The Bellingham real estate market is currently experiencing a significant shortage of available homes, leading to challenges for prospective buyers. Several key factors contribute to this limited housing inventory:

1. Homeowners Retaining Low Mortgage Rates

During the period of historically low interest rates between 2020 and 2022, many Bellingham homeowners secured mortgages with rates around 3% or even lower. Now, with current 30-year mortgage rates averaging approximately 7%, these homeowners are reluctant to sell and finance new homes at significantly higher rates. This phenomenon, often referred to as the "lock-in effect," discourages homeowners from listing their properties, ultimately reducing the number of homes available for new buyers.

The result? Fewer homes on the market, leading to heightened competition for available listings and upward pressure on home prices. Unless interest rates decline significantly, this trend is expected to continue limiting housing inventory.

2. Disparity Between Job Growth and Housing Costs

Bellingham's housing prices have seen substantial increases, with a notable 11.13% rise in 2022 alone. While home values have surged, local wages have not kept pace, creating a growing affordability gap for residents.

Many of Bellingham’s largest employers, including Western Washington University, PeaceHealth Medical Center, and various manufacturing and technology firms, offer salaries that struggle to match the rapid rise in home prices. While the median home price in Bellingham is now well over $600,000, the median household income remains significantly lower than what is needed to comfortably afford a home in the area.

This economic imbalance has several effects:

• First-time buyers struggle to enter the market, leading to more demand for rentals and fewer move-up buyers listing their homes.

• Some residents are forced to relocate to more affordable neighboring communities, such as Ferndale or Lynden, which can further limit available housing in Bellingham itself.

• Homeowners who might otherwise sell and upgrade to a new home often find that their increased home equity still isn’t enough to comfortably afford a new purchase in the current market, keeping them in place.

3. Population Growth Outpacing New Construction

Bellingham's population has been growing steadily, with an average increase of about 1,450 people per year over the past five years. However, this increase in residents has not been matched by a corresponding increase in housing construction. The result is a tight housing supply that simply cannot accommodate the growing demand.

The vacancy rate in Bellingham dropped from approximately 3% in 2013 to about 1.7% in 2016 and has only modestly recovered to around 2.5%. This signals that new housing developments have not been built quickly enough to keep pace with demand.

Several factors contribute to the slow pace of new construction:

• Zoning Restrictions: Many areas of Bellingham, particularly near downtown and in historic districts, have strict zoning laws that limit high-density housing developments.

• Limited Land Availability: Bellingham is geographically constrained by the bay to the west and protected farmland to the east, restricting available space for new housing developments.

• Rising Construction Costs: The cost of materials and labor has increased significantly, making it more expensive for developers to build new homes and pass on those costs to buyers.

4. Limited Expansion of Desirable Neighborhoods

Bellingham is known for its charming and historic neighborhoods, with areas such as Fairhaven, Columbia, and Sunnyland being highly sought after due to their walkability, amenities, and character. However, these neighborhoods are well-established and have limited room for new development.

Since the majority of homebuyers prefer to live in these areas, competition for available homes is fierce. The lack of available land means that new housing projects are either small-scale infill developments or high-priced renovations of existing properties. This further limits inventory and drives prices higher in Bellingham's most desirable neighborhoods.

Bellingham’s Appeal and Strategic Home Buying

Despite these challenges, Bellingham remains a highly desirable place to live. Its wonderful summers, mild year-round climate, abundant outdoor recreation, and strong sense of community make it an attractive destination for both long-term residents and newcomers. The city’s safety, quality of life, and proximity to both Seattle and Vancouver, B.C., make it a sound market for real estate investment.

For those considering a move to Bellingham, having a well-structured plan is crucial. Given the competitive nature of the market, being prepared to act swiftly when a suitable property becomes available is key.

I offer a comprehensive approach through my "Purchase Proficiency Playbook", a strategy that has positioned me among the top 15 buyer's agents in Whatcom County. This program is designed to navigate the complexities of the Bellingham real estate market effectively, ensuring that clients are well-prepared to secure their desired homes with minimal stress and maximum success.

If you're thinking about buying in Bellingham, let's set up a time to discuss how my process can help you confidently navigate this competitive market and find the home that’s right for you.

Schedule a call here or reach out directly.

- Josh Crown
360-389-6906