2002 Real Estate Forecast (as discussed on Radio Real Estate Saturday, December 29, 2001) Thank you for taking the time to read the forecast for 2002. 2001 was a very eventful year nationally, regionally and locally. The real estate market was extremely active and even with an initial slowdown after September 11, 2001 the market continued to remain extremely active through the end of December. I am looking forward to a very active year in real estate in 2002. My recent guest on Radio Real Estate was Denise Lones, CSP, MIRM of The Lones Group Inc. Denise is a real estate speaker, trainer and researcher. In the past, Denise's forecasts have been extremely accurate and her 2002 real estate forecast is very positive. Here are some of Denise's predictions. Interest rates The later part of 2001 saw record low interest rates. We have not experienced interest rates this low in over 3 decades. Will this decline in interest rates continue? The answer to that question depends on what is happening globally. If the war in the Middle East continues and our service people remain overseas the interest rates will remain relatively stable. If the economy continues to decline, the interest rates will remain stable or will actually lower even further. I feel very strongly that 2002 will see an increase in interest rates as we begin to succeed in our war on terrorism. I predict interest rates to rise to about 7.2 to 7.50% (for a 20 year fixed mortgage) by September 2002. (So if you need to buy - buy now and if you need to sell - sell now). The current market is perfect for both buyers and sellers. House prices House prices will remain stable as long as interest rates do not increase to higher than 8.5%. House prices increase when inventory decreases and house prices fall when there is a surplus of inventory. I do not see large variations in housing inventory this year. Generally speaking, I feel that there will be pocket areas of inventory shortages which will cause price increases in those areas. I do feel very strongly that the Birch Bay and Ferndale areas in Whatcom County will continue to see an increase in house prices. I see a very slight increase in the Bellingham area and I see Lynden remaining stable. Land availability I predict that land will become more and more difficult to purchase and to build on in 2002. As our building regulations become stricter, it is more difficult for builders to find available land to build on. If you were to ask any builder in Whatcom County what their number one challenge is - they would probably say finding good buildable land. I do not see this changing in 2002 which means as land becomes more scarce, land prices will increase. I see land prices going up in 2002 by at least 10 to 15%. Market activity I see 2002 as a year of market growth and market stability. The market growth will take place in areas directly outside of the major cities. For example, I see areas like Birch Bay and Ferndale being growth areas. I see Bellingham being a market stable area. I see Lynden being a market stable area. I also see the market activity generally starting off slow in 2002 and picking up momentum in the second and third quarters. 2002 will be a good year for real estate. I hope these forecasts have given you some insight as to what the experts feel the market will be like in 2002. Each home purchaser and home sellers situation is unique and I would be happy to discuss your real estate needs with you. Please feel free to contact me so I can help you forecast your real estate market for 2002. Mike Kent