Whatcom home prices drop 4.2 percent

DAVE GALLAGHER - THE BELLINGHAM HERALD

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Whatcom County and other Washington communities saw a significant drop in home prices the past year, according to a new federal report.

Home values dropped 4.2 percent in Whatcom County in the second quarter compared to the same period in 2008, according to the Federal Housing Finance Agency's all-transactions house price index.

While it's a steeper decline than in the first quarter, when home prices locally fell 2.2 percent year-over-year, it's not as dramatic as in some communities in the Seattle area, which have seen drops in the 9 percent range.

Since Whatcom County's price index peaked in the first quarter of 2008, local home prices are down 5.5 percent.

The all-transactions index includes data from Fannie Mae and Freddie Mac mortgages used for home purchases and refinancings, which gives a good indication of repeat sales, said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University.

Crellin said he wasn't surprised by the numbers, and said they indicate the real estate market has some work to do to get back on track. Right now, the market is being driven mostly by first-time homebuyers taking advantage of the $8,000 federal tax credit.

"I have concerns about later this year, when the tax credit expires," Crellin said.

Julia Hansen, an economics professor at Western Washington University, said home sales - which appear to have stabilized locally this summer - will likely drop when the tax credit program ends Nov. 30. That could continue to drag down prices.

"I think it is too early to call a bottom in prices," Hansen said in an email. "Prices in our market have not declined very much from the peak, and the price-to-income ratio here locally is still well above historical averages."

Crellin noted that first-time homebuyer sales have yet to stimulate sales in other price ranges. One factor is because of the significant number of homes in foreclosure or in near-foreclosure.

Typically, when a first-time homebuyer makes a purchase, the seller moves up into a higher price range for the next purchase. But now, those sellers of distressed homes are moving into rental housing, he said. With lower demand for homes in the higher ranges, prices among those houses will continue to fall.

Overall in Washington, the purchase-only home index fell 9 percent, which ranked the state 44th in the U.S.

States that saw the biggest drop in the home price index were Nevada (down 28.1 percent), Arizona (21.2 percent) and Florida (17.6 percent). Only four states saw some price appreciation year-over-year, with North Dakota (up 2.8 percent) seeing the biggest rise.

Across the U.S., home prices fell 6.1 percent year-over-year, but the monthly index has risen a net 0.5 percent over the first six months of this year.

"For the second consecutive quarter we are seeing much slower rates of depreciation of the HPI than in 2008," said FHFA Senior Deputy Director Edward J. DeMarco in a news release. "This is further evidence that prices may be stabilizing for the nation as a whole."

HOME PRICE INDEX ACROSS THE STATE

Changes in the all-transaction House Price Index for Washington metro areas:

Area, Year-over-year change, Five-year change

Bellingham, down 4.2 percent, up 40.5 percent

Bremerton, down 9.7 percent, up 36 percent

Kennewick, up 1.8 percent, up 17 percent

Longview, down 7.4 percent, up 33.8 percent

Mount Vernon, down 6.3 percent, up 39.7 percent

Olympia, down 6.3 percent, up 39.5 percent

Seattle, down 9.5 percent, up 32.1 percent

Spokane, down 5.1 percent, up 44.4 percent

Tacoma, down 9 percent, up 34.3 percent