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Money come, money go

A look at personal wealth and growth in Whatcom County

According to a recent study by SmartAsset Advisors LLC, Whatcom County is the sixth wealthiest county in Washington state based on investment income, property values and median income — just behind King, San Juan, Snohomish, Island and Kitsap counties.

Those values have changed over the past decade or more and are affected by population growth and shifting community demographics in the county and by out-of-town and local investment. To gain a better understanding of how personal wealth in Whatcom County has changed over time and what factors could affect it down the road, we looked at economic trends and spoke with local financial advisers and real estate brokers.

Income by the numbers
Personal income and its resultant wealth includes earned income, investment income and government payments such as Social Security and veterans’ benefits. No matter whose numbers you look at, it’s clear that income has not kept up with the pace of inflation or the cost of living in Whatcom County over the past several decades.

Numbers vary depending on the source and how you look at the data (median versus average, for example). Investment income includes income obtained from pension funds and from owning a home. Per capita personal income equals total personal income divided by the resident population. Here are a few values for comparison.

According to U.S. Census Bureau data, Whatcom County’s 2019 median household income (the one right in the middle, with equal numbers of households making more and less) was $65,712, less than the median for Washington state ($78,687) and the United States as a whole ($69,372). This trend is also reflected in hourly wages. In 2019, 12.9% of Whatcom County’s resident population were living below the official poverty line, more than the state average (9.8%) and similar to the national average (12.3%), according to data published by the Washington State Employment Security Department.

According to the Bureau of Economic Analysis, average per capita personal income ($59,510) is lower in Whatcom County than the state average ($67,126) but higher than the U.S. average ($52,787). Whatcom County ranked 14th among the 39 counties in the state for per capita income, according to the U.S. Census Bureau.

Although the Washington State Employment Security Department reports slightly different numbers, the trends are similar. In 2020, Whatcom County’s average annual wage was $53,325, well below the statewide annual average wage of $73,504 and above the national average wage of $50,834.

What is influencing personal wealth in Whatcom County?
Of course, changes in income values mean little without considering changes in the cost of living — which includes the cost of goods and services, real estate values and rental rates — over the same period. An increase in income isn’t felt at home when the costs of rent, food, gas and utilities have all gone up at the same time.

The pandemic, supply chain issues and inflation have all contributed to a higher cost of living in Whatcom County and across the nation. So, although wages also have gone up — Whatcom County’s median income had grown to $70,011 in 2021, according to a 2023 report from The Bellingham Herald — when asked, few county residents are likely to say they’ve been able to feel their personal wealth increase over that time.

Your outlook on whether your personal wealth has grown depends a lot on whether you’ve had extra money available to invest. A large portion of Whatcom County’s personal wealth is tied to the rate at which real estate values have increased over the past several decades.
“Everyone can see that their house has gone up in value, and the last five years we’ve had ridiculous appreciation due to the pandemic,” said Kathy Stauffer, managing real estate broker at Windermere Real Estate, “but long-term, owning versus renting is a better idea, even with higher mortgage interest rates.”

A lot of wealth also has been moving to Whatcom County from elsewhere, said Bryant Engebretson, fiduciary investment adviser and managing principal of Tradewinds Capital Management.

“I’m a capital markets guy — the stock market and financial planning — but I hear from my clients and neighbors,” Engebretson said. “There are a lot of wealthy retired people moving to Whatcom County that have created that wealth elsewhere.”

Financial adviser Paul Twedt, of Northwestern Mutual, agrees.

“From what I hear, the wealth that is moving into town has come from the sale of real estate in places like California and Seattle, and with their equity they are able to buy a nice place up here without a mortgage payment,” Twedt said. “Most of the clients we work with are self-employed professionals from all different kinds of industries that have some control over their compensation.”

Many people coming to Whatcom County are doing so with cash to spend from other places. This in turn has affected businesses and real estate values here.

“They want to go to nice restaurants, and there is some trickle down,” Engebretson said.
Other businesses also are profiting, Twedt said. Bellingham Golf and Country Club, for example, has full membership and a long wait list, which was not the case a decade ago.
“People are wanting to spend more,” Twedt said. “Our clients are focused on getting and keeping good workers on board.”

But the current environment also has made it harder for service people to live near where they work in Whatcom County.

“A lot of people who have wanted to buy homes have been forced to pay up for that privilege,” Engebretson said. “One disturbing trend I’ve observed is how much Wall Street-type money has moved into the residential housing market, driving up the prices and forcing those that really wanted to buy here to pay over market value. That’s great if you’re selling, but it also forced people who were outbid to become renters. It’s disturbing that we’ve allowed this to happen to the middle class, because home ownership has traditionally been a bedrock of the American dream.”

Those with fewer means, including young families trying to establish themselves here, have been priced out of the local real estate and rental markets by older Americans with accumulated wealth.

While those with enough income to own their home (who bought at the right time) have increased their personal wealth significantly, that benefit has impacted those who cannot afford to buy and so must rent. For renters, rising real estate values have significantly increased the cost of living in Whatcom County and therefore have decreased the portion of their incomes available for savings and investments.

The county’s median home value in 2019 was $569,207 — the fourth-highest median home value in the state, according to census data reported in The Bellingham Herald. And according to the U.S. Department of Housing and Urban Development, the fair market rent — the cost to rent a moderately priced home or apartment, adjusted for the local market — in Whatcom County is $1,355 this year and $1,571 in 2024 for a two-bedroom home.
If you live in Whatcom County, it’s probably been obvious that the population has been growing steadily. Perhaps you’ve noticed increased traffic on our roads and Interstate 5 or longer waits for services across a range of sectors, including restaurants, home maintenance, medicine and mental health. According to U.S. Census data, the population of Whatcom County in 2022 was estimated at 230,677, up 14.7% from 2010.

