2022 Q2 Market Report

Alright folks, the second quarter is in the books and it’s time to review the happenings of the last 3 months. The big topic on everyone’s minds:  We had inklings of it over the late winter and spring, for three major reasons:

1. Historically speaking, local housing sales inventory shoots up in April/May each year, and helps ease some of the buyer activity of the winter. 

2. Interest rates. Back in January, we were gearing up for rates to move into the 4s (doesn’t that sound like a dream now??) which was projected to hit by April. Now upper 4s, 5s and 6s are the bread and butter mortgage rates (any individual’s rates are based on a variety of factors which is why I’m keeping this very general here).

3. Cultural shifts. Work-from-home trends leveling out, some major employers calling their employees back to the brick-and-mortar buildings, rising inflation, international war and general economic uncertainty. While none of us here at the Cohen Group NW are economists, the local housing market we’ve experienced since March of 2020 has been unusual - and at some point the market would settle back to resemble the norms of 2018 and 2019. 

Experientially, the Cohen Group NW first noticed the shift in our own business with two listings we brought to the market on the same day: March 31. One was a $1 million custom build in Whatcom Falls; one was a neatly updated 1970s build in Tweed Twenty, priced at $650,000. While both saw a good amount of showings and were both under contract within a week, we were honestly really surprised by the lack of offer activity. 

Then in June, our county saw a surge of new inventory: 540 new single family homes came on the market.

On Monday, April 4 we had 197 single family homes on the market in Whatcom County.  As I draft this on Monday, July 4, we’re sitting at 535 - that’s an inventory increase of 172% in the last 3 months. [Edit: as of 07/13 our active residential inventory was up to 568 homes].

One question that I’ve been asked constantly is:

If you’re driving east up Alabama Hill, are you headed towards Lake Superior? 

Technically, yes. You are headed in that direction.

But that’s not what’s on your mind in the moment of chugging up the hill - you’re probably going to the Silver Beach or Geneva neighborhoods, or cooling off at Bloedel-Donovan Park.

Technically speaking, we are moving away from the intense sellers’ market of the last 2 years. If we reach a buyers’ market - and how long that will take - remains to be seen. The last time Whatcom County had a true buyers’ market was in spring of 2014, as our county recovered from our Great Recession housing low in 2012.

Roughly speaking, we would need to reach about 1430 active residential listings on the market at one time for the market to truly have shifted.  

(Slightly pretentious nerd moment from Tiffany: 

However, that metric is based on the average speed of sales for the last 15 months. If buyer demand has dropped off the metaphorical cliff - and stays that way long enough - one could argue that the speed-of-sale has changed too quickly in real time for the metrics we use to be precise. Last time I tested that idea, the speed of sale for 15 months of data and for 3 months of data has stayed stable. I’ll be watching for that. 

Also, we need to recognize that as a market shifts there may be a momentary destabilization that acts like a strong buyers’ market (for the niche of cash buyers especially) that could swing wide then level out in a matter of weeks, where the data available lags behind and doesn’t ‘see’ it. This report sticks to the data available as a whole market trend rather than every possible niche.)

It’s important to remember that housing sales data only reflects the sellers and buyers actively buying and selling. We simply don’t have data for the people outside those pools - and economic changes affect people differently. 

The drop in buyer demand + the surge in inventory doesn’t mean that all buyers suddenly now have so much power to negotiate prices down. It means that the buyers who have retained enough buying power even after interest rate changes are now in a much stronger bargaining position.

It means that a lot of buyers who were already having a hard time with today’s prices are now priced entirely out of the type of home/area that they need.

It means that a lot of buyers lost out on buying power and are shopping in a different price bracket

Our team has analyzed this topic a LOT over the last three months. Here’s some perspective for both sellers and buyers in today’s market:

• Pricing your home in today’s rate environment (with Leo)
• What’s a normalized market? (with Leo and Tiffany)
• 3 types of buyers in today’s market (with Max and Leo)
• I’m new to this whole thing and need an overview (with Tiffany)