.

“At the end of it all, we sold the house for nearly double what we bought it for and got more than 112 percent of asking price,” said Barr.

It was more than the couple dreamed they’d see for their beloved bungalow. “Truly ridiculous,” said Barr. “But it was the only way we could have gotten into our new place — we needed every penny.”

This, of course, is not to a buyer’s advantage.

“It’s not a time for either side to have amateur representation,” said Ghio. “More than ever, it’s important that both buyer and seller have an experienced, professional Realtor on their side.”

Ghio said he believes that while it’s a great time to sell, there’s no cause for panicking and selling “before it’s too late.”

“People are going to continue moving in and I think prices are going to continue to rise,” he said, “just maybe not as steeply as they have been lately.

“The frenzy will cool down and marketing times will lengthen, but I think we will still continue to see high numbers of sales and strong appreciation. Bellingham is just too nice an area to stop growing.”

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