Northwest Living | Bellingham Real Estate Market

The Federal Reserve dropped the federal funds rate to 4.25 percent today. The street however was hoping the Fed might instead lower rates by a half point but chose not to. This key rate is what governs overnight lending between the nations banks.

In another move the Fed also lowered the discount rate it charges for direct loans to banks by matching a quarter point here as well to 4.75 percent. Since September the Fed has now lowered the overnight rates by a full percentage point in an attempt help the nations economy and lower the risk of falling into a recession. 

Most of todays decision was based on the nations condition with the housing sector.  With so many banks exposed to subprime loans, especially in the southern part of the country from California to Florida, that the banks are reluctant to extend credit.  The Northwest is not spared from the subprime mess, but were at least fortunate to have a much lower rate of subprime loans outstanding per loans on the market. One look at the national map of subprime loans shows that the Northwest should at least be feeling like we will get through this. 

But because the nation as a whole has several areas of concern with housing and subprime loans, it affects us all, and so the fed had no choice but to step in and react.

Outside of the housing and financial services sectors, the U.S. economy has exhibited resilience. In addition to a steady labor market, many retailers reported stronger than expected November sales and a slumping dollar helped boost demand for U.S. exports.

Also, the risk of a inflation, which the central bank had cited as a reason for monetary restraint even as financial markets clamored for rate cuts, appears to have
eased slightly. Productivity has been strong and core inflation gauges, which exclude volatile energy and food costs, have remained tame.

However, after a period of relative calm, credit markets are showing a level of strain not evident since August, when mounting defaults on U.S. subprime mortgages first led to a
worldwide pullback in money markets.

Does this mean that interest will drop in lock step, not necessarily, because interest rates are connected to long term bond rates.  Subprime borrowers will not gain from this cut, because those type of loans are keyed with LIBOR rates which actually have been trending up in recent weeks. Because of the liquidity issues in global financial markets, LIBOR rates have actually increased at the same time that treasury and other benchmark yields have been declining. The rate cuts today will however benefit those that are looking for lower rates on home equity loans, because those are tied in with the prime rate that borrowers pay on such loans.

Jerry Campbell - Muljat Group - Bellingham, WA - Bellingham WA Real Estate

It seems like more and more these days I’m getting questions about buyers wanting to purchase foreclosure homes. So I did some research the other day and found a few web sites and blogs that had some very useful information on the subject of foreclosures.  One of the best sources I found was on the Austin real estate blog which had a lot of useful information.  Ki Gray is the owner of the site and he’s using a map that he found on the New York Times showing county by county where the highest percentage of the subprime loans were taken out.

click the map below to open a new window with the full interactive version and our Northwest viewers can checkout the areas in the Northwest with the highest subprime loans.  That will give one an idea where you could pretty much predict where one would expect to find loans going into foreclosure.

subprime mortgage map

The interactive map showed that for the Northwest corner of Washington State, Skagit County showed that 27% of all mortgages are in subprime lending, 19% in Whatcom County, 18% in Island County, and only 10% in San Juan County. As high as those numbers might seem at first glance, those numbers are not to bad when compared to many of the other counties in the State of Washington.  Most of the other counties range from 25% to 35% overall.

This map is a good indication why the Northwest has done so well versus the rest of the country.  The light shade areas are the areas in the US that have the lowest subprime loans per county, and the darker areas are the worse hit by these tough loans. Looking at that map it appears that many areas in the midwest and especially the south and southwest have really been the hardest hit.

Click that link above the map and you can really zoom in and get a good idea of whats going on across the united states.  I really think if buyers and sellers in the Northwest could see this scenario, it would give a much more positive attitude towards are market here.  Especially when one factors the low interest rates under 6%, low unemployment rates (down to 3.8% in Whatcom County), and pretty good retail numbers.  In Whatcom County we also have the benefit of having almost three million citizens of British Columbia just over our border and with the parity of the Dollar and the Looney, Canadians are shopping here more. 

Next week I’m going to post the sales numbers for the Whatcom County housing market and it will show that the Bellingham WA housing numbers for the first ten months of 2007 vs 2006 are actually up year over year. I have the total sales numbers for the last eight years on a monthly basis and I’m going to start sharing them here on my Northwest real estate blog.  Look for the stats next week. I tend to look at the number of sales instead of prices, because I feel its one part of statistics that can not be easily manipulated. Price increases only tell you about what properties are selling for, but what about the homes that tested the market and didn’t sell.  That’s why I look at sales numbers comparisons instead. Tells a more true story.

Jerry Campbell - Muljat Group - 510 Lakeway Dr - Bellingham, WA 98225 - Northwest Living