The $300K home is disappearing in Bellingham. Here’s what is being done about it

If Whatcom County real estate had the equivalent of an endangered species list, a single-family home for under $300,000 would be on it.

Researchers at Zillow recently broke down the number of single-family homes by price point for Bellingham and Whatcom County. In August 2014, homes valued at under $300,000 dominated the Whatcom County market . According to Zillow, this area had 52,500 homes priced at less than $300,000 that year, taking up 67.8 percent of the market share.

Fast forward to August 2018, and it is a much different picture: The number of homes valued at under $300,000 dropped by more than half to 25,400. That housing segment now represents only 32.8 percent of the market share.

The change is even more dramatic in Bellingham: Four years ago, the market share of homes under $300,000 was 60.8 percent. Zillow estimates Bellingham now has 7,900 homes valued at under $300,000, or 20.5 percent.

Put another way, four out of five homes in Bellingham are now valued at more than $300,000.

Much of the Bellingham market share is now in the $300,000 to $500,000 price range, coming in at 52.3 percent.

But the number of homes in the upper price ranges also have swelled — In just four years, the number of Bellingham homes in the $500,000 to $1 million range jumped from 3,900 in 2014 to 9,300 this year.

The number of Bellingham homes over $1 million was 400 in 2014, but has now nearly tripled to 1,100, according to Zillow’s data.

Zillow used its proprietary “Zestimate” algorithm to come up with its data. According to its website, it creates an estimated market value for an individual home, but not an official appraisal.

This four-year trend of high appreciation increases is unusual and very much driven by demand, said Sarah Mikhitarian, a senior economist at Zillow. It’s also not just a Whatcom trend — the shift in inventory is happening in many areas of the U.S., she said.

The appreciation of existing lower-priced homes is the biggest factor in the inventory shifts, Mikhitarian said. She noted that the median price of Bellingham homes under $300,000 in 2014 have appreciated 56 percent in four years.

So a home in the $275,000 range in 2014 is selling for above $400,000 now.

While rising appreciation is the biggest influence, other factors also are at work, Mikhitarian said. With inventory low in recent years, homeowners have added value to their current home by remodeling or adding on instead of looking for a new place.

With rising land costs and permit fees, it’s also become expensive to build a home. As a result, construction firms are opting more often to build expensive homes because they can better turn a profit, she said.

It shows up in the Zillow data: Four years ago, about 30 percent of all the homes built in Bellingham were priced over $500,000. In 2018, that jumped to more than 40 percent.

“The demand is there (for higher-end homes) as people move in from more expensive cities,” Mikhitarian said.

Competition is stiff

Real estate agents here have been busy educating buyers about the reality of the current market. RE/MAX Whatcom agent DeLisa Boatman said the change has been dramatic the past couple of years.

If a buyer is looking for a place under $300,000, they’ll have better luck looking outside the city limits, or need to be prepared to buy a fixer-upper, she said.

It’s still possible to buy a house for less than $300,000 in Bellingham, but it has become a stiff competition.

Boatman said the chances of getting one can depend on the financial strength of the buyer — the more extra cash they have available for a down payment, the better the chances, she said.

On Friday, there were only eight homes for sale (not under contract) for under $300,000 in Bellingham.

Overall inventory is starting to creep upward because it is the end of the peak season, but interest rates are also going up, hurting the purchasing power of some buyers, Boatman said.

Boatman has a listing for a house near Lake Whatcom that was originally listed above $300,000. It’s a two-bedroom, 654-square-foot place that needs some work, she said. She recently lowered the price to $249,900 and it has seen a flurry of activity.

Inventory is an issue

The big drop in the number of $300,000 homes is a major concern of Bellingham city planners. This sudden rise in prices has come at a time when the median income of Bellingham resident hasn’t increased significantly, said Rick Sepler, director of the city’s planning and community development department.

Sepler said the city is looking at a several strategies to tackle the problem.

One is to encourage more variety in the types of housing built that are more affordable, including duplexes, triplexes, cottages and row houses. Hundreds of these types of housing units have received permit approval this year, particularly in north Bellingham.

Permitting is another area the city is looking at, Sepler said, acknowledging that it is costly to review building permits and connect to services. Bellingham is constrained when it comes to lowering fees, Sepler said, adding that the city is constitutionally prohibited from providing subsidies to private development. Instead, city planners have focused their attention on quicker turnaround time to approve permits.

“In Bellingham right now, the building permit review for a single-family home that is proposed on a lot free of Critical Areas takes one week,” Sepler said in an email.

Bellingham voters also have sought to fix the problem, approving the Bellingham Home Fund in 2012. According to its website, the fund produces and preserves affordable housing through new construction and the preservation of existing buildings.

The fund is up for renewal this year; if approved, it will cost property owners 36 cents per $1,000 of assessed valuation. For the owner of a $400,000 home, that’s an additional $144 in property taxes annually.

Others are looking for solutions to the change in inventory. The Whatcom Housing Alliance, which includes a number of public agencies and private sector businesses, is hosting Whatcom Housing Week Oct. 21-25, with 13 different events. Many of the events are discussions as well as area market tours.

Details can be found at whatcomhousingalliance.org.

This story was originally published October 21, 2018 at 5:30 AM.