The demographics of Whatcom County’s population also have continued to shift. While the county’s age distribution has remained relatively similar for many age groups in the past decade, overall, our population is aging. While most age groups saw growth in total numbers from 2010 to 2021, the 65-plus age group was the only one to have increased its proportion of the total population — from 13.3% in 2010 to 18.3% in 2021, according to census data published at usafacts.org. This is mostly due to the huge jump in population among older people, with the segment growing by 56% from 2010 to 41,938 in 2021.

Those seniors also have felt the crunch of increasing living costs. A study published in 2022 by advocacy group The Senior Citizens League showed that even with 2023’s historic Social Security cost of living adjustment of 8.7%, rising inflation and changes in the cost of food, medication and other common goods and services used by retirees means they won’t feel the increase in their wallets due to a loss in buying power. According to the study, increases in the costs of typical expenses for seniors have been more than double the Social Security increases since 2000. The cost-of-living adjustment for 2024 was just announced as 3.2%, less than half the increase from the previous year.

Citizens and business owners alike are finding it more difficult to find and move to affordable locations or to facilitate needed expansions.

“People who want to move from their first home to their second can’t,” Engebretson said. Both prices and interest rates are high, so people are opting to stay with their lower rates.
Stauffer agrees. “Nobody wants to sell if their mortgage is 3%, so that is going to dampen supply,” she said. “The number of people in Whatcom County with full equity in their homes is over 50%, which is much higher than other parts of the state and country.”

In the end, people are hanging on to their homes longer.

“The average person stays in a home for seven years, but that’s going to become closer to 10 years due to the rising interest rates,” Stauffer said. “So you have to get creative, and we’re working hard to get prices to be more appealing. A generation of homeowners thinks 3% is a normal mortgage rate. But that’s not normal. The average over a 50-year history is actually 7%.”

Twedt has observed higher interest rates affecting real estate investors and developers.
“More projects are being said ‘no’ to because it’s harder to make the math pencil out,” he said. “Housing is not keeping up with our population. So rent rates go up, housing prices go up; the cost to get in is a higher barrier to entry. Their monthly payments aren’t going to allow them to buy the home they want or need. Those coming from more expensive places like California who have cash and don’t need to borrow are getting the benefit of the recent drop in real estate value caused by higher lending rates.”

Whatcom County business owners are feeling the demand of this increasing population. Whatcom County’s rental vacancy rates have hovered around 2% for the past decade and were second only to Skagit County in 2022. So while property owners and managers are able to earn top rents with little loss, residential and commercial rent is eating up larger and larger portions of individual incomes.

That has long-term impacts on generational wealth down the line as well. The current real estate market has caused some to rethink their future retirement plans.
“Some are choosing to invest in a second home or condo in a less expensive location with a more favorable tax structure and a political environment that more closely matches their own, such as Texas, Idaho or Mexico,” Twedt said.

Engebretson has similar observations.

“They plan to sell their largest asset, which for a lot of people is their home in Whatcom County, and live off the liquidated equity,” Engebretson said. “Moving to an area with lower real estate costs can completely change your economic situation for the better. Overall, everybody has a different economic reality based on their actions up to that point, which then determines their choices beyond that point.”

What continues to draw people to Whatcom County?
“There is a lot of literature out there about the type of communities folks like to retire to,” Engebretson said. “Cultural activities that colleges bring have a real influence. It’s all relative based on where you’re moving from.”

Stauffer agrees.

“When you compare us to other places, our proximity to the I-5 corridor and Vancouver is definitely a draw,” she said. “People love the Pacific Northwest, but they haven’t appreciated what’s happened to Seattle, so they are coming here instead.”

Both Stauffer and Twedt noted that sprawl, crowding, homelessness, drugs and crime are driving those with the means to escape further from our biggest cities.

“We have a core group of people, perhaps a third of the market, that know, love and trust Whatcom County and want to be here,” Stauffer said. “They might start in the Columbia neighborhood and then move to acreage as their family grows. Later they might downsize to a condo. Another 30% are coming out of King County, Eastern Washington or other parts of Washington, and another 30% are coming from out of the area — from Texas, California and the East Coast.”

Engebretson believes we’ll see some correction and shift in the current financial and real estate situation as baby boomers pass their wealth to younger generations.

“The millennial generation doesn’t seem to be as interested in material wealth as their parents and grandparents, but partly because they had to adjust their dream because they are realizing that they had desires that they could never achieve,” he said. “You have to reformat your thinking. They are realizing that they are just as happy taking a hike versus owning Harleys or other material things. That is causing them to move to cities, where the opportunities and quality of life are.”

It’s better for the community when a broader range of people — not just the wealthy — can afford to live here, Stauffer said.

“Hopefully, Whatcom County is being responsible to try to make this a nice place to live and work, but there is some price point where our economy doesn’t support the cost of our houses,” she said. “I admire employers that make a point to pay their service workers a rate that enables them to live here. If they can’t live here, then you don’t have an amenity base of people to take care of your services. It’s a delicate balance for the city and county to manage long-term.”

While the factors that influence personal wealth in Whatcom County are certainly complex, making the future hard to predict, Whatcom County continues to rank among the top counties in the state for wealth and quality of life. We’ll need to work together to ensure that those in lower income brackets can continue to afford to live where they work. ■

